Profitability is critical to the company’s existence, but modernisation is critical for long-term survival. It’s a careful tight-rope walk between a profit-focused live fast but die young approach or reinvesting in modernising with the hopes to survive and thrive. The choice is a clear catch 22, you cannot focus solely on one without the other, so what’s the answer? Balance… with stabilisers.
At its most basic level, profit is money that can either go into shareholders pockets or reinvested back into the company. No business can survive for a significant amount of time without profits, as without them the business is a liability rather than an asset.
Modernisation is a type of investment involving updating systems, processes, or practises within the business. The goal is to keep ahead of competitors, be the best-in-the-market for customers, and ultimately receiving a return on the investment.
Modern problems require modern solutions
Modernisation can be a costly and time-consuming endeavour, however it is an increasing necessity as customers’ expectations are driving this change. Customers are seeking to connect with businesses in faster, highly accessible and more flexible ways. Businesses are promptly rising to this challenge which is shown in their spending: 2018’s net global spending on digital transformation was approximately $1 trillion and this is set to rise to $2 trillion by 2022*.
This impressive trajectory of digital modernisation seems to have been sped-up by Covid-19 with 79% of companies reporting the pandemic has increased their budget for digital transformation. This may be surprising – especially as the uncertainty caused many businesses to activate survival mode; reduce all possible costs and keeping assets liquid – although it highlights the critical need to keep changing and modernising even in unprecedented times.
‘Innovation’ is in the lobby – click here to admit
So you’ve survived 2020 and have funds set aside for reinvesting – but with hundreds of different paths how do you know which course of digital modernisation is right? At Nine Feet Tall we embrace open innovation: leveraging knowledge and expertise from outside our organisation to support us to make the best decisions. Open innovation takes many forms, from being as simple as asking the team to share learnings from their previous clients, to holding webinars with experts in the field.
Once we have an agreed direction, our next stage is to modernise incrementally. In today’s uncertain world taking on massive risks is not sensible, Instead, we focus on a series of small but constant improvements, continuously testing, adapting, changing, and keeping an agile mindset. Of course, this approach is not new, in fact it’s been coined as ‘digital Darwinism’ seen in James Dyson creating over 5000 failed prototypes before launching the incredibly successful vacuum cleaner, and the never-ending release of new iPhones to keep up with emerging functionality. The point here is modernisation is not something you can just do once, it requires consistent activity, meaning frequent reinvestment of your profits.
Finding the balance
Between profiting and modernising there is not one that matter more than the other, rather it’s a cycle down a (hopefully long albeit windy) track. But remember your stabilisers; always keep a rainy-day fund to fall back on in moments of survival, be open to external thoughts and expertise, and modernise incrementally and continuously to reach and maintain the sweet spot of running an effective progressive business.
If you need any information to help find the right balance of innovation for your organisation contact EstherM@NineFeetTall.com