One of the biggest barriers to executing on a digital strategy is inappropriate funding. Only 24% of companies have modified their funding processes to better support digital investments. As a result, organizations are slow to dedicate resources to, and shift resources among, digital initiatives.
As a greater proportion of digital spending shifts from capex to opex, linear funding processes require digital initiatives to be planned in detail up to a year in advance. This slows digital business acceleration and hinders the agility that digital investments require.
To dedicate the necessary resources toward digital business optimization and transformation outcomes, align digital funding to products rather than projects. While project-based funding locks resources into a plan, product-based funding results in flexibility and strategic resource allocation toward the most important business capabilities and outcomes. Eighty-four percent of organizations plan to adopt a product funding model for parts of their business over the next few years.
In a product funding model, products are defined broadly as capabilities, services, platforms or goods for a particular customer segment, classified by their value and how they are consumed. The target customer segment for a given product can be either internal or external to the organization. Businesses commonly structure product lines around business enablement, competitive advantage capabilities or phases of the customer journey.
To move to a product-based funding model for transformational digital investments:
Set funding targets that direct disproportionate funds to the most important digital transformation and optimization product categories and lines by establishing and ranking digital strategic pillars and using relative weights when assessing investment options.
Build comfort around uncertainty on digital investments by adapting business cases to accept outcome ranges, and map out what is uncertain and what will be learned as initiatives progress.