Tech leaders have invested in transformation programs for a decade, which has coincided with an economic boom. Should tech leaders be slamming spending shutters, or are transformative initiatives more important than ever?
There has been increasing debate over whether the US economy has entered recessionary phase, as the traditional definition of two consecutive quarters of GDP decline has come to an end. However, a strange cauldron of historically low unemployment and historically high inflation makes the situation less clear. Regardless of which economic definition is applied, a majority of business leaders believe we are in a recession or towards one, indicating that many of our bosses believe in a shrinking economy that will ultimately affect the budgets and focus of technology leaders.
These economic clouds are already impacting tech leaders, and many are considering where to cut costs?. Digital transformation initiatives are often large items in tech leaders’ budgets and must be scrutinized as economic conditions change.
Defining Digital Transformation
According to Morgan StanleyA survey of CIOs found that nearly 10% plan to increase spending on “digital transformation” by 2022, a slight drop since 2021. While this could mean that digital transformation is not only relevant, but even a top three priority, even in an economic downturn, it is subject to the classic problem of the term “digital transformation” – everyone has a different definition.
While there’s no need to debate defining digital transformation, tech leaders need to dig deeper into their transformation initiatives to prepare for tighter budgets. In general, initiatives billed as digital transformation fall into one of three categories:
- Cost reduction through new technologies (e.g. cloud migrations or automation)
- Improvements to current products or services through digital technologies (for example, an app linked to a physical product)
- Create operational flexibility (e.g. external/hybrid work tools)
If you currently spend a lot of money in the third category, the recessionary pressures can reduce the need for new services. Likewise, if all of your transformation initiatives are focused on reducing costs through new technologies, you may be missing out on growth opportunities that can take advantage of competitive weaknesses caused by a changing economy.
Digital transformation initiatives should be the strategic element of a technology leader’s portfolio, and the mix between cost reduction and new revenue creation should reflect the broader business strategy. If nothing else, reviewing your portfolio of digital transformation initiatives should be a topic of discussion the next time you meet your colleagues outside of IT.
TO SEE: Research: Digital Transformation Initiatives Focus on Collaboration (Tech Republic Premium)
recession strategy
It’s great news for the broader economy that we haven’t seen a widespread recession in over a decade. However, that makes this economic headwind a new test for everyone from executives to employees in the early years of their careers.
In most organizations, tech leaders should have a newfound credibility that comes from helping their organizations deal with the challenges of migrating a large portion of their workforce to a remote environment, and in some cases by those employees back. to bring to the office. You have likely earned newfound respect as a capable operational leader, as well as someone who can activate and enable the broader business strategy.
Use what you’ve learned and the relationships built during the pandemic to leverage technology to prepare for and respond to changing economic conditions. Your portfolio of digital transformation initiatives is one of the most important tools in your arsenal and should reflect your interpretation of how best to implement the broader business strategy to respond to these times.
