Why is Getting an ROI out of Technology Difficult?

The nature of technology is such that it impacts everything at the business - employees, work culture, various departments (sales, marketing, HR, accounting, manufacturing), and so on. Without clearly defined goals, established performance indicators and aligning the technology with existing work culture, organizations struggle to arrive at their ROI on technology.

Here are 5 challenges that organizations face when calculating ROI on technology:


1. Difficulty Measuring the Numbers

Having clearly defined cost models and mechanisms to connect financial metrics with operations is crucial. Any small business that lacks the ability to measure the aspects they wish to improve will fail to drive true impact from any technology. Without these models and metrics, businesses will struggle to ascertain whether a project benefited the bottom line. 

For example, if a manufacturer needs to improve recruitment and they have landed on a website overhaul as the solution, they may track “organic website visits”, “number of job applications”, and even retention rates. These metrics are tracked in different sources but they all tell a story as to whether the new website is really paying off.


2. It Takes Time to See Results

New processes can take time to adopt and show results. Businesses usually look at calculating ROI based on the investments over a short timeline. However, they overlook how long real transformation can take and how that gradual progress can sometimes be hard to see or measure. 

For example, employees may find it challenging to migrate to a new CRM. Consequently, short-term productivity may fall but over the long term it may lead to higher efficiency. When implementing new technology, management needs to look at the long-term benefits of their investments rather than limiting themselves to evaluating the short-term impact. 


3. Not Having a Clear Business Goal 

Not defining the specific business capabilities to improve when implementing new technology is a common mistake. While new technology has the potential to bring several benefits, deploying just for the sake of it may not yield the expected results if a goal wasn’t discussed in plain terms. Small businesses must be exact on what core areas they want to improve, whether it’s reducing costs, becoming more agile, improving security, or something else, without defining objectives, businesses run the risk of demotivating the people and eventually resulting in a dud project.


4. Failing to Factor In Existing Culture

Some departments or employees are more open to change than others. And since a new technology often changes how people work in some way, management needs to anticipate the naysayers and target the early adopters to build momentum. 




5. Not Hiring Transformation Experts

The success of digital transformation depends largely on the people who implement it. Executives often start off as champions of the new technology, but before long they are pulled into other projects and unable to stay focused on it, whereas IT experts are good at deploying new technology but then walk away. An expert recognizes the need for their role as the planner, as the person to anticipate bottlenecks and to come up with reasonable solutions. Companies should instead take the help of firms like NSI who have people and processes to carry out digital transformation projects for small businesses in Connecticut.


How can Digital Transformation Help? 

The primary driver for digital transformation is cost savings but it also brings along several benefits:


1. Better Resource Management

Digital Transformation allows firms to integrate resources and data into a centralized pool, bringing together company resources in one place. While all companies are busy collecting heaps of data, only a few are successful in deriving insights from them. Technology transformation develops a system for turning the data into valuable information. This helps produce a unified view of operations, production, finance, business opportunities and customer journey for the management. 


2. Improves Collaboration

Digital transformation gives employees access to customized tools and improves collaboration between departments. It promotes a digital culture by merging individual team needs to benefit the entire organization. Firms can also conduct surveys, feedback assessments and events to gauge employee satisfaction and take note of the challenges they are facing. As the data is centrally collected, management can check and address the bottlenecks immediately.


3. Increases Productivity

Access to sophisticated tools allows employees to streamline workflows and automate repetitive processes. This improves the efficiency of team members. Digital transformation also lets employees innovate and come up with unique solutions that contribute to improving customer experiences in the future.


4. Higher Revenue and Profit Margins

The increased productivity translates into higher revenue and improved profit margins. According to a report by Deloitte, companies implementing digital transformations were likely to show industry-leading revenue and profit margins. Companies on the higher side of digital transformations reported a 45% increase in revenue and a 43% increase in net profit while those on the lower side posted a modest 15% increase in revenue and net profit. 


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Summing It Up

New technologies are highly effective at improving bottom lines, but only if implemented in a gradual and smooth manner. Understanding the work culture, balancing human and technology resources, and defining business goals are critical to making digital transformations successful. With the help of an experienced Managed IT service provider firms can ensure the costs are reasonable and the desired ROI on technology is achieved.


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About The Author

President of NSI, Tom has been helping small and medium businesses succeed in Connecticut for over 25 years.