Most companies’ finance and IT functions view the value of technology investments with different lenses and using different yardsticks.
The mismatch can be resolved by valuing technology-related investments in terms of their contribution in three areas: day-to-day operations, business expansion, and disruptive innovation.
Stronger proof of technology’s boost to both productivity and innovation will better enable companies to compete, especially as the role of AI becomes more central.
Given AI’s considerable promise to boost productivity and transform business models in every industry, it is no surprise that the technology’s ascent is already increasing companies’ rate of investment in IT. Yet the advent of AI raises yet again a question that business and IT leaders have been puzzling over for decades: What’s the return on technology-related investments?
Much of the difficulty in answering this question is due to the disparate goals of the IT and finance functions: CFOs want financial proof that the money spent is worthwhile in the form of attributable, timely, and repeatable outcomes, while CIOs—as well as CDOs, CIDOs, and CTOs— worry that waiting for perfect evidence of returns can reduce competitive advantage and stifle innovation. The paradox is not that technology fails to create value, but that the value often seems to show up in the “wrong” places and on the “wrong” timelines and is rarely captured in bankable terms.
Sitting between them, CEOs must try to reconcile these two perfectly rational positions: the need to move fast enough to capture opportunity but not so fast that investment decisions depend on
faith.
We propose a new way of looking at the return on technology investments. Rather than trying to force the measurement into a single ROI yardstick, technology-related investments should be
valued in terms of their contributions in three areas: day-to-day operations, business expansion, and disruptive innovation.