How to define an appropriate budget for digital transformation - one that’s realistic yet takes into consideration the aspirations of and opportunities available to your organization

This a difficult balancing act, and never more so than for digital transformation projects. Here, we share some tips to deliver you a budget that effectively serves your transformation aims, helping you maximize the impact of your initiatives.

With so many different moving parts, digital transformation projects require a rock-solid foundation from which to build - including a budget that accurately reflects the scale and complexity of the initiative, while remaining achievable and realistic.

However defining such a budget - not to mention getting it signed off - can be challenging. We’ve all heard the horror stories of projects going over budget, stalling, or even being abandoned altogether.

If you’re currently in the early stages of your digital transformation journey and want to avoid a similar fate, this post shares practical tips to put you on the right path from the start, covering some of the key considerations you’ll need to address to ensure your budget truly supports your organizational requirements and strategic goals.

8 tips for your digital transformation budget:

1. Involve everyone

You can’t involve everyone from across your organization in your budgeting process, and nor would you want to. However, where digital transformation is concerned it’s important to consider alternatives to those traditional budgeting approaches that have typically been managed on a departmental basis, with the financial director approving a high-level budget that is then distributed across the team.

These models simply aren’t viable today, when digital stretches across different departments, roles, and locations to touch all parts of the enterprise. Instead, the ubiquitous nature of digital calls for a collaborative approach that facilitates an overarching understanding of core business processes, to ensure that every element of these is factored into your budget. Without this holistic picture, you run the risk of creating bottlenecks that will draw investment down and away from the revenue-generating activities that matter.

2. Consider potential ‘hidden’ costs

Alongside the disparate requirements of the different business functions within your organization, there are almost certainly going to be additional areas that will need to be accommodated in your digital transformation budget. These can be easily overlooked, so be sure to undertake rigorous requirements gathering activities to uncover any supplementary demands.

For example, consider the following:

Infrastructure. How will your digital solutions be supported?

• Do you have any vital information/content that needs to be migrated from your existing systems?
• Is the investment required to meet relevant compliance and security standards?
• What skills and knowledge are needed to ensure your team can perform effectively?
• Change management. If your transformation is going to impact your processes, how will any necessary changes be rolled out?

… and not forgetting the costs associated with your requirements gathering activities themselves!

3. Create a shared vision

As mentioned in the introduction to this post, defining your budget is only part of the battle. You’ll also have to secure sign-off, meaning that those individuals in control of the purse strings need to be bought into your vision. It’s crucial therefore that you raise awareness of the need for - and benefits of - digital transformation at an early stage.

Even if you think this is already understood across your organization, it often isn’t the case. Indeed, as budgets are typically agreed in advance without any understanding of the complexity or dependencies involved it’s easy to assume a shared vision at the outset, only to find out further down the line that you don’t have the resources you need to move as quickly as you’d like, or achieve your desired results.

A dedicated ‘discovery’ phase can help you more clearly articulate your vision, and so communicate this to stakeholders - particularly if it includes the creation of low-fidelity deliverables such as prototypes and proofs of concept, which allow you demonstrate your ideas and objectives in a highly visual way, and provide increased confidence to help secure buy-in.

4. Demonstrate value

The key driver behind any digital transformation project should be to deliver value. If you focus solely on the features you want to be delivered without thinking about how they serve your overall vision, the project is unlikely to deliver the results you’re after. As you define your budget, then, think about the precise reasons why you want to undertake the work you’re planning.

This will not only help you justify your budget by providing specific examples of the benefits you aim to realize that you can reference - for example, streamlined processes, higher revenues, or a larger user base - but will provide a valuable baseline against which you can measure the success of your initiatives, and so inform any future programs of work and their associated budgets.

5. Facilitate agility

If you’re undertaking a digital transformation project, you’re no doubt very aware of the rapid rate of change being driven by technological advances and changing user behaviors. But is your budget also flexible and fluid enough to allow you to capitalize on new trends and market conditions in a timely fashion?

While many organizations have embraced more agile ways of working in their operational processes, the commercial elements of a project typically still follow more traditional approaches and areas such often focused on fixed cost, defined requirements, annual cycles, and allocated spend. It’s clear that a change in mindset is required to deliver the greatest possible value from your digital transformation initiatives - and the following tips explore in more detail some of the ways that this can be achieved.

6. Support change where required

While strict budget plans may offer high levels of predictability, they can seriously impact your ability to respond to change, and so leave you at risk of being overtaken in your digital transformation efforts by nimbler and leaner competitors. However, when introducing increased flexibility you’ll still need to provide the governance required by those allocating budget, who will be unlikely to want to relinquish control altogether.

One way to achieve a balance between these competing demands is to adopt a model that budgets for ‘epics’ (large, overarching projects) while moving the responsibility of more granular decisions away from budget holders towards those with a closer working knowledge of individual initiatives.

The very structure of your budgets can also be adapted, to give you a closer steer to reality. As the rate of change in the digital landscape continues to outpace traditional annual budget cycles, some organizations are choosing to plan two six-month budgets instead - increasing the frequency with which they can assess project deliverables and monitor the market for potential opportunities. This allows the budget to be more quickly reinvested in productive areas, and be halted where value isn’t being realized, to minimize waste and accelerate the rate of returns.

7. Allow for innovation

Another way of supporting change while still keeping budgets under control is to invest in dedicated ‘innovation’ projects. Offering the opportunity to try out new ideas on specific parts of the wider transformation piece, this kind of initiative allow you to prove the business case in a low-risk environment, and get a feel for the challenges and benefits associated with a project before committing significant resource.

You might also want to include a dedicated Research and Development (R&D) line in your budget, using this to explore various opportunities for innovation and disruption outside of the stricter frameworks and processes you may have in place elsewhere. By removing unnecessary overhead you can reap the rewards of increased velocity, and the first-mover status that often comes with this.

8. Keep it going!

Perhaps the most important thing to remember when budgeting for digital transformation is that it isn’t a single, distinct piece of work, but an on-going journey. While you likely won’t (and probably shouldn’t) try to capitalize on each new trend and technology that emerges, you will need to ensure your strategic roadmap aligns with the latest conditions and priorities, and have the necessary resources in place to execute this.

Adopting an iterative approach that encourages continuous improvement can prove extremely beneficial here. By focusing on regular deliveries and short feedback loops, this way of working will provide you with a model that’s ideally suited to the complex and evolutionary nature of digital transformation, which can then be adapted and extended beyond the initial launch to ensure you continue to deliver value at every stage of your journey.

source: smartinsights

The results of the survey by International Budget Partnership reflected recent efforts exerted by the Saudi government to enhance transparency and disclosure in public finance.

Saudi Arabia has made a marked improvement in terms of budget transparency and accountability, according to the Open Budget Index survey released on Wednesday.

According to the survey, conducted by International Budget Partnership (IBP), an international non-profit organization concerned with evaluating disclosure and transparency of general budgets worldwide, Saudi Arabia has advanced 18 ranks compared to the previous survey, after scoring 18 points compared to one point in the previous survey conducted in 2017.

The results of the survey reflected recent efforts exerted by the Saudi government to enhance transparency and disclosure in public finance.

Commenting on the result of the survey, Dr. Saad Alshahrani, deputy minister for macro-fiscal policies at the Ministry of Finance, highlighted the importance of this achievement that the Kingdom managed to realize within a short period of time and confirmed that with this progress, we aspire in the future to achieve a higher ranking that reflects efforts made in the framework of improving the quality of fiscal data and enhancing the level of transparency and disclosure thereof, which is one of the important tracks pursued by the government of the Custodian of the Two Holy Mosques in line with the Kingdom's Vision2030.

The Ministry of Finance has sought to develop its fiscal systems, providing the greatest possible amount of information about its fiscal policy, disclosing its fiscal and economic data and publishing relevant periodic reports to inform specialists, analysts and citizens in a timely manner.

This has also allowed the private sector and investors to plan ahead and make informed decisions.

Dr. Alshahrani said that the budget forum held annually by the ministry is an effective way to enhance communication and an important channel for identifying the best ways to develop the budget preparation process.

He also said that this forum underscores the importance of partnership between different government agencies to share challenges in preparing the budget and mechanisms to achieve the goals.

The forum is considered a successful initiative to inform the public finance stakeholders on the various projects of the finance ministry and related programs, and to provide training opportunities following the highest international standards.

The deputy minister added that the jump in the Kingdom’s score was the result of several concrete measures taken to enhance transparency. Since the launch of the Kingdom's Vision2030, the ministry has released many reports and has continuously developed its content on an annual basis according to best practices.

The reports address a broad base of specialized recipients and the general public inside and outside the Kingdom.

In 2017, the ministry issued the first detailed budget statement, quarterly (periodic) reports for the budget performance, the citizen’s budget, in addition to the publication of its medium-term fiscal framework. During the past two years, the ministry began periodically publishing the pre-budget statement and year-end report on its website.

Dr. Alshahrani explained that transparency is one of the important aspects of concern to international financial and investment institutions, impacting their investment decisions and is usually reflected in their reports.

He added that, in the past year, the Kingdom’s government joined the Special Data Dissemination Standard (SDDS) adopted by the International Monetary Fund, as well as implemented the Statistical Data and Metadata Exchange (SDMX) initiative on the national data page, making the Kingdom the first among the G20 countries adopting SDDS and to apply SDMX.

The general government coverage was also introduced in the presentation of fiscal data for the first time in the past year. Also, the National Fiscal and Economic Data Page was created on the website of the Ministry of Finance with the participation of the Saudi Arabian Monetary Authority and the General Authority for Statistics.

All of these measures contributed to a material and unprecedented shift in the levels of disclosure and transparency in the Kingdom, leading to an enhanced position on various international indicators and contributing to supporting domestic and foreign investment, as well as the credit rating of the Kingdom.

The Open Budget Index (OBI) is an important global tool, independently prepared every two years to assess the transparency of government budgets around the world.

Countries covered by the open budget survey are ranked according to their scores in the survey.

source: zawya