Advice to investment executives approving new technology investments
Introduction
According to many studies, 68% of all software IT initiatives fail. Poor requirements analysis cause a vast majority of these failures, meaning projects are doomed right from the start.
To complicate matters, for the first time C-Level Executives at large funds are starting to select software solutions for themselves – tools that give THEM the data, visibility, KPI’s and dashboards to deliver confidence in deal selection, capital investments, and resource allocation decisions.
“The Titanic didn’t sink because of lack of tools and advanced technology in the engine boiler room. It sank because the captain didn’t have real-time visibility into forward-looking risks on the horizon, right in front of the ship. That is a recipe for disaster in the investment world too.”
This requires a different kind of decision-making process; one where the exec needs to stay at the table and drive the decision making, because it affects the senior leadership of the fund and the impact on the overall performance of the fund.
This is a critical behavioral change needed from the C-Suite versus the software selection and approval process from the last 30+ years, which entails approving enterprise software for a functional department. The head of investment, for example, will push for a CRM Solution; the CFO for an accounting/ERP system, etc. Decisions are based on a business case of the ROI, researched and presented by a departmental head. That process is well established in the corporate world, large or small.
The purpose of this article is to offer some advice, from experience and observation, on how best to select an executive software technology solution to ensure that decision doesn’t fall into the 68% failure category.
This may sound simplistic, but there are five critical steps that, more often than not, are not followed or thoroughly completed in the software decisioning process. This applies to choosing any software technology.
- Clarify the top 2-3 business outcomes you want to achieve over the next 12-24 months
- Assess the major risks/gaps to achieve those business outcomes
- Identify the real root cause of the major risks gap
- Quantify the cost of living in the current state of affairs (cost has to be quantified in terms of risk, time and money)
- Develop a solid specification tied to fully addressing the root cause
Unless you have all 5 questions answered thoroughly, you should not approve any software expenditure.
Step 1
Think of the business outcome first – where do you want to be in 12-18-24 months?
Think of the business outcome first – where do you want to be in 12-18-24 months? This is usually well documented, but what are the 3-4 critical business levers you want to achieve? Competitive advantage? Technology differentiation? Growing market share? Increased EBITDA? Having a clear picture of the key business priorities – the outcomes in 1-2 years – will keep you focused through the rest of the process.
Step 2
Map out biggest risks and obstacles in the way (along with senior leadership).
Diagnose the pain points, the gaps, and stress test every part of organization for failure points. Be honest about the organizational weaknesses. They can become your strengths if properly diagnosed and treated.
Step 3
Understand the root cause (I mean REALLY understand it!)
I have a great story to highlight this…
I once asked a CEO of a large, publicly-traded asset owner in a private “off-the-record” conversation what was his biggest problem. His answer was “cash on hand, cash flow, cash collection”. He said his team struggled with supplying the banks a complete document set in the timelines required. With a single document missing, the bank wouldn’t fund the next phase of development, hence tying up several hundred million dollars of cash on hand. The bank had a 30 day cycle to resubmit. Now the company was hamstrung to start the next project. He assigned one of his senior executive the task to see how the organization could improve its process with their banking partners.
We got permission to help diagnose the problem and find out the root cause. When we met with the senior executive assigned to look into the problem, he had concluded that the problem was “document management”, and he had submitted a plan for replacing the current document management software. As we continued our diagnosis, and met with the team responsible for collecting and preparing the document packages, we discovered the real root cause was the “process” (or lack thereof). They had a 300 page process manual but no way to digitally institutionalize it across the organization. This is why mistakes were being made in submitting documents. What they really needed was a digital workflow process and collaboration platform parsed down by each functional group. A new document management system would not have solved the real problem.
Getting to, and understanding, the real root cause is critical, and may take some extensive analysis. Everyone must be on the same page.
Step 4
Quantify the cost of living in the current state of affairs.
It’s really important to understand the cost of scaling the business, meeting your business outcomes with your current business processes and tools. Make sure you quantify three critical dimensions:
- Cost of resources required
- Increase in operational risk
- Agility and accuracy in investment decision making
This will come in handy in appreciating and valuing your investment in a new software technology platform. Without this, you may end of walking away from a solution that appears too expensive but offers the most value to your organization in the long run.
Step 5
Build a strong product specification for the solution you need.
You don’t hire anyone without a job spec, right? You don’t buy a house without a list of requirements for the realtor. It shouldn’t be any different for enterprise software purchases. Armed with the critical business drivers, an understanding of the gaps, and insight into the root cause, creating a robust and detailed specification should flow pretty easily.
In summary, this new paradigm in executive software purchases (for me, by me) means top executives need to stay involved all the way through the process to ensure they get exactly what they need to drive the business. If you decide to delegate any part of this to someone else (internal or external), be absolutely sure that your business outcomes and major risks/gap are well documented and internalized. It’s a new executive skill, but mastering it will pay significant dividends in the end.
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