Well, folks, I’ve got some bad news for you: Summer is over. Which means it’s time to bear down for the rest of the year—and start planning for next year as well. In other words… it’s budget season! Yay!!!
Wait… what?!? Who loves budget season? So, maybe budget season isn’t your favorite time of year. It’s not fun to have to build your business case for digital again and again, year after year. At the same time, putting together a compelling budget story for your digital efforts doesn’t have to be painful. As this episode of Thinks Out Loud shows, there are a few fairly simple things that you need to keep in mind when you’re working to build the business case for digital in your organization.
As you might imagine, it starts with having your numbers straight. Let’s not kid ourselves; numbers matter. But other things matter just as much. Some of these include:
- Knowing your audience
- Thinking in terms of that audience’s business priorities
- Telling a compelling story about why your numbers matter to the organization more broadly.
What else matters? How can you use these insights to build an effective business case for digital? This episode of Thinks Out Loud has you covered.
Want to learn more? Here are the show notes for you:
Revisiting "How to Build the Business Case for Digital in Your Budget" — Relevant Links and Show Notes
- Measuring the Value of Digital Goods and Services – MIT Initiative on the Digital Economy
- Digital Transformation Changes How Companies Create Value
- Five metrics for CEOs to measure digital success | McKinsey
- Is the 10/90 Rule of Web Analytics a Practical Measure?
- The 10 / 90 Rule for Magnificent Web Analytics Success – Occam’s Razor by Avinash Kaushik
- The Secret of Successful Analytics? | Smart Insights
- How to Measure Anything: Finding the Value of Intangibles in Business: Hubbard, Douglas W.: 9781118539279: Books
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- Customer Focus
- A Modern Content Marketing Checklist. Want to ensure that each piece of content works for your business? Download our latest checklist to help put your content marketing to work for you.
- A Brief Introduction to Thinks Out Loud. As a bonus, we’ve also included this PDF document that highlights some of our core episodes to help you dig into what the show is about. We think it will help you capture the show’s essence while you’re working your way through the 300-plus episodes published so far. Download it here.
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Past Insights from Tim Peter Thinks
You might also want to check out these slides I had the pleasure of presenting recently about the key trends shaping marketing in the next year. Here are the slides for your reference:
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Transcript: Revisiting "How to Build the Business Case for Digital in Your Budget"
Well hello again, everyone. Welcome back to Thinks Out Loud, your source for all the digital expertise your business needs. My name is Tim Peter, this is episode 353 of the big show.
The Most Exciting Topic in Digital: Budgets and Building a Business Case for Digital
And we are going to talk today about the most exciting thing in all of digital, and that is budgets. Now I know everybody is super excited, but we’re getting into the summer here, people are starting to think ahead towards the fall and starting to think about how do we get the budget for later this year or for next year around where we want to invest in growing our digital capabilities and growing our businesses overall. And there’s really no better time to get started than now, right? You’re going to be thinking about these questions in a big way within a handful of weeks or a couple of months at most. So doing the groundwork on how to build a successful business case for digital in your organization is critically important.
It’s also really important to realize that without sufficient budget to do what you want to do, you can’t actually do what you want to do. So I actually think budget season is an exciting time because it allows you to start thinking about where you want to be in the longer term.
So yes, it might be a little weird, but I actually do find this topic exciting and incredibly important, and that’s why I think it’s worth thinking about.
One Size Does Not Fit All in Building a Business Case
Now, I want to be really clear. There is going to be some differences in different industries, and obviously lots of differences in different companies in terms of how you go about budgeting your spending on digital, whether we’re talking infrastructure, whether we’re talking operating expenses, and things like capital expense versus OpEx and things like that. We’re not going to get too into the nitty gritty of that.
I’m happy to have a discussion with any of you, just drop me a line at email@example.com or at (201) 305-0055 if you want to have that discussion. But what is true is there are some fundamental things that stay constant regardless of the business you’re in and regardless of the industry you’re in, and that’s what I want to talk about today.
The Business Case for Infrastructure
Tops among these is that many people I know in digital have a tough time building a business case, especially for infrastructure, especially for the things upon which we build. So whether we’re talking content management system or a digital asset management (DAM) platform or we’re talking about content distribution platforms or connectivity or the like, analytics suites, yeah, those are all things that are tough to make a case for. But I think as we talk through this, you’ll see it’s actually not as hard as you might think. Don’t misunderstand, it’s always somewhat hard. And obviously in certain organizations, it can be harder, but if you follow a fairly simple process, you can make it easier and not maybe as painful as it might often be.
The First Step Towards Building a Business Case for Digital: Know Your Audience
So the first of these is, know your audience. Who are you talking to? Who are the decision makers in this process, and how do you make it easy for those decision makers to say yes? You might be reporting to the CEO, or the president of your company, or the owner of your company if you’re a smaller business. Or you might be speaking to somebody who’s in a middle management role, who’s your boss, depending on where you are in your career. But you have to think about what is it that makes it easy for those individuals to say yes.
Think Priorities, Not Projects: What Are Your Decision Makers’ Overarching Business Priorities?
So start with, know their priorities. McKinsey has a great point that I think people overlook often when we talk about digital: "Think priorities, not projects." The company has some place it’s trying to get to. The company’s leadership, your boss, whomever you’re talking to has things that they are trying to accomplish. So what do they care about, those folks that you’re talking to? Where are you trying to go as an organization, not just as a digital team, but as an overall company? And how does your investment in digital contribute to that? Are you looking at revenue growth? Are you looking at cost reduction? What’s most important to the people that you need to convince?
Improve Time to Market. Now, let me give you a couple of thoughts on how you can help convince them with those. First, think in terms of what can you do to improve your time to market. One of the reasons that’s so important is it helps with revenues because you get things in front of your customers sooner and gets you a quicker return on spend. Whatever dollars you put out there, you get back faster or you start getting back faster. It also helps with cost reduction because you tend to spend less on projects and initiatives that take less time. So when you’re thinking about infrastructure, is this an infrastructure investment that improves your time to market that can help you make that case.
Finding and Retaining Employees. Think also in terms of how does this help you attract employees or retain employees. We live in a space right now where it’s really hard to attract talent, and I’m going to come back to talent a lot in just a moment. But if the infrastructure helps the company attract or retain talent, and I know you’re saying, "Well, how can that be the case?" I’ll tell you one in just a second, but that’s something where you might want to include that in the message you’re having to the folks you’re talking to.
So how does that help with employer retention and employee attraction? Well okay, this is a little bit of coming at this the long way around. But if you think about it, people want to work for companies that share their values. People want to work for companies that look like they’re moving in a positive direction.
If you are investing in your digital platforms. If you are investing in things that make you more responsive to customers, you can begin to tell a story about this is a company that sees a future. This is a company that’s trying to build an exciting future. This is a company that cares about delivering on its priorities, and this investment illustrates that fact. Now, okay, admittedly, if you’re doing a new CMS, a new content management system, maybe that’s a little bit tougher of a sell, but it still is a sign that the company makes investments in things that matter, that we are a digitally oriented company and we are thinking about these things.
If you’re investing in things like APIs to open up your data, to open up your insights and your information to additional partners, it actually shows a greater commitment because it shows we’re thinking about the long term future of this organization and how we can better partner into a larger ecosystem. So there’s all kinds of things you can do there in terms of telling that story.
Better Inform Your Decision-Making Process. And then the last one, particularly when we’re talking about infrastructure is thinking in terms of better insights that drive revenue growth, cost reduction, or both. Are you investing in things that help you get better data about what’s working and especially better data to inform better decisions? As Douglas Hubbard says in his classic, classic book, “How to Measure Anything: Finding the Value of Intangibles in Business,” the point of any measurement is to reduce uncertainty so that you can make better decisions. That’s all you’re really trying to do here.
So think in terms of how are you helping the senior leaders or the folks who are the decision makers on your budget make better decisions and more quickly, and make sure you’re including that in your messaging to them. With regard to the cost reduction versus revenue generation story, I do want to be fair. Obviously, you have to think about what matters to your audience, what matters to the decision makers.
Think in Terms of Business Model Reinvention
I will also say that my experience with clients and other companies, and lots and lots of research shows that digital has the biggest return when it’s used to drive innovation and business model reinvention. So you might want to include some revenue story in there as well, even if you’re thinking primarily in terms of a cost reduction play.
Just as an for instance, there’s a story that’s going around today about on Axios is talking about how The Washington Post was thinking of selling its content management system platform, the division that makes this. Instead of just selling the product, they were looking at selling the whole division, supposedly. And now, supposedly or reportedly, they’re thinking has shifted to, "No, we want to keep that," because they believe they’ll make more money selling the platform to other businesses than they will from their news division in the long term. Now, it could be that they’re just saying that because they want to pump up the price of the division and they want to sell it, but clearly the fact that they’re making tens of millions of dollars per year and they project that it could be a nine figure company pretty quickly, strongly, strongly suggest that they are seeing great returns from this in terms of just pure business model reinvention.
Tell a Story to Build Your Business Case for Digital
Once you know your audience and once you know the priorities of the organization, where you are trying to go and why that matters for the business, start thinking in terms of the story you’re going to tell. Now, I know this is going to sound weird when we’re talking about budget, but we’re thinking in terms of the story itself. We’re going to get to the numbers, I promise we’re going to get to numbers. But people aren’t swayed by numbers, they’re swayed by stories. Can you paint a picture of where you’re trying to go, and why this matters to your business, and how it aligns with the priorities of the organization, with the overarching objectives of the organization? Again, you’re trying to make it easy for people to say yes. What can you do that will demonstrate that story in a meaningful way?
For instance, we were once working with a client that was embarking on a major internationalization effort, they wanted to expand around the globe. They had a business presence in many countries, but their digital presence in those countries was a bit weaker to be perfectly candid.
We looked at not just the economics of various countries, but we drew customer stories from folks who actually were struggling to work with the company because of their lack of investment, and wove that into the narrative of not only how this would affect people economically, but also how it would affect the perception of the business, and how the business was perceived at that moment. That resonated with the senior leaders who wanted to show they were good partners in the countries that they were operating in, and it helped get the budget approved.
By the way, in terms of how you can connect this to things like infrastructure investment, because we had to make changes to their digital platforms to deal with internationalization, different character sets, longer words, the translation operation, et cetera, we also used that as a time to invest in greater accessibility. Because if you think about it, many of the things that you’re doing for people who are visually impaired or hearing impaired, who are using aspects of your website and your digital presence, is like another language. So we married those two ideas together and were able to get funding for the overall initiative at the same time. Why? Because it was in support of what the company was trying to do anyway, which was expand globally more effectively. But it became part of a narrative.
And, Of Course, Onow Your Numbers
Now, I talked about knowing your audience, I talked about telling the story. Obviously, when we’re talking about budget, the last thing that you have to focus on—and you do have to focus on that; I don’t mean this in the sense of the last thing you need to focus on—I mean the next thing you need to focus on that just happens to be third in the list, is you do, of course, have to know your numbers. I’ll tell you a funny story from my own past, it’s a little embarrassing, but it’s one of those things that you do. We built this massive spreadsheet, my team and I, to make the business case for some work we were planning to do. And we knew that this actually had the ability to drive a fairly significant uptick. It had the ability to drive about a 10% improvement in overall revenues. This was a major, major investment with a major, major return on it in terms of what it was going to do for the company.
And we had a typo in the spreadsheet, and we were so focused on the details that we missed the bigger picture. And in fact, the typo in the spreadsheet didn’t show that there was a 10% improvement, it showed that there was a 100% improvement, which was a silly mistake to make. But I was sitting down with my boss, I was taking him through it; I reported to the CEO at the time. And I was sitting down with my boss and I took in this whole report and everything else, and walked through the whole thing. And he asked to see the spreadsheet we’d done and the like, and I pulled it up and he said, "So I just want to make sure I understand this. You are saying this will return as much money as we intend to make as a company next year?" "Yeah,” I said, “I’m going to bet there’s a typo in there somewhere. Let me take that back and get that reviewed and we’ll come back to it." And he was like, "Yeah, no problem." He was a pretty cool guy. But it was funny example of how you need to make sure you have your numbers totally solid.
Invest in People
Now, one thing to think about in those numbers is, think about how you’re investing in people, as well as technology. There’s an old rule of thumb Avinesh Kaushik came up with years ago with regard to analytics, which he called the 10/90 rule, right? Which for every $10 you invested in analytics, make sure you’re spending $90 on the people to do something with those analytics. Now let’s be fair, A.) don’t take that as gospel, as I’ve seen many people point out over the years. The flaw in that is if you’re using something like Google Analytics—and I’m just using analytics as the for instance here—but if you’re spending $0 on Google Analytics, then that means, well, for every $10 you spend, you spend 90 bucks on people. Well, we’re spending $0 on analytics, so 90 times zero is still zero. So think of it in terms of aspirationally.
Share Knowledge Across the Organization
The other thing you really should think about is people, particularly in digital, are getting really hard to come by right now. So make sure as you think about what you’re going to invest in people, but can that investment be in training people within your organization? Can you democratize the knowledge so that people can self-serve and do some work on their own there? Can you automate, and what people do you need in addition to that. It should be built into the budget, but you have to have a story there too, about where you’re going to find the people and how you’re going to close the gaps there.
Don’t Forget “Intangibles”
The next thing that I want to say with regard to numbers is, don’t forget intangibles, things like brand value, things like customer experience, the qualitative measures, as well as the quantitative and the more intangible measures. If you’re not sure how to measure those things… Again, I’ve recommended this book a moment ago, but check out Douglas Hubbard’s book, "How to Measure Anything: Finding the Value of Intangibles in Business." There are so many great insights there; I’m a big fan of the book, I’ve talked about it for years… in terms of how you think about: A.) what those are; And, B.) how you assess them.
Can You Reverse Any Decisions?
And then the last thing you want to think—and this could be part of your story—but the last thing you want to think about in terms of your budget is think in terms of which decisions are you asking for that are reversible, right?
One of the reasons agile is so popular is, can we start something and then stop if it doesn’t look like it’s going to work out? Can we invest a little to learn a lot?
So if you want to make it easy for people to say yes. Give them an out later, if you can. That’s not always going to be the case, not always going to be the case, but keep that in your back pocket for where it does exist. For the things that aren’t reversible, make sure your story and your numbers line up even better because you’re asking for a bigger commitment. So you’ve got to think in those terms to say, what is it we’re trying to get done here and how do we tell this story in the right way?
Conclusion: How to Build the Business Case for Digital in Your Budget
So how do we budget for digital and how do we invest in it in a way that we know is going to work? Know your audience, know their priorities, tell a story about what you’re trying to do with digital and how it contributes to those priorities. Make sure you know your numbers and that they support the story that you’re trying to tell, including measurements of intangibles. Think not just about digital, but also the people and how you need to invest in those as well. And of course, make sure you know which decisions are reversible so that the people you are asking to say yes can make a decision about, is this something we must commit to fully, or do we have a way to change course later?
The goal always is to make it easy for the people who are going to sign off on these decisions to say yes. If you can tell a story, if you can show the numbers that back it up, if you can make the decision reversible or at least understand where the opt out points are, you’re going to make it much, much easier for people to do that and also deliver on the priorities that you’re promising in the long run.
Now, looking at the clock on the wall, we are out of time for this week. I want to remind you that you can find the show notes for today’s episode, as well as an archive of all past episodes by going to timpeter.com/podcast. Again, that’s timpeter.com/podcast. Just look for episode 353.
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