When it comes to technology in a business or organization, I have often seen two major mind-sets. One group views every purchase of goods and services as an expense. The other group takes a more holistic view and bases purchasing decisions on value, and approaches the purchase as more of an investment. The differences between these two mind-sets are interesting when you look at companies and organizations that are growing and those that just survive.
Companies that have the “I can’t afford the expense” attitude tend to view every purchase of goods and services as an expense. When times get tough, they drastically cut back on all spending. As a business owner myself, I fully understand. However, when you study business organization, something else comes to light. When everything is viewed as an expense, then decisions are not made for growth, but for survival. This impedes the ability to make informed and sound decisions that will grow and sustain the business. When you develop that survival mentality you tend to get caught in a death spiral that can last months or years. Which type of business do you have?
My attitudes have always been to build a company that has value and is valued by my clients. The tough part is the day-to-day slog that throws all sorts of distractions our way and soon we get caught up in the business details and forget to actually work on the business. By stepping back and looking at the large picture, we can base our purchasing decisions on a sound plan. Every purchase of goods or services should fit into our plan and provide value. By doing this, we begin to see the difference between an expense and an investment. Most successful companies invest in three key areas: People, Product, and Process. Another important area is marketing, which is challenging for me.
People: Money spent on your personnel in the form of training, work environment and culture is clearly an investment that provides great value. Successful organizations have happy, trained, helpful people working with them. Do you want to deal with an organization that has brash, un-trained, and generally un-caring people? Think about it.
Product: Whether you provide a service, a product, or both, the product or service must fill a need and provide value to your customer. Making the necessary investments in product quality and delivery are essential. Over-commitment, under-performance, and quality cutting to save a buck can ruin a good company’s hard earned reputation in a heartbeat.
Process: Without a top notch process in place, you will not be able to hire and retain good people and your product will suffer the minute you begin to get busy. When things are slow, that is the time to double down on process to enable you to scale and take on new business. Investment in process will always pay off.
Why this discussion about expense and investment? As a technology services provider, I often see businesses make decisions based solely on cost. What they fail to realize is not making an investment in technology and its updates will actually cost more. I’ll throw out a few examples to make the point and leave it at that.
- Remember Blockbuster video? Netflix made the investment.
- Do you ever purchase encyclopedias or do you use google and Wikipedia? Google made the investment
- Do you use an old rotary phone or do you now have a cell phone? AT&T, Sprint, US Cellular made the investment.
- As much as I love bookstores, do you now use a kindle and order from Amazon? Amazon made the investment.
- Typewriters still work fine but do you use a computer and word processor? Microsoft and others made the investment.
- I still love my 35mm film camera, but haven’t used it in years. I made the investment in an iPhone with a camera.
- The accounting firm who had a server failure during tax season was able to keep the business on track. They made the investment in a good backup and recovery solution, and discovered that it has real value.
I could go on and on with examples of technologies and companies that have come and gone. The ones that view every purchase as a “cost” typically don’t make it, or they get marginalized. The ones that survive and thrive are the ones that make the “investment” in the right strategic technology. They run the numbers to ensure their equipment provides value and a return for them. They make sure it fits with their overall strategic plan and changes with the shifting market. Successful companies in today’s world do not view their technology purely as a cost.