Favorite pop-steps on the same rake

Digitalization and business development are two processes that have been going toe-to-toe. In the modern world, it is impossible to imagine the successful development of any organization without the automation of repetitive processes. However, the most successful ones have diversified from physical assets into digital products and services.

This became particularly evident after the parade of black swans: COVID, crisis, and war. Those who relied on established processes, on an existing set of services and products, lost their positions and suffered significant losses. Those who invested in warehouses and equipment, physical goods, lost components under bombardments. Those who emphasized property now understand that physical assets depreciate, and transferring them from one geography to another is increasingly challenging.

“I believe that the reflections of owners, top managers, and development directors on diversifying business and portfolio into IT products are a wise and strategically correct step. However, I always see the same mistakes made by traditional businesses. Unfortunately, due to some of these mistakes, investors and owners lose not only money but also reputation. Instead of profits from investments, they receive headaches, and if they are lucky, only that, not legal actions,” says Maria Prokhorova, CEO of InDevLab.

Let’s consider the “favorite pop-steps on the same rake ” that those who have decided to move along the new digital path often step on.

1.Processing and storage of user data

In the early 2000s, I saw how access to databases was available to all company employees, from programmers to administrators and assistant administrators. Today, in 2024, I still see the practice of “it will do.” Without established processes within the technical team, everyone has access to data. In the end, the organization may face the fact that some offended programmer or administrator can simply wipe everything from the server. The cost of such losses can be as simple as 1-2 months of the development team’s work (from $10,000 to $60,000) or even more significant amounts.

2.Neglecting standards and regulatory requirements

Cybersecurity rules, like aviation rules, are written in blood. In the blood of reputation losses, money, and court processes. GDPR has already obligated developers of IT products serving foreign users to comply with its requirements. But it is worth looking deeper at the regulators. Ukraine is moving towards Eurointegration, and soon the requirements of not only GDPR but also ISO 9001, ISO 27001 will be necessary for business operations. The cost of neglecting security rules and standards can be around 2-4% of the organization’s turnover or €10,000,000 – €20,000,000 for both parent and subsidiary organizations.

3.Server under the manager’s desk

Back in 2015, I observed a physical server located in the corridor of a media publication. Any power outage or technical glitch would simply halt the operations of the entire editorial team and the publication as a whole. This happened several times a month. Even in 2024, I still encounter businesses that store data on a server in the manager’s office (thankfully, not in the corridor). The argument for keeping the server in such a location is, “Because it is $30 cheaper.” However, no one knows how much it costs per day for the server to be idle. If it is less than $30, then why bother with this IT component at all?

4.Either from hay and cobwebs or a space launchpad

Organizations either start by designing extremely complex systems that resemble the Death Star schematics from Star Wars (and end up with the entire initiative of diversifying business through IT in orbit with inflated expectations and a 50-year strategy). Or they hastily assemble a car from hay and cobwebs and try to participate in Formula 1 and win.

The approach of “launching with minimal effort and testing the hypothesis” is correct. However, it is even more correct to stop in time and start using technologies, materials, and approaches that align with your tactical and strategic goals for the next 3-5 years. In my memory, at least 5 organizations suffered extreme losses ranging from $20,000 to $300,000, considering only direct expenses. This does not even account for the time of top managers and non-specialized employees.

5.Lack of proper team management

I often see traditional businesses appointing individuals without a background in the IT field to manage IT teams. I have seen project managers who were former government officials, bank managers, teachers (if they at least had IT courses), and managers from the construction and logistics sectors. There are also cases where a relative, with some vague connection to IT, is appointed, whose professional qualities leave much to be desired.

The results of such projects have been extremely disappointing. The managers of these projects usually had hyper-control, did not understand what should actually be done, but were unable to admit their lack of competence. As a result, even a well-selected team lost motivation, and consequently, direction. The development processes of a genuinely cool idea transformed into simulating a bustling activity just to keep the ill-equipped manager at ease.

Products never made it to the market, never found their spot in the sun.  I have seen great ideas in VR/AR and commerce buried with investments starting from $500,000. I’ve also witnessed products in the field of healthcare and medicine, where the investment losses ranged from $500,000 to $11,000,000.

6.Wrong specialists, wrong tools

This point naturally stems from the previous one. Due to the lack of intelligent and proper management, I often encountered “so-so teams.” Typically, people in these teams fell into one of three categories:

-Something vaguely resembling what we need, but not exactly (or precisely not what we need).

-Recommended by relatives/friends.

-Truly qualified specialists who leave after 1-6 months of chaos.

As a result, there were improperly chosen methods and technologies that did not align with business requirements or the organization’s strategic goals, poor implementation, project delays, and a lack of results. Monthly expenses for such teams range from $15,000 to $50,000. If we calculate this for six months, we end up with $90,000 to $300,000, which will then simply be poured into another unsuccessful project.

7.Return on Investment or Profit Is Needed Now

Imagine a financial director or lawyer not from the IT sphere. Those who have worked in the creative economy and those who have dealt with managers in traditional businesses have now felt this “chill down their spine.” It is a chill when you’ve tried 1001 ways, presented 100500 arguments, and still don’t know how to explain what technical teams are doing and why there is no return on investment after the third sprint.

Imposing traditional business approaches and treating IT products as a quick return on investment is a knowingly losing strategy. Unfortunately, as soon as a product shows initial results, investors, financiers, and lawyers wanting to see a quick return on investment start squeezing success out of the newly launched product. Ultimately, such products fail to develop to the necessary scale and end up shutting down.

Due to impatience and the desire to “hurry up and get everything,” I have seen products that had excellent launches and all the chances to become leaders in their niche deflate. Along with them, investors’ funds were also lost. On average, losses due to impatience equaled the investment in a team for 1-2 years and could range from $500,000 to $2,000,000.

8.Ignoring Processes and Safety Rules

Or “Until the frozen pipes are exposed…”

More than 80% of all projects disregard safety rules in product development or IT infrastructure construction. And I am not just talking about traditional businesses but also about companies that already have their own IT department, IT managers, and established IT processes.

If organizations are already investing in automation and building digital solutions, processing user data, integrating with hardware, or will have critical IT infrastructure for their enterprise and operations, it is not wise to cut costs on protection and reliability. Calculating the cost of 3-5 business days and unrealized profit allows you to assess potential losses and risks.

Mary Prokhorova, CEO of InDevLab