It’s time to bridge the tech investment gap – six lessons from BVCA Summit 2021

The theme of the recent BVCA Summit was Investing in a Changing World. Quite how quickly the world of business is changing was the subject of much discussion during a panel session I led on digital transformation post-COVID-19 and Brexit.

It was fascinating to hear perspectives on digital transformation from across the spectrum – from CEOs in charge of born-digital businesses, to others who have spent much of their careers leading established financial services firms through (often turbulent) transformation.

Although there was a lot to chew on, some clear themes emerged.

• Digital transformation has shot up the boardroom agenda

In many industries, such as financial services, people have been talking a good game on digital transformation for the best part of two decades but remained challenged in driving significant amounts of value. In the last 18 months many organisations have been forced into taking more direct action to digitally transform, often in a very rapid way, whilst many other organisations now realise that digital technology is no longer a nice-to-have – it’s business-critical.

• Even tech evangelists have been shocked by the pace of change

One of our panellists compared the pandemic’s impact on business to that of the meteorite that wiped out the dinosaurs. They said it had led to a period of extraordinarily rapid evolution for businesses. For example, companies that had long been hesitant about cloud computing were now tripping over themselves to make the transition. They admitted that, even as a self-confessed digital transformation evangelist, the speed at which businesses were suddenly willing to evolve had been astounding.

• Digital transformation is as much about improving existing processes as building new ones

One aspect of digital transformation that is often overlooked is the way it can help improve and optimise existing supply chains and value chains. This is happening even in centuries-old industry sectors. One of our panel described the extraordinary strides that have been made in the German construction industry, where the process of transporting sand and grit is being digitalised at every stage from quarry to construction site - ensuring that materials arrive in exactly the right place at the right time, in the right quantities. A traditionally inefficient process has been upgraded significantly through digital transformation.

• Businesses that fail to invest in digital technology are rushing towards obsolescence 

When it comes to digital transformation, there are three types of business: those that get it, those that are yet to get it, and those that will never get it and won’t exist in a decade. Ultimately, successful transformation comes down to investment.

Born-digital firms like Amazon and PayPal are devoting around 20% of their operating cost base to tech investment, against an industry average of 5%. While some legacy firms are doing a good job of bridging the gap, others are lagging behind. It’s clear a major change of culture and mindset will be required by many.

• Transformation is easier when you can build up from the bottom

There was an interesting discussion around the different approaches to transformation taken by legacy and born-digital businesses. In many older multinationals, such as large financial institutions, transformation is generally top-down, and it only takes one layer of management not to buy into the concept for it to break down. For born-digital firms where change generally happens from the bottom up, such issues rarely occur.

A panellist agreed that born-digital organisations hold the advantage, saying it was striking that in such organisations, the words digital and digitalisation are rarely used, because it is implicitly accepted that digital is fundamental to everything they do.

• The battle for talent will only intensify

While some firms are scrambling to bridge the tech investment gap, many are also finding it hard to find the right leaders to successfully implement digital transformation.

Anyone who has undertaken a C-suite search recently will recognise there is a worrying lack of breadth and diversity to the talent pool in many areas. The panel agreed there was no quick fix for this, although brighter days may lie ahead. By bringing in more young tech talent, and letting them grow and rise up through the ranks, companies can take a step towards developing the leaders of tomorrow.