If those who control the purse strings of digital continue to think of it as a capital cost they will kill it’s effectiveness.
Some days I feel like a failure. I pride myself on my ability to show management the importance of digital. To encourage them to restructure so they can better serve their connected consumers. I have even become somewhat of an expert at transforming organisational culture to be more user friendly.
But despite this I fail in one simple thing. I cannot get organisations to move digital from one column of a spreadsheet to another.
Brace yourself for some financial terms
When it comes to business there are two basic costs. There is capital expenditure and operational expenses.
Capital expenditure is money an organisation spends to buy a fixed asset like a building or some equipment. An operational expense is money spent on the ongoing running of the business. This often involves things like wages or rent.
Digital is not a fixed cost
My problem is that too often management see digital as a capital cost, rather than an operational one. In the eyes of management and finance you ‘buy’ a website, content management system or some other digital ‘asset’.
In essence they see digital like purchasing a building. You buy it and then spend a small amount on ongoing maintenance. But in truth it is more like planting a garden. Yes there is an initial cost but there is also a significant ongoing investment in that garden reaching its maturity. Planting the garden is only the start.
Why digital is an ongoing expense
The idea that digital is a capital expense comes from how we have dealt with websites in the past. We have redesigned our sites every few years and then abandoned them in the intervening time. This made sense in the past where websites were little more than brochures. But when a website becomes business critical this thinking fails for three reasons.
1. Periodic redesign is wasteful
The traditional pattern of redesign is wasteful. Every few years an organisation decides to relaunch their website. They launch the website and then abandon it except for some minor content updates. Over time the design looks dated, the technology unfit for purpose and the content incorrect.
In the end the website becomes an embarrassment and the company stops referring people to it. Management then intervene and commission a redesign. But by this point it is too late. For a significant part of its life the website has not been fit for purpose.
When we do finally redesign our site, we replace the whole thing. We do this despite some elements of it still being serviceable. It is like buying a house, failing to clean it and buying a new one when it becomes dirty! (Although I confess I would like to do this if I could afford it. I hate housework.)
2. We only understand user needs post-launch
But the waste does not stop there. We build features into our websites that are not needed. This is because we only understand what users want after we have launched the site.
No amount of research replaces seeing real users interacting with a real website. That means we only understand if we have got things right once we have launched the website. Unfortunately this is exactly the same moment the money dries up if we see digital as a capital expense. The site goes live and everybody walks away.
3. We waste money building unwanted features
As digital professionals we know that we don’t understand users needs until after we launch. That is why we want to create a minimum viable product. We allow the user to shape the digital services we provide by launching a basic service and then responding to feedback.
But when management see digital as a capital expense this is impossible. Capital expenditure turns our digital service into a project, rather than an ongoing investment. Projects need fixed budgets and that means fixed specifications. Specifications that are a best guess of what users want. At worst they are a wish list of what the company would like to build.
This means that organisations over engineer their digital services. For example it is typical for organisations to add features ‘they might want in the future’. That or features they are guessing users ‘might find useful’. It is all guesswork.
Instead organisations should be building the core of a digital service. They should then evolve it based on user feedback and changes in organisational requirements. This is much more cost effective.
Under-resourced digital teams
This capital expenditure thinking leaves the majority of in-house digitals teams under resourced. They are setup to provide basic maintenance and yet the demands of digital are requiring more of them. They never have the time to think strategically about the direction they are taking.
It also forces many organisations to rely on outside agencies. Not only is this more expensive, it leaves a business critical component in the hands of a third party. A third party that may not always been available or even in business.
How to encourage the change
Reclassifying digital as an operational expense is becoming important. But it is not always black and white. In a company where digital is not yet business critical the need for ongoing investment is less. But often it has become crucial and yet management have not realised.
My problem is that I don’t seem able to convince management that they have reached a tipping point. Hell, I don't even seem able to convince them that there current thinking is wrong.
So I turn to you. How would you go about overcoming this problem? How do you word this in such a way to convince management? Is this even an issue in your organisation? I would love to hear your thoughts in the comments if you have a moment.