Early in my career, soon after I switched roles from software development to technology strategy, I worked quite a bit on business cases and strategic plans related to technology investments. I wondered why some of the best ideas, with the best-written business cases, wouldn’t get implemented. At some point along the way, I realized it wasn’t just about having ideas that best fit into the technology strategy. I discovered a parallel universe: investment strategy.

These days, in our work on business transformations, one of my favorite activities to work with our clients on is the financial side of strategic planning – specifically how a company’s ownership and associated investment strategy impacts the way their transformation plan comes together. In my experience, while this isn’t often readily apparent, even when companies of the same size and industry want to achieve a similar vision, the financial implications of the organization’s ownership structure will necessitate different strategies to achieve the same outcome.

As an example, let’s look at three different companies. We’ll assume they are all roughly $1B in annual revenue, and they are all in the same industry – let’s say insurance. They have all decided they need to go through a transformation to interact with their customers in a more digital, yet more personalized way. They all know they’ll need to transform their technology group if they want to support their digital roadmap. They all know their entire organization will need to operate differently in this new world. They will all be motivated to take on this transformation, and they will all want it to be successful, but:

  • The first company is publicly traded. They are eager to package everything they can into a “restructuring charge” that can be written into their financials as a footnote because it is less likely to impact their share price. After that, they are much more willing to make investments along the way that can be capitalized since those do not hit their short-term profitability.
  • The second company has just been purchased by a private equity firm. This private equity firm plans to exit their investment in roughly 6 years – pretty typical for this industry. They’ll be more likely to invest very aggressively in the first 1-2 years so that the payback from their investment meets their exit objectives.
  • The third company is privately held. They may be more inclined to spread investments out over time to maintain cashflow. They may also be interested in a rigorous governance structure to make sure initial results are achieved before they invest more.

While the future state they are trying to achieve may be the same, these companies need very different implementation plans in order to meet their financial objectives. It doesn’t just change the timing of the projects within the transformation; it can actually change the approach of each of the projects.

Of course, aside from ownership structure, other financial factors may have a significant impact on a transformation plan – like the companies we’ve worked with that are entering or exiting bankruptcy, or the ones that are preparing to go public, or those that have just gone through a merger or acquisition. For a period of time, those factors may even outweigh the significance of the ownership structure. If financial expectations have been set with investors, then companies will go to extreme lengths to meet those expectations.

I wish I could create one of those decision trees that would lead an executive to an aligned transformation plan based on their answers to a dozen or so financial questions. Unfortunately, the complexities are too great for such a simple decision method. Instead, it requires disciplined work to drive alignment between people with competing opinions and priorities. Many organizations wait to have these hard prioritization conversations until they are ready to move into implementation, but it is much more effective if these conversations are had more frequently and from the very start before transformation planning even begins.

As a company, we are always looking for ways to pull this conversation earlier into the strategic planning we do with our clients and integrate it along the way, because the executives we work with who get these parallel universes aligned up front are often the same ones who achieve their visions.