According to Forbes, while the economy may not officially be in a recession, it’s not looking great. Rising rates, geopolitical issues, slowing growth, and increasing unemployment have created a perfect storm of uncertainty throughout the economy.
These macroeconomic headwinds have increased the sense of risk aversion as organizations choose to preserve capital over the potential for a higher-than-average return. Investors and leaders are narrowing their focus to preserve cash, protect profits, and postpone technology investment amidst uncertainty.
Although discretion and prudence are vital during periods of uncertainty, adversity can create opportunities for tech leaders to incrementally innovate1 under capital constraints while improving under operating cost pressures. Given the bleak economic outlook in 2023, tech leaders need to be intentional about balancing the immediate-term needs and the longer-term value-creating opportunities that can be realized through the right technology investments.
Read on to learn the measures you can take for efficient technical innovation in the midst of the economic recession.
Restructure
Given the economic climate, many organizations are putting their focus on business continuity. Executives must weigh driving productivity, cutting costs, and implementing safety measures against supporting innovation-led growth. However, deprioritizing innovation to focus on minimizing risk and conserving cash can have adverse consequences on a business, such as limited growth and increased competition. Instead, tech leaders can restructure their innovation portfolio to meet current enterprise needs while ensuring existing processes are effective and resources are allocated appropriately.
Restructuring2 helps cut costs, improve business operations, and incorporate new and more efficient technology. By restructuring, organizations can optimize their short-term financial performance and strengthen their ability to compete when the economic recession ends.
When restructuring, it’s vital to mitigate inefficiencies within existing processes to ensure your efforts are effective. Tech leaders can leverage technology to help manage all the moving parts, including mapping out a rigorous restructuring framework, building an information base, and stabilizing operations. Technology helps organize and automate tasks while reducing the risks of oversights and errors.
When leveraging technology, leaders should invest in smart tools such as process intelligence to manage the restructuring process. By leveraging process intelligence3, leaders can identify and troubleshoot inefficiencies, determine opportunities for automation and AI-driven innovations, and pinpoint the projected returns on investment (ROI). This can be achieved with automation or process re-engineering. Operational efficiency not only provides cost-saving opportunities but also generates cash flow to be used elsewhere.
Smart tools help companies and their leaders move faster by managing large data pools and making preparing and organizing essential information quicker. It also reduces time-consuming, repetitive, manual tasks in the process, increasing operational efficiency.
Ways To Minimize Inefficiencies In Your IT Infrastructure
Here are some of the ways you can minimize waste and inefficiencies in your IT infrastructure:
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- Develop an IT strategy that highlights the common needs across the organization.
- Investigate and reduce the number of IT solutions used for common problems or needs.
- Conduct an IT benchmark study to estimate the expenses associated with IT delivery as compared to the best practices.
- Conduct an organization-wide audit to understand the current infrastructure’s shortcomings.
- Explore ways to lower the total cost of ownership. This can be rationalization, labor arbitrage, managed services, or standardization vs. customization.
Reconsider
As mentioned earlier, leaders must be intentional about technical innovation investments. With the current uncertainty, sometimes the best decision is to do nothing. Investing in the latest tech innovations and upgrades may help organizations stay ahead of the competition, but negatively impact capital, resulting in financial constraints.
It can be challenging for some organizations to make the decision to punt on projects or pause in-flight initiatives. However, now is an excellent time to evaluate the portfolio and determine if these initiatives are truly must-dos. The goal is to identify areas where you can cut costs and redistribute expenses to infrastructures you actually need and use. This ensures you fully utilize the company’s capital resources for higher returns.
Justification for projects and initiatives that need to be punted on cannot be subjective, as they affect the entire organization. Instead, project sponsors should review the portfolio of initiatives that are both inflight and planned for the upcoming year to determine which are obsolete, which can wait, and which bring value to the company. You should prioritize those that bring value and offer a higher return on investment.
Reinvest
Organizations view IT as a cost center more than a profit center. This is why tech leaders often face difficulties trying to convince execs to invest in strategic technologies. Alternatively, they can continue to invest in existing technologies that improve competitive advantage.
Once leaders identify the projects and initiatives that are must-dos, it’s time to reinvest in them to increase business revenue and profit. Rather than use limited capital resources to fund multiple or new projects, re-investing helps maximize capital used for lower risk and higher returns. However, ensure initiatives are rooted in a sound, believable business case with clear ROI. Such initiatives drive long-term business growth and sustainability.
Conduct a thorough audit of all planned projects and inflight initiatives and determine the cost of each and potential ROI. The goal is to find ways to “finance change” by delivering quick wins that often require less capital, less resource commitment, and offer a faster payback.
Changing Technical Innovation
With a recession seemingly inevitable in the year ahead, tech leaders must implement measures that increase the effectiveness and efficiency of technological investments and innovations. The potential restriction in the flow of capital will result in a fundamental change in how companies organize and implement technical innovation.
By restructuring existing innovation portfolios, reconsidering planned projects and inflight initiatives, and reinvesting in high-ROI portfolios, organizations can survive the downturn and make profits and returns.
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Footnotes:
- HBR
- Forbes
- TDTP
