In my world of ERP, I hear more and more stories of how relatively minor investments are being paused late in the approval cycle. Sign off must now go as far up the chain as the CEO. I suspect anyone selling hardware, software or services into a large enterprise has also noticed this measure creeping into the supply chain as the scrutiny on purchase orders intensifies.
It's not hard to see why this tenant is gathering pace. It’s a way of managing the balance sheet as the talk of being on the brink of recession heightens. We’re not there yet, but it’s prudent to have a plan should the rules of the game change.
War chests are being built
Reduce cost and grow the business. Deliver a return to the top and bottom line. Show me the real value. Save me cash. These are words any self-respecting CEO would be saying right now. It’s reflected in company reports of our prospective customers, across a variety of sectors. CEOs are actively generating war chests to help them buffer the economic turbulence ahead and making a big deal out of small deals as they build up the cash reserves.
With an overwhelming duty to return cash to shareholders, CEOs, myself included, are now looking at how we can have our cake and eat it. For the business leaders that have realized it’s possible to operate their business on less, they will question why they should invest, or certainly where they invest so they return a positive EBITDA and allow growth.
Every function will be competing for airtime with, and investment from, the CEO. In my business, I’m asking people to look at where automation can help us fix some of the tricky challenges we face. Take the conundrum of labor arbitrage. When unemployment is low, you can’t hire the talent you need, and when you’re working in an economy with inflation hovering around 10%, you need to make different decisions about investment.
Any cash injection must make a material difference and add value. Bottom line is you need to ensure the skill you do have is working efficiently, and it has the best tools and/or processes available.
Customer success ripe for change
Customer success is another good example. Everywhere I look, it’s under pressure to reduce the cost to serve but still maintain a good level of service so customers stay loyal and happy. Technology can do a huge amount to help here.
Automating some elements of the service model to give customers self-help options is an area of great interest. After all, why wouldn’t I get a customer to self-serve on the more mundane repetitive tasks if it means my teams can focus on the problem solving for customers that are facing more complex challenges? This form of support is regarded as high value for the customer and delivers better metrics for the service organization.
Automate the right processes as a necessity
Put simply; it’s a no brainer. But I still need to make sure teams are automating the right processes and are introducing the right technology to do it. That’s going to take a degree of business acumen. Leaders in the organization need to not just understand, but explain and demonstrate the precise value the investment they are asking for will deliver. That’s the litmus test of whether we really need it and how much cash it will go on to return to the coffers.
To explain how this could pan out in the future, I’ve come across instances where the CFO is telling the organization that they will only make five investments in the year. The strongest cases in terms of returning cash and reducing overheads will make the cut. That’s creating a mindset of using money carefully, only investing when necessary, and ensuring the resources you already have are being used at full throttle.
It won’t be long before this mantra of being selective on investments is the norm not the anomaly. In some ways, that’s a healthy place to be. Decisions will be focused, and automation will move up the agenda as it proves its value for returning cash on to the balance sheet.
The economic situation that FTSE100 and US corporates are facing into requires this thinking. Nice to have will never be a priority in this environment. It’s a response that brings clarity to an unpredictable world and frankly, isn’t that what we all want?