How To Balance A Budget-Based Perspective With Longer-Term Goals

Rajeev Sharma, CTO of Grid Dynamics
Rajeev Sharma, CTO of Grid Dynamics, on the importance of a capability-based roadmap approach.

IT leaders need to balance their traditional budget-based perspective with the more strategic approach of capability-based roadmap planning, says Rajeev Sharma.

Sharma, the CTO of Grid Dynamics, an IT consulting firm based in San Ramon, California, spoke with StrategicCIO360 about the elements of capability-based roadmap planning, why CIOs need to be more forward thinking today and the importance of working with your CFO.

What is capability-based roadmap planning?

Capability-based roadmap planning is a strategic approach based on a roadmap of key capabilities, which need to be built or acquired to stay competitive and drive profitability and consistent growth. With budget-based planning, there is an inward focus on how to trim costs or do more with less. This is conventional wisdom and the path often adopted by many enterprises. However, with this approach, some CIOs can be so overly focused on the budget numbers that they forget what the company is trying to achieve. In essence, they lose the forest for the trees.

The questions that many CIOs face when planning the company roadmap include: what is the company’s market position; how are we differentiated from our competitors; and how are we allocating resources to meet our goals? Oftentimes, CIOs answer these questions from a budget-based perspective, which I believe is for the faint of heart. 

Ideally, a company should have a blend of both—capabilities and a budget-based approach, because each brings value. Without question, there needs to be a good handle on budgets. At the same time, leadership needs to look at the capabilities required to grow revenue and push the envelope on productivity while providing the best customer experiences. A gap analysis between “as-is” and “to-be” state is central to planning the capabilities that can propel an organization forward in a highly competitive and dynamic market landscape. 

Which one of the two dominates your decisions?

I need to wear both hats—that of an engineering leader and a business leader. I cannot skip one for the other. From my perspective, I always take a capabilities-first approach. I’m always thinking about how to solve our customers’ problems and how to accumulate the capabilities needed to be successful in the short, medium and long term. Investments in building our service offerings, accelerators, partnership channels and nurturing exceptional engineering talent to help our customers further their digital transformation agenda are at the heart of the discourse around capability building and budget allocation.

For example, let’s delve into how we plan our accelerators and starter kits. Through a capabilities lens, we first look to answer the why, which means we look at the customer base who would be best served. Next, we determine what skills, team size and budgets would be needed to build that capability for each quarter. From there, I create a business case and work with the finance teams to get the right budget to support a given set of capabilities. Building these capabilities is necessary to compete as a top-tier technology and engineering company and to stay a few steps ahead of our competitors.

In some instances, we invest in selected R&D projects in emerging technologies to keep well ahead of the competition and build next-generation solutions. We also build accelerators to create customer solutions that can solve specific challenges and take them to the market faster. In these scenarios, I am always planning from a capabilities perspective.

What in your view defines digital transformation?

Digital transformation is about building an ecosystem of enabling technology platforms and services that drive business growth. These platforms are powered by the cloud, data engineering, AI, advanced analytics, user experience, design and front-end engineering. By using these digital building blocks in different permutations and combinations, enterprises serve their customers and create barriers to entry for the competition to maintain a sustainable competitive advantage.

Thus, digital transformation is not just one or a few initiatives. Rather, it’s an ever-evolving web of digital components, enabling enterprises to harness the power of technology to reach customers while innovating and building new products and services at scale. All of these components working cohesively in a scalable, reliable way and being maintained in a consistent manner are at the heart of any digital transformation initiative. 

What criteria or metrics would you put in place to assign priorities and budgets?

When it comes to metrics, there are five key buckets to assign priorities and budgets: revenue, cost, productivity, customer experience and lastly, maintenance. It is imperative to quantify the impact of market dynamics on each of these buckets. To that end, enterprises strive to create and adopt a credible governance framework that allows leadership to run a data-driven metrics program that is reviewed for relevance and potency.

Additionally, there are several key business-driven metrics that enterprises need to be mindful of. These include items such as time-to-market, number of patents filed, number of releases per week, month or quarter, number of redundant applications, and revenue per given line of new products. For all of these initiatives, the CTO’s job is to reduce the time to market for new features and product offerings, while the CIO ensures each effort happens quickly and at the lowest cost.

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