It has been long-anticipated that as we put the worst financial implications of the pandemic for businesses behind us, that we would see a releasing of pent-up investment capital – capital that has been cautiously reserved as firms prioritised business-critical operations over long-term planning and investment.
With digital platforms like apps having become paramount for connecting with and creating value for customers, it is even clearer than before that forward-thinking companies should look to refresh their business models to place digital at their core. If they don’t, they risk losing out to digitally native brands.
As the UK economy is now on the brink of returning to pre-pandemic productivity levels, now seems an opportune moment to review whether businesses are indeed looking to invest in innovation and gaining new competitive leads in their market, or are remaining cautious when it comes to trial and experimentation.
Risk or caution?
To this end, Studio Graphene recently commissioned an independent survey of 752 business leaders in the UK to explore the relationship between their views on digital innovation and their strategic plans for the year ahead. Significantly, more than two-fifths of decision-makers (42%) do not plan to increase their IT spending during 2022, while amongst the largest businesses in the sample (those with 500+ employees) more than three quarters (77%) do intend to ramp up their investment in tech.
The theme of smaller businesses showing greater reticence to risk investing in digital transformation holds throughout the survey. For instance, only a third (32%) of businesses with 1-9 employees intend to invest in a previously unexplored area of technology, such as artificial intelligence (AI), cloud, or IoT (the Internet of Things). Among the largest samples of 250-500 employees and 500+ employees, 76% and 72% plan to do so, respectively.
Among the smallest companies in the sample, only 32% considered trialing new digital products to be a key strategic priority for 2022; while more than three-quarters of the largest businesses felt so. Evidently, conservation and risk-aversion are more prominent among startups and SMEs – in normal times, a cohort more typically perceived as engaging in ‘fail fast’ experimentation as they look to expand their market position. In turn, established enterprises have economies of scale to naturally insulate them from risk.
However, with this scale comes drawbacks of their own – it is not fair to suggest smaller businesses are not agile through their caution. Of the largest business, seven in ten feel the resources spent on fixing basic issues impeded bigger-picture tech innovation – compared with only 16% among the smallest.
Similarly, only one in five smaller businesses felt hybrid or remote working had hamstrung their efforts to launch new digital products; compared with two-thirds of the largest enterprises. This suggests that despite larger firms having the capacity at hand to invest, communication issues and lag can delay or obstruct efficient innovation; where leaner small firms can respond proactively to challenges.
In an increasingly digital business world, having an appetite for risk can often be its own reward. Companies can find the practice of experimentation value-adding not in the tangible rewards such as ROI, but instead in readily affording the conditions to identify and implement credible innovations through the experience of learning from failures.
Business leaders no longer have the luxury of time to pursue late adopter strategies, and should not be put off by a failed trial in high-potential emergent areas of tech. Instead, I would encourage them to refine their approach and understanding of the values of products like AI and IoT to bolster their core operations as appropriate.
Written by Ritam Gandhi, Founder and Director at Studio Graphene
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