New research from Forrester has found that companies prepared to shift their attitudes, especially when it comes to how they make investment decisions, grow 1.6 times faster than their peers. What’s more, data shows that the biggest obstacle to success is a continued reliance on traditional ROI-based decision making.

Forrester has released new insights based on its Future Fit Survey, 2022 in which it showcases how business and technology professionals’ different attitudes and behaviour impact growth.

In a report based on the data titled Future Fit Technology Strategies Require a New Approach to Making Investment Decisions, principal analyst Bobby Cameron writes: “One of the largest obstacles to tech execs implementing a future-fit technology strategy is the finance department and its requirement for robust ROI-driven business cases. Many tech execs struggle to win executive colleagues’ approval for important initiatives because they don’t know how to translate the IT organization’s capabilities — especially adaptivity, creativity, and resilience — into clear, solid ROI.”

Playing it safe doesn’t always deliver

Exploring how traditional ROI-driven business cases can lead to flawed technology choices, the report identifies three key problems:

First, the authors point out that generally accepted accounting principles (GAAP) encourage companies to invest in safe and tangible assets rather than those that would be appropriate for a future fit organisation, such as software, data, algorithms, or even culture and loyalty. While GAAP doesn’t reflect these intangibles in the balance sheet or traditional ROI models, the authors say it is what investors are looking for.
Second, while “safe” projects may yield a positive ROI, they may not deliver as much return (either on budget or time investments) compared to projects that have less certain outcomes but large potential upside.
Finally, the report recognises that it is crucial for leaders to invest in emerging technologies such as cloud-native computing, natural language processing or edge intelligence. However, the report’s authors do point out that it is difficult to prove the business case when they can’t predict the exact future innovation that could be built because of these investments.

Outdated, short-term growth strategies are likely to fail

Warning tech leaders not to fall into the trap of short-term growth strategies is the topic of another Forrester report, The Customer-Obsessed Growth Engine.

Forrester chief research officer and the report’s lead author, Sharyn Leaver, advises leaders to take bold steps when she writes: “Stakeholder, shareholder, customer and employee expectations for growth remain steadfast, despite the lingering effects of a pandemic and looming economic headwinds. In fact, many of these expectations have increased after you’ve innovated, adapted and created new experiences over the past three years. Now is not the time to hunker down. It’s time to step up.”

This is especially true when dealing with an increasingly empowered digital customer. Forrester data shows that 56% of US online adults are “always willing to do or try new things”. What’s more, 60% of US online adults have made use of chat platforms to conduct commerce, while 30% actively use Alexa, Siri and other voice assistants to do so.

Ditching traditional ROI models doesn’t mean more risk

To help tech leaders avoid the pitfalls of traditional business cases, Forrester has created frameworks and tools to help design technology investment models that are more appropriate for current challenges.

Forrester’s Cameron believes a future-fit approach to address these challenges should be adaptive (recognise the threat and impact of disruptive competitors), creative (prioritise customer and business outcomes over cost-cutting as an operating principle) and resilient (address risk and acknowledge the full cost of mitigation). Embracing this approach allows companies to maintain customer trust even through crises.

Forrester also believes that a robust financial evaluation framework is required when stepping away from traditional ROI models. The company advises tech leaders to take an iterative process and use the early results as a basis for further investment decisions. This allows successful decision makers to view a business case as a life cycle rather than a one-time checklist.

Finally, Cameron warns that tech initiatives can’t be effectively judged when using models that assume one-off capital expenditure with reliable returns. Rather, he says decisions should include risk-adjusted data that includes various scenarios, both optimistic and pessimistic, as well as plans to adjust investment based on the new business’s early results.

To better understand the components that make up a future-fit technology strategy, as well as how to embrace new ways to evaluate innovative proposals, contact Joan Osterloh at [email protected] – Forrester’s authorised research partner for South and East Africa.

About Forrester
Forrester helps business and technology leaders use customer obsession to accelerate growth. That means empowering you to put the customer at the centre of everything you do: your leadership, strategy and operations. Becoming a customer-obsessed organisation requires change — it requires being bold. We give business and technology leaders the confidence to put bold into action, shaping and guiding how to navigate today’s unprecedented change in order to succeed.