ILLUMINATION Book Chapters
Digital Intelligence — Chapter 4
Intelligence for Financial Aspect of Ventures
Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6a, Chapter 6b, Chapter 7a, Chapter 7b, Chapter 8, Chapter 9, Chapter 10, Chapter 11, Chapter 12, Chapter 13, Chapter 14, Chapter 15, Chapter 16, Chapter 17, Chapter 18, Chapter 19, Chapter 20, Chapter 21
Introduction
Money, especially in the form of return on investment, predominates in digital ventures. From experience, the financial aspect of digital transformation initiatives has been the most important one. This aspect requires specific intelligence.
Let’s put it this way. Even if we create a pinnacle of architecture with impeccable designs, if the solution is economically not viable and does not produce compelling returns on investment, the business stakeholders will consider the venture a failure.
Therefore, financial intelligence for any digital venture is mandatory. The financial aspect always gets priority at the executive level.
In this chapter, I provide a high-level view of digital cost and value propositions. Understanding the financial aspects makes valuable contributions to our digital intelligence.
Awareness of Digital Venture Costs
Everything in digital ventures generates substantial cost. We categorize them broadly as known and hidden charges.
Dealing with the known costs can be relatively more straightforward. The standard approach is to apply some logic using project management discipline and allocate necessary resources to address them.
However, dealing with the hidden costs can be daunting.
Hidden costs are the more significant part of the proverbial iceberg. Even though financial teams manage the cost, the technical team needs to find ways to make digital solutions inexpensive, affordable by lowering the cost gradually without compromising quality. Quality considerations are the critical requirements of digital transformation initiatives.
Quality Versus Cost
Some people believe that without compromising quality, it is not possible to make solutions cost-effective. Their reason is that a considerable number of trade-offs for quality must be made in the architecture, design, and deployment phases.
I agree with this statement. There are many challenges and factors to be considered to achieve quality maintenance goals. However, an innovative approach makes a difference in balancing quality and cost.
Exceptional leaders of digital ventures can reduce the solution costs by making trade-offs with a systematic and collaborative approach. For example, they can obtain collective input by bridging business and technology stakeholders.
They can also apply an agile approach and other innovative methods such as automation and standardization to repetitive and resource-hungry digital solutions components.
They can increase the solutions’ quality by applying professional diligence, architectural rigour, delivering with agility, innovative collaboration across multiple teams, and harvesting re-usable materials.
These principle-based and cost reduction approaches are vital to maintain and increase quality. Increasing quality can create a favourable effect on the financial viability of the solutions.
Bill of Materials
A simple yet powerful impact on cost control is related to the Bill of Materials in digital ventures. Bill of Materials refers to hardware, software, and services costs.
Leaders of digital ventures can participate in cost model development proactively and engage with all stakeholders to prevent duplicated efforts. For example, they can develop a solution Bill of Materials after setting the solution strategy and complete all high-level design documents.
Why is this important? Because there may be tremendous pressure from project managers and procurement staff to generate an upfront Bill of Materials due to the project life cycle’s demands. However, the responsible leaders can point out that it won’t be viable to commence purchasing materials upfront without agreed and approved architecture and design artifacts.
This assertive and straightforward intelligence from technical team members can save a considerable amount of funds to the digital ventures and save wasting well controlled and tight budgets in this economic climate.
Unfortunately, I witnessed millions of dollars of materials purchased upfront and wasted on several occasions due to solution architecture and design changes. This lesson learnt is worth consideration for leaders for digital ventures.
Infrastructure, Maintenance, And Support Costs
There can be extensive infrastructure, maintenance, and support costs associated with digital ventures. Data centres, server farms, mobile devices, storage units, data processing tools, analytics machines, and hosting in multi-Clouds are a few to consider.
These foundational infrastructure components are essential to make digital enterprise solutions viable.
However, a single failure or defect in a device or a group of devices serving the consumers via these high-end technologies can adversely affect the service levels, leading to high costs for service providers.
Service Availability and Performance Costs
Service availability and performance of the systems are the significant factors to address punitive service levels. One way of intelligence to manage these risks is the introduction of automation to service management.
Automated Service Level Agreements (SLAs) can detect low availability and poor performance. These automated SLAs trigger the rules and force the organizations breaching the agreements to pay the contractually agreed penalties.
System downtime is the most critical cost factor for generating excessive penalties. The longer the systems are down, the higher the penalties.
By taking proactive measures, leaders of digital ventures can contribute to cost reduction for availability and performance. Let’s touch on SLAs as it is a critical topic.
Service Level Agreements
Service downtime costs can be very high based on agreed rates. They can cause excessive penalties when organizations accumulate service-level breaches.
Service Level breaches also have a strategic adverse effect on an organization’s product and services. For example, downtimes in services or defects in products can result in poor client satisfaction.
If we also look at the situation from the consumer perspective, they lose business due to service downtimes. Service downtime can create a lose-lose scenario even though the consumer organizations are compensated with SLA penalties paid by the service providers.
Leaders of digital ventures need to pay attention to the SLAs starting from the initial stages of the digital solution life cycle. The higher the solutions’ quality is, the easier it can be to meet SLAs when the solutions are in production and the operational state. The rigour for quality in each phase can positively contribute to deal with SLA risks.
Some of the key considerations to address SLA issues could be autonomous condition monitoring and remote maintenance. There are specialist solutions regarding these trending techniques. Assigning automation and standardization specialists to design these unique features in digital solutions can be productive.
Service level management is also crucial in digital initiatives. To put this into a practical perspective, one of the biggest fears of business executives is the impact of poor performance and low availability problems damaging their organizations’ client satisfaction. These issues can compromise business revenues.
To address the risks associated with these valid business concerns, digital venture leaders need to pay particular attention to their SLA strategy, planning, design and implementation in an integrated way.
Proactive and effective SLA management is one of the key areas where digital intelligence impacts cost management.
Costs For Digital Systems
Digital transformations are long journeys moving business organizations from chaotic situations to coherent service delivery. The transformation process includes every aspect of the business.
For the scope of this book, I focus on digital systems. Even though digital systems look like only a tiny amount of an organization in an overarching enterprise, this field by itself can be massive, especially for large business organizations.
Business digital systems can include technology processes, business data, business applications, technology infrastructure, and technology service delivery. These domains can even be more complex and complicated when geographical factors are added to the equation.
One of the essential workaround solutions for this complexity is to modernize these primary domains iteratively in parallel.
Let me introduce a high-level systematic approach to cost management.
Methodical Approach to Cost Management
Digital venture leaders need to follow a methodical approach to manage the cost and contribute to the solution viability and profitability. A top-down and a bottom-up approach must be applied depending on the requirements of the venture.
At a conceptual level, you can visualize the business and technology processes as the top tier. And you can imagine the infrastructure at the bottom tier. These two domains can independently be transformed using parallel activities.
However, an integrated approach is essential as there can always be dependencies and interdependencies from multiple angles in both top-down and bottom-up approaches.
Once an organization has an approved transformation strategy, the digital venture leader can refine the strategy and convert it into transparent architectural and technical formats.
The digital strategy document is a critical artefact to bring all stakeholders on the same page. The digital solution leader can then identify the necessary dependencies among these domains based on the short term, midterm, and long-term considerations.
Using the digital strategy and considering the dependencies, the digital solution leaders must develop a high-level transition and transformation roadmap to inform the sponsoring executives.
This roadmap can indicate the key outcomes, timelines, and order of magnitude costs for the overall transition and transformation activities. These indicative points initially can be at a very high level as there may be many factors affecting timelines, resources, and associated cost at later stages.
Once the roadmap for the digital transformation is set, the solution leaders need to make a comprehensive viability assessment considering the current state of the scoped initiatives, their indicative future state and the strategies to reach the end state. This viability assessment must include key risks, constraints, assumptions, and dependencies. The viability assessment can be a valuable information tool for sponsoring executives to make informed decisions.
After reviewing and approving the viability assessment, the digital solution leaders can delve into collecting the solutions’ high-level requirements based on the domains mentioned earlier. As dealing with those domains’ needs can be daunting, the digital solution leaders can delegate the requirements collection process with the domain and program architects, technical specialists, and business analysts carefully considering their skill sets relevant to the requirements management.
In the requirements gathering phase, the digital solution leader’s role is to coordinate and facilitate the requirements management team activities undertaken by multiple architects, technical specialists, and business analysts.
After requirements are collected and analyzed reasonably, the next important activity is prioritizing the requirements based on business impact. The digital solution leader needs to develop a set of criteria to prioritize the requirements based on factors depicted in the digital strategy and roadmap, including the sponsoring executives’ financial and business priorities.
Following this methodical yet straightforward approach, digital venture leaders can be on top of issues and contribute to cost control proactively.
Reducing cost can increase the financial viability of the digital solution. Also, the leaders need to introduce innovative approaches continuously as a cost reduction enabler. Innovation can be the dominant player for overall cost management in complex digital ventures.
We cover the innovation in a separate chapter in detail due to its significance in cost management and investment returns.
Other chapters
Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6a, Chapter 6b, Chapter 7a, Chapter 7b, Chapter 8, Chapter 9, Chapter 10, Chapter 11, Chapter 12, Chapter 13, Chapter 14, Chapter 15, Chapter 16, Chapter 17, Chapter 18, Chapter 19, Chapter 20, Chapter 21
If you want to be an editor please contact me.
If you have books or manuscripts and own copyrights, please contact us by sending a request with your Medium account ID to contribute to ILLUMINATION Book Chapters. We will publish your book chapters in story format. Leveraging this initiative not only generates passive income, but you also can gain new readers.
Index of ILLUMINATION Book Chapters
Thank you for reading my perspectives. I wish you a healthy and happy life.
Sample Stories for New Readers
Sugar Paradox: Key to Solve Metabolic and Mental Health Disorders
Cholesterol Paradox and How It Impacted My Health Positively
Three Tips to Boost Nitric Oxide and Lower Heart Disease/Stroke Risks
What Would Happen if We Set Healthy Boundaries for Emotional Maturity?
Why 442 Million People Live Diabetic and What We Can Do About it
I wish I had Gone Self-Employed 40 Years Ago for Three Reasons.
Ten Hobbies Enhanced the Quality of My Life over the Past Five Decades
An Overweight Man Called Me “Crazy & Freak” in the Butcher Shop Today
After I Defeated a Teenage Rock Climber, His Vegan Mum Asserted I Was on Steroids.
I wrote about nutrients like
Urolithin, taurine, citrulline malate, biotin, lithium orotate, alpha-lipoic acid, n-acetyl-cysteine, acetyl-l-carnitine, CoQ10, NADH, TMG, creatine, choline, digestive enzymes, magnesium, hydrolyzed collagen, nootropics, pure nicotine, activated charcoal, Vitamin B12, Vitamin B1, Vitamin D, Vitamin K2, Omega-3 Fatty Acids, and other nutrients that might help to improve metabolism and mental health.
About the Author
Thank you for subscribing to my content. I share my health and well-being stories in my publication, Euphoria. If you are new to Medium, you may join by following this link.
You may also join my seven publications on Medium as a writer requesting access via this weblink.
I write about health as it matters. I believe health is all about homeostasis. I share important life lessons with people in my professional and social circles.