When was the last time your spend matched your planned budget? Mmmmm. Funny though how we all seem to have spent at least some time devising, or contributing to a careful 12 month plan, based on granular spend and return.
Budget inflexibility can obliterate innovation in a business, and it’s mostly rigid because business fears the loss of its significance. Mainly because it’s the thing to which you can hold people accountable. This is not an excuse to get all fluffy and non-specific, in fact it’s more important to plan to ensure you can deliver the expected results – they will be all the more visible because of their immediacy.
Businesses are now moving much more quickly than the traditional budget. So – what’s the solution? Do we continue to re-justify our mis-matched spend (and wasting precious hours doing so) or do we opt for a more mobile model that can take into account peaks and dips, with an eye on overall income and spend to ensure it’s making good business sense. You of course need a sound business plan, and it’s not realistic to avoid having a clear idea of what you are capable of investing …but the focus should be more on WHERE that money should be directed rather than how much, and to do that a budget needs to be able to think on its feet. Example – a resolution you identified to implement mid year may not be the best, most affordable or capable one when the time comes to roll it in and you are prevented from opting for a better solution because of strict budgetary guidelines. That’s a waste of time and money.
Big business is waking up to this. As an example, we can see that the fixed tech budget is dying. It was recently identified that 56% of businesses now blend operational with central business budgets, moving away from CapEx to OpEx which is driven mainly as departments solutionise via apps independent of IT. This is also reflected in the reduction in acquisition timelines, 3 years ago, 24% stated it would take over 6 months to decide on an important purchase, now 22% are saying 1 month. It’s imperative that budgets are able to keep up (1), and can be understood beyond the tax year.
As a result, quarterly rolling budgets are becoming more popular, as that allows for flexibility with less focus on, ‘does it fit in my budget?’, more ‘do the numbers stack and how quickly can I get it running?’
Budgets for most people are boring at best, frightening at worst – that’s because it often is not built around what can go well, but how to avoid going wrong. Minimum expectations based on wild variables that may not often reflect true events do not foster enthusiasm. Often a budget is based on assumptions and despite how well researched these may be, they can easily turn out to be incorrect leaving you with a big black (or red) hole to fill. And then we turn to cost saving measures – of which most will not be felt as immediately as a cut is made. Big savings are often the result of optimised processes and workforce which can take time to bed in.
But what if you could build a financial plan based around fact? Around the hope that the business is going to grow and evolve? Things change. Organisations should be thirsty for change as that is how it is likely to keep abreast of its industry and continue to win customers.
Looking at technology specifically… many services are based on promises of agility and speed so shouldn’t we expect tech vendors to live by that in all aspects of their own business and adapt their pricing structure in line with this? Expectations change. Say, you decided you need 100K for Project A, but now you need to add a whole new team into the mix (thanks ‘merged budgets’). It would be very inconvenient but not be unbelievable for you to need to re-evaluate and tender the whole project if aligning to a traditional budgeting model.
Scaled, adaptable pricing for technology specifically is the way forward, especially as IT increasingly sits more deeply at the heart of critical business activities. It will allow businesses to swell and contract in line with what is best for their organisation in a risk free way, and without the need of a crystal ball.
The team at FLOvate are committed to empowering individuals in business that need and want to adopt new thinking for their BPM to drive innovation and ensure their organisation is kept at the tops of its game. Speak to us about how we get it done today. Oh, and we also offer a scaled pricing platform – find out how much your solution will cost here.
No one will be angry you have made a better decision, but some may be frustrated with the change – read our blog about fear of change.
- Source: (1) ComputingWeekly.com