The business value of an organization is calculated with the sum of its various parts, which could include tangibles, such as its revenue, assets, net income, operations, customer base, employees and systems, and intangibles such as for instance strategic positioning, competitiveness and customer experience. What is interesting is that there is no one standard formula to calculate business value, but rather how the value is perceived by a potential buyer or investor.
In the calculation of business value, technology is increasing in importance as a reflection of a company’s efficiencies and scalability. This is also evident from the fact that the tempo, magnitude, and effect of innovation and disruption due to technology have accelerated exponentially. Point of fact, technology is well on its way to becoming the primary influence on business strategy, decisions, and value-creation models. Whether your firm’s strategy involves exit though an IPO and strategic sale or growth by means of M&A or roll-up, building a strong technology scaffolding helps increase business efficiencies in context of long-term investment goals and achievements. Investing in IT is the number one driver for ensuring successful exits.
As the relationship between technology-based business performance and business value becomes more apparent, most top companies are paying more attention to their digital adoption strategy. According to a recent PwC Digital IQ report, this number is higher than 70%.
Effect of technology in current business landscape
Business and technology leaders across industry verticals are fast realizing that laying down best management practices and allocating a good R&D budget are no longer adequate to compete against the ever-changing market forces. Such legacy organizations are increasingly facing stiff competition from new-age, technology-driven businesses.
Integrated platforms are improving efficiencies by streamlining workflows, eliminating manual workarounds, and reducing operational risks. This is supported by well-established and streamlined security checks for accessing control, securing communication and data, and ensuring compliance with regulations.
Digital systems are essential to enable effective communication and to improve collaboration amongst the workforce, especially in cases of off-site employees who require real-time collaboration with their team members and process heads to carry out their work proficiently.
The new technology-based systems and processes that run business applications require data management that provides analytical insights to guide decision-making and strategic planning by various stakeholders. In addition to that, good data management aids in compliance with data privacy and protection laws.
Technology is bringing transformation not only in the existing business models, but end-user expectations. Customers are now seeking seamless experiences, based not only upon better knowledge but enhanced possibilities with the click, swipe or tap of a finger through an omnichannel presence. Organizations that have the ability to reimagine their omnichannel methodology to create a distinctive customer experience are likely to get off the back foot and get their bearings back faster. This is corroborated by the fact the customer experience leaders saw a lower slump, faster recovery, and three times higher the total shareholder returns compared with the market average in the long run, during the financial crisis of 2008.
Technology and business value – connecting the dots
There is no denying that digital technology delivers a number of operational, strategic, and competitive advantages.
However, it is imperative to find a good fit between technology and organizational deliverables to achieve desired impact on the business’ revenue, costs, and overall productivity. In doing so, business leaders and technology heads must strive to find a balance between innovation and maintenance of existing systems and processes. It requires building a collaborative relationship with service providers and ensuring company’s technology systems are up to date.
Impact of a robust technology infrastructure on the company’s business value can be further realised by evaluating cloud deployment to cut costs, that can help reduce the internal IT footprint and the corresponding need for in-house support.
A key fact to keep in mind is that technology alone cannot enhance a business’ value; the role a leader plays in delivering strategic direction and ensuring technology is a good fit is what contributes to the business value. However, there is no denying the fact that strategic investments in technology can help ensure your business stays ahead in the game –providing you the leverage to optimize and monetize your business value.