Why scaleup businesses are hurt by a lack of technical/digital strategy

Close to one-third of IT decision-makers (32%) say that digital business has already helped their organization achieve revenue growth (with an average of a 23% increase) – according to IDG. Are businesses which are not taking care of this missing out on a substantial increase in revenue?

LinkedIn Sales Navigator suggests that there are ~360k MDs/CEOs in the UK, but only 32k Technical Directors/CTOs/CIOs. Based on this, back of the napkin maths creates an assumption that up to 91% of businesses have no one in the leadership team with a technical background. The same search for businesses with a headcount of 11-500 people suggests that 87% of scaleups/SME businesses suffer the same problem.

How does this impact a business? Well, technology can be a complex subject. As businesses, we outsource legal and accountancy services for the same reason.

Businesses likely use accountancy software like Xero or FreeAgent, and on occasion use online software to generate lower risk legal documents (like a website privacy policy), but when it matters (like filing yearly accounts, or reviewing contracts), we use experts.

Does the same happen with technology?

It’s common for scaleup founders to understand their business, and the business strategy they have to drive it forward. However, who is looking after the tech? Who is driving forward a digital strategy to empower your business strategy? Is this creating opportunity cost for the business?

Is it important to have a technical strategy to align with business strategy?

According to Adobe, digital-first companies are 64% more likely to achieve their business goals than their peers.

That’s a hard figure to ignore. Would accelerated digital transformation better able you to hit your objectives? If you already are, would higher adoption allow you to set more ambitious objectives?

How is a competitor likely to compare who is doing this successfully? How will that impact your business?

Warning signs that not doing this is negatively impacting business right now:

In terms of day to day problems you may notice, we’ve compiled a handy list of 21 Indicators that lack of tech is slowing scaleup growth, some of these are:

Slow, manual and error prone processes rely heavily on paper or spreadsheet software
Reports are not accurate, not trusted and are slow/manual to create
Data is not used to make evidence-based decisions, key decisions are made on assumption and not evidence
Adding more people just makes things slower
Manual admin work leads to repeated mistakes

Zooming out, we generally see these problems:

There is no technical expert within the business, meaning tech is not an informed consideration when the leadership team make decisions
There is little to no coordination amongst active projects (different people running projects with no coordination). There may be competing solutions/software in the business (e.g. 2 reporting tools), or solutions which can’t talk to each other, making automation harder
Technology is put into place to fix current issues, without thinking longer term. Thus, this technology reaches a natural limitation and must be replaced later, after it’s already embedded into the business – this is painful
The ROI generated, nor the problems solved by technology implemented, are not understood, meaning it’s not clear if it was worth doing or not
Problems reoccur and build up over time, meaning more and more time is spent firefighting
Competitors are more competitive and innovative, and are accelerating this gap

What should a technical/digital strategy achieve?

Ultimately, your business objectives.

It is important that a technical strategy empowers the business, to ensure that the execution of this strategy leads to paddle strokes which match the drum beat of the business.

Lack of coordination increases chance of failure.

What should be empowered/achieved?

Remember that digital & software are a conduit, not the objective. A technical strategy must demonstrate how it will enable business objectives
What are the key objectives in the business strategy? How will technology either empower or achieve these?
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An understanding of where the business is now, what will need to change to allow this transformation?
What does success look like? How do we measure whether the execution of the strategy is working or not?

A digital strategy must not act as an enabler of the blind adoption of technology because it seems like the right thing to do. It must empower business objectives.

We recommend in our DIY Digital Transformation document an approach which considers at least the following:

Adoption of technology & automation of processes
Use of data to drive decision making
Continuous Digital Improvement
Process documentation

How do I do it?

We have detailed in our DIY Digital Transformation document an approach to achieve this.

Below we’ve listed some excerpts as questions:

What are your business objectives, and how should tech be used to drive those forward?
What does success look like? How will you measure that?
What are the current pain points in your business?
What will your business look like if you eliminated these pain points?
Do you have your current processes mapped & documented? Is this documentation used? Would automating these generate a ROI?
Are your processes enforced via software? Is it easy to make a mistake in any of your processes, or bypass key gate checks?

Who should be involved?

Less than 30% of a company’s technology vendors are actively involved in their digital transformations.

A business implementing technology without an overall strategy, and lack of coordination between staff/suppliers, is like a rowing boat where everyone paddles in different directions. It is common in this situation to see the following pitfalls:

Technology implemented for the ‘now’, not the long term, leading to problems later. e.g. duplication of effort and wasted time/resource
A lack of communication, resulting in staff/suppliers making decisions which negatively impact other solutions managed by other staff/suppliers
No single person has a top down strategic view of the whole tech landscape in the business, reducing coordination and increasing the chance of failure and surprises

To reduce that risk, it’s important the following people are involved:

Someone from the leadership team to steer at a high level & provide strategic input (e.g. a Technical Director/CTO/Operations Director/COO)
Someone reporting to that person to manage the day to day execution of the plan
Key technology suppliers who manage key software/infrastructure

From here, if there is someone overseeing all projects, and if everyone is aware of the plan, it reduces the changes of failure.

It’s also worth considering who is able to champion this as a day to day activity from within the business? Does anyone have the skillset, or is coachable?

Empowering a person to drive this forward day to day, ensures that it's not just thought and strategy, but that there is action driving the plan forward.

We have no one with the technical experience to execute this, what next?

It’s important that there is someone present who understands technology from a strategic perspective, and who is able to bridge that gap between business strategy and technical strategy.

Relatively few SMEs have a CTO/technical director in the business, that person would normally fit the bill.

If that is the case, the following are options:

Hire a CTO

“The median salary in 2019 for the job title CTO was 80,000. A chief technology officer in the bottom 10% of the salary range made 49,000” – CTO Academy

There will be a natural point at which employing a CTO makes sense. If you’re a technology business by nature, that is likely to be relatively earlier in the journey, especially if you’re looking to raise investment.

Hire a Virtual CTO

This may be a good bridge with a lower cost than a full CTO, but you’re paying consultancy rates, so expect to pay around £1-2k per month.

Use an existing technology partner

Providers like Wubbleyou strive to be more than just a software/solution provider. We often input (or lead) on wider technical strategy, simply because we’re the most technically capable entity involved with the client.

We’re able to provide further value, as understanding and shaping long term technical strategy ensures we consider that when executing shorter term projects.

When taking this approach, it’s important that you build a strong relationship with your solutions provider (like us) to ensure everyone is aligned. It’s important to:

Ensure that mutual trust exists
Ensure everyone is honest & transparent. The strategy naturally involves solution provider (as they are probably delivering key elements)

Why don’t businesses do it?

IDG lists the biggest obstacles in achieving success with digital business as:

Lack of sufficient budget (39%)
lack of staff and/or correct skill sets (36%)
the need to replace legacy systems (34%)
cultural issues (33%)

We also don’t know what we don’t know. Without the technical expertise in the first place, how do business owners know what is possible?

Let’s face it, it’s hard – but it has high reward when done correctly. We recommend following a crawl, walk, run approach. At a high level, this looks like:

Understanding high level objectives (business strategy objectives), and create understanding of how tech would support this, create objectives for a multiyear technical strategy which align with business strategy
Understanding easy wins, what are the painful/costly processes in the business which if resolved would see an immediate Return on Investment
Use this momentum to learn and create confidence/buy in throughout the team, and free up budget for further reinvestment. This starts to become cultural
Incrementally undertake more ambitious projects to increment closer to strategic objectives, by creating 90 day and 12-month objectives

Conclusion

Technical/digital strategy is hard, but rewarding when executed correctly. Technology is a way to leverage your business strategy, and must be used to empower and accelerate the business towards the achievement of your business objectives.

Digital-first companies are 64% more likely to achieve their business goals than their peers
Scaleups with no technical expert in their leadership team, are not likely equipped to create and execute a technical strategy
Scaleups who are using an external software/IT provider, should involve them in technical strategy

What are your barriers to creating and executing a technical strategy, and how could we help?