Digital Brand Discussions is a series of articles that discuss, debate and elaborate on topics in relation to Brand - theory, practice, management and Digital - in the broadest sense of the word. And mixture of those two. Starting with the articles from April 2016 I covered both basic topics such as "What is a Digital Brand" and "Why should your Brand be a Digital Brand" but also more strategic such as "Digital (as) Brand Equity Building Tool" and organizationally-oriented such as "The conflict of Brand and Digital in matrix HQs". Full list of articles on Digital Brand can be found here.
This time I wanted to ponder on the topic of Digital Brand Budgeting - Budgeting for Digital and Impact of Digital on Process, Structure and Execution of the Budget.
Budgeting Structure and Process as a Litmus Test for Digital Change?
If someone would ask me to asses the level of digital transformation around the world and if you would need to asses the level of change across different industries, geographies, company sizes, one thing I would ask to look at is their budgets - the structure of budgets and process of budgeting.
A look at budgets and budgeting of any company uncovers how the company really works, how it sees itself versus the environment
I believe that a look at budgets and budgeting of any company uncovers how the company really works, how it sees itself versus the environment. If you think about it, the way the company sets its budget is informative about its perception of reality, but also of its interior skeleton, the ways permanent company structures are organised, how an organisation plans to put those structures to work and at what priorities. The way brands create budgets and what they put in those budgets will tell you much about their strategy, how they plan to cope with a competitive environment.
Budgets are a great way to discover whether the transformative digital change has been real and impactful to core of the business or it has been a surface, cosmetic type of a change.
I also think budgets are a great way to discover whether the transformative digital change has been real and impactful to core of the business or it has been a surface, cosmetic type of a change. Technology has brought about change to consumers' behaviours, their habits, how they search and access information, make decision and make purchases. And Brands have mostly adapted, or trying to adapt, their forward-facing layers - communications and communication tools. But what about their core and structural elements - such as Budgets and Budgeting? Budgets are engines that move a certain company into pre-set levels and types of motion. Isn't it a good question to ask - has Digital changed the ways companies budget? If it did - what was that change? And if it hasn't - can we say that environment changes imposed by technology have really been that altering? I don't have all the answers, but I do have some lines of thought to share.
Budgets are engines that move a certain company into pre-set levels and types of motion. Has Digital changed the ways companies budget?
Budgeting for Change(s)
Budgets are integral parts of company's execution. Strategy as an intention to compete, translates into actionable steps. Actionable steps - size, sequels, numbers are defined by budgets. Thus, a look at the budgets - their structure, process of making and execution - is also a look at the strategy of the company.
If one thing we can all agree on is that the consumers, competition and environment have never been changing so much and so fast - what should that mean for brand's budgets?
The structure of budgets should facilitate company's exploration in face of such strategic uncertainty
If environment is changing and brands are increasingly unsure how these changes will unfold, then the structure of budgets should facilitate company's exploration in face of such strategic uncertainty. In effect, that would mean that budgets and budgeting criteria should have the purpose of enabling strategic flexibility in any sense - from market selection that you're going to compete on, to method you're going to compete through. How would that translate into a real budgetary items, I am unsure, but would definitely keep it layered and make as little as possible fixed (long term) commitments I can.
Budgeting for Learning
With so much changes happening, the only viable strategy is to budget for that change. Sounds easy, but what would that really entail? To change is to learn, thus budgets should also be structured for learning. What does that mean? It means that budgets should be structured for trial and error and for experimentation. This means that you should plan that road you take might not lead you where you had wanted and that you should have enough budget to take another road. And switch between those two roads fast. This also means that your budget execution should be iterative and such of "validated learning" which is a concept I borrowed from Lean Start-up terminology.
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