Using Investments in Technology to Build New Competitive Advantages

When taking the decision to invest in a company’s future in, most commonly the Finance Director wants to be able to see the tangible benefit to their investment.

Whether they are looking to replace existing equipment or make a new purchase to improve on current offerings or change processes altogether the benefits of introducing the right technology to deliver them can take many forms. Below we set out some of advantages that investing in new equipment can bring.

why investment in technology means competitive advantage

Monetary Advantages

How can monetary advantages provide you a competitive advantage and what monetary advantages should you consider?

Predictability – the ability to align predictable incomes with your fixed costs, especially in industries where grants or contracts are in place, will improve your forecasting capabilities. Improved forecasting allows you to manage your workforce, target your spending and ensure you are able to invest when less predictable opportunities arise in future.

Cash flow –  by reducing the need for up-front payment, you are able to ensure that your cash reserves remain intact. It is possible to turn this into a competitive advantage by using these reserves to safely offer your customers credit terms that, in time, will produce additional and predictable future revenues.

If your organisation has a sales team, this kind of flexibility could also help them to win deals against competitors who cannot offer such terms.

Technology-Driven Capabilities

Your systems should always be designed to make the most of the great team you have employed. A great system will not just facilitate their work but also enhance their capabilities and provide them with a platform to work towards even better results in future.

So, what technology-driven advantages should you consider?

Capabilities – new technology can often provide you with the capacity to offer more products and services than you could before. By increasing or enhancing your offering in this way, you can attract larger clients or projects and produce a bigger impact on them as a result.

Processes – process improvements have often been the key driver in turning a strong competitor into a market leader. Think of Henry Ford and his assembly line, which transformed not just the company’s immediate capacity to compete but the way the entire industry operates today.

Time-saving – we all know the old saying ‘time is money’, and in this case it can be very true. If your employees are wasting time overcoming the challenges of needlessly difficult technology or time-consuming admin, the wastage on their time alone could be proving costly.

Team Size Time Wasted Per Day (Mins) Hours Lost Per Annum
1 15 60
5 15 300
10 15 600

If you can provide the same level of service as your competition in less time, this will drive down your costs and provide you with the options of reducing prices, improving profitability or using the time to enhance your services and go above and beyond for your clients.

Other Benefits

Whilst monetary and technology-driven advantages will probably be behind most investment decisions, there are a few other areas where sensible choices could provide a different kind of competitive advantage.

So, what other benefits should you consider?

Morale – we’ve probably all worked for a company where the technology simply doesn’t work, and it is frustrating. Given the amount of time modern workers spend on their computers, the importance of having the right equipment in place for your team cannot be underestimated if you are aiming to be a great place to work.

Public relations – securing media attention is often just a matter of turning a good decision into a great story. Consider the goals of your investment and the impact it’ll have on your customers or community. The bigger the impact, the more likely you are to be able to provide journalists with a great story that will promote your company in a positive light.

Tax and VAT– it is possible in some cases to spread the VAT, along with the cost of an asset, depending on the type of finance agreement, however this is not always the case. Similarly with Annual Investment Allowance “you can deduct the full value of an item that qualifies for AIA from your profits before tax” [source: gov.uk] up to the value of £200,000. Some exceptions and exemptions do apply.

Securing Your Competitive Advantage

Any of the benefits provided could feasibly be turned into a competitive advantage for your company. The three elements you need to consider in your decision are:

  • the impact you want the project to have
  • the best way to achieve that impact
  • and how will you pay for it.

Once you have those three core elements in place, it is wise to begin planning for the transitional period, and your employees will become a key factor in securing your competitive advantage.

We’d suggest working alongside the teams that will be impacted by the changes to ensure that they are on board with and excited about the improvements that the project will bring to their everyday working lives. By securing their buy-in for your investment, you can smooth the transition phase and get the best value for money out of your investment.