Tuesday, November 28, 2023

5 Methods to Align Digital Funding Conversations with Productivity

By Nisha Sharma - August 31, 2022 4 Mins Read

5 Methods to Align Digital Funding Conversations with Productivity

The strong partnership between CIOs and CFOs of the enterprises experiences better business objectives understanding that influences the intended role of digital funding in achieving those targets.

The collaboration between CIOs and CFOs affects the digital funding of the enterprises. For smooth planning for digital investments, the relationship between CIOs and CFOs should be business-centric and collegial. This means the reliance of CFOs on the CIO, which is a healthy dependence since CIOs today are also business strategists, and their co-dependence needs to be marked by mutual respect for each other’s experience and talents, and not just as budget co-owners.

Leveraging alternative funding for digital initiatives

Current accounting metrics that originated at the time of the Industrial era are not capable of capturing the tangible and intangible value accurately created by digital initiatives. Hence, CFOs and CIOs are required to alter the companies, financial management practices by leveraging the power of leading indicators to help the planning and reporting for digital initiatives.

This practice can be performed by shifting the focus of the conversation from capital expenditure vs operating expenditure to long-term value creation. Another option for this practice is the adoption of product-line funding models. Rather than solely emphasizing EBITDA, CFOs track how digital investments affect metrics related to things such as workforce productivity, operational margins, and revenue-generating activities. CIOs highlight the operational and strategic benefits of digital investments funded from OPEX in a cohesive, transparent product-funding model.

Reconsidering Expectations for success of digital initiatives

The majority of digital initiatives are governed as IT projects, and decisions are taken based on IT KPIs. It can be difficult for CFOs and other top executives to quantify the benefits to the organization since these metrics are frequently too complex for them to understand. The measurement becomes even more difficult when the benefits that accrue are indirect. Such efforts require a non-financial demonstration of value; otherwise, stakeholders won’t find enough justification for investment or support. Metrics like user Engagement and participation-like s often fit better for digital investments, than the traditional financial metrics.    The metric modification or reconsideration sets the realistic expectations for success in balancing the cross-functional buy-in on digital strategy. 

Using a typical performance management framework

A standardized array of key performance indicators (KPIs) that demonstrate the impact of digital funding on the business, is needed to report on the performance of digital efforts. This could be in three different ways-  the digital KPIs that bring all the digital initiatives on the same page, the facts translated into business impacts that could concern the stakeholders, and finally the decisions and trade-offs extension faced by the stakeholders.

Finance involvement in early technology road mapping process

The business success road mapping process requires a strong team partnership between CFO and CIO. It is suggested that CIO should discuss a roadmap with the rest of the stakeholders, using it as an opportunity to share a technology deployment manifesto designed to advance the enterprise’s big-picture strategy and the impact of budgeting for digital initiatives on corporate financials. The deployment of finance in the early stages of technology road mapping assures mutual understanding of the business goals towards which all CXOs work, and a common target of what success looks like.

Also Read: Business Process Management (BPM) Trends in 2022

More digital cost structure transparency

To understand the approaches to generate digital cost transparency variation, the involvement of CFOs in technology initiatives is important to work with transparency. For instance, the chargeback is frequently used by CIOs as a means of funding IT budgets and recovering IT costs. A chargeback strategy alone does not help to bring transparency into the value of those expenditures, even though it can illuminate how digital services are utilized within a company.

Therefore, finance and IT must work together strategizing on the digital cost value in the context of performance improvement measurement. The types of openness that CFOs require are most likely to be produced via service-based costing models, which are less precise but place greater emphasis on the output produced by a cost.

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Nisha Sharma

Nisha Sharma- Go beyond facts.Tech Journalist at OnDot Media, Nisha Sharma, helps businesses with her content expertise in technology to enable their business strategy and improve performance.With 3+ years of experience and expertise in content writing, content management, intranets, marketing technologies, and customer experience, Nisha has put her hands on content strategy and social media marketing. She has also worked for the News industry. She has worked for an Art-tech company and has explored the B2B industry as well. Her writings are on business management, business transformation initiatives, and enterprise technology.With her background crossing technology, emergent business trends, and internal and external communications, Nisha focuses on working with OnDot on its publication to bridge leadership, business process, and technology acquisition and adoption.Nisha has done post-graduation in journalism and possesses a sharp eye for journalistic precision as well as strong conversational skills. In order to give her readers the most current and insightful content possible, she incorporates her in-depth industry expertise into every article she writes.

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