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4 Questions to Gauge If Tech Debt is a Hidden Cost

by Doug Davidoff | Mar 24, 2023 2:00:00 PM

Tech Debt - Costing You More Than a FixWhat if I told you that some recent, spectacular organizational failures that made headlines could have been easily prevented?

Remember when a contract technician accidentally deleted some files and the FAA screeched to a halt, grounding 10,000 flights? And when Southwest Airlines encountered the perfect storm (pun intended), stranding thousands of families over the holidays due to the cascading effects of a blizzard, sick employees, and an outdated computer system? 

It all boiled down to two words: technical debt.

Tech debt is the increased cost of fixing the problem in the future instead of maintaining it in the present. In other words, today’s decisions can create tomorrow’s challenges and barriers.

And that’s ultimately why thousands of flights were grounded during the biggest travel period of the year. While both the FAA and Southwest had been making upgrades over the years, their fundamental systems had remained unchanged since the 1990s. 

“That’s kind of interesting,” you might be thinking as you read this, “but I don’t deal with airplanes or even the tech stack that makes my company run. That’s the CIO’s territory.”

Why every company needs to worry about tech debt

However, as the damage to Southwest’s reputation shows, tech debt can hobble your company’s competitiveness. (Luckily for the FAA, they don’t actually have competition.) The cost of rectifying this crash likely negated any money Southwest “saved” by not changing systems since the Clinton administration. And that doesn’t even consider any lost business due to customers who no longer trust Southwest to get them where they need to go.

To be fair, both Southwest and the FAA spent money on updates and upgrades every year but still had tremendous tech debt. Both companies built Frankenstein systems that became increasingly unwieldy and difficult to manage. 

In a worst-case scenario, you then deal with an outlier event and everything blows up. Many of the news stories reported that Southwest imploded due to one bad week—but that bad week was ten years or more in the making. While these dramatic airline meltdowns will live in infamy, most examples of tech debt are far more subtle and insidious. 

That’s because system overhauls are big decisions. Change is costly, scary, and risky. 

Most tech debt results from fear of change, but it can occasionally go to the other extreme. For example, Elon Musk cut Twitter staff by 75% and the platform still seems to be running (most of the time, anyway). 

But history has shown that if you cut production capacity or ramp up production to exceed production capacity, you'll always look like a genius, at least in the short term. The long term is often another story. That's not to say that Twitter wasn't overstaffed. It probably was—but time will tell if the cuts were carefully considered or if Twitter is accumulating greater tech debt.

In light of recent events at Twitter, I’ve been thinking about “Chainsaw” Al Dunlap, who was regarded as the turnaround expert of the 1980s and 1990s. Dunlap would come in and cut the **** out of everything. After that, operating margins and productivity numbers would improve. People thought he was a genius and fought to hire him to run their business. Dunlap had a pattern; he took over a new business every two or three years and seemingly turned it around. Inevitably, the company blew up after he left for his next position. At first, people thought the companies were imploding without him, but eventually, everyone realized he was simply leaving a wake of destruction. 

So how does this relate to RevOps?

We do a lot of CRM implementations at Lift. That means we talk to many mid-market companies with a hundred or more salespeople and, often, home-grown systems that have been pieced together over the years. 

When management at those companies gets a quote for CRM implementation, they wonder if they can justify the cost

They’re wondering that because they aren’t thinking about their current cost of friction. They have no sense of what their “Frankenstein” system is currently costing in terms of productivity. The executives aren’t looking at data that tells them how much time salespeople are bogged down in work other than selling, the number of people maintaining the current system, delays getting insights and the data, and many other costs that aren’t neatly summed up in a line item. 

As I say all the time, technology will never be the reason that you succeed, but increasingly it will be the reason that you fail.

Most companies won’t implode like Southwest. Their failures will be more subtle and insidious, due to drag and unnecessary friction. Their employees find it harder and harder to move things forward and to operate at speed.

Management will respond by throwing more personnel at the problem, but that doesn’t address the underlying problem. The companies’ reputations suffer. 

In other words, failure is being reactive, not proactive. It’s treating the symptoms, not the illness.

Failure can also be doing nothing at all—which is far more common than most people think.

Perhaps now you’re thinking, “That’s all great, Doug, but how do I know if I have a problem?”

The Ideal Tech Stack For Mid-Market Companies Serious About Smart Growth

How to Assess if You Have Tech Debt

Here are four questions that will help you see where you stand:

1. Is your business process driving your technology?

If it is, you’re fine making only incremental changes and launching your CRM three to four times per year.  But if your tech is driving your business process—and this is often the case—you need to make a change. Period.

2. Are you operating with comprehensive information?

If you don't know with a high level of confidence that everything is as it should be, I promise you it's worse than you think it is.

The reality is most companies don’t have the data and information they need to make an informed decision, so they start making decisions based on what they think is true. 

Executives are worried about bad data, but that’s not the biggest issue, as long as you know where the bad data is. The bigger issue is not having comprehensive data in the CRM but thinking you have a picture.

In that case, you might look at your sales cycle and think it looks okay. But what you don’t realize is that you’re missing more than half your opportunities because CRM adoption and utilization are poor because the system is so cumbersome or lacks real value. You lack that insight and you make decisions based on what you believe to be true.

As the saying goes, “It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.”

3. Are you failing to invest due to spend?

A nearly billion-dollar company recently came to me to discuss a CRM implementation. According to my analysis, their operational friction is costing them between $10 to 15 million and their lost productivity cost is in the $25 to 50 million range.

The challenge is that that number doesn’t show up in one place. It’s in seventeen or so line items. 

And many companies, like Southwest, don’t invest because of spend, more than cost. The idea is that you’re fine if something doesn’t show up on the income or expense statement. But Southwest really needed to pay attention to the cost. Don’t make that same mistake.

4. Are you actively managing your tech stack?

Companies used to think of purchasing technology as a capital expense; they would treat it like they were buying equipment. That meant they’d run the equipment for its life cycle and would eventually get new technology. 

Now the question is “When do we redo it? When do we start again?” Companies still have that legacy mindset, which means they are loath to change until there is no other choice. 

The right way to do it is through constant iteration and implementation. If you have a hundred salespeople or more, you should have quarterly cycles on your go-to-market tech stack. You should always be actively managing your tech stack in the same way you're actively managing all your other resources. If you do that, you're, you're never in a situation where you’ll fall completely behind.

If you’ve gone through all four questions and you’re feeling good, congratulations! If not, read on.

Okay, I have a tech debt problem. What should I do?

You’ll need to do a structure and approach audit to identify your key issues and discover where the mismatches lie. From that, create an action plan to get on course.

If you walk away with one takeaway from this piece, remember that you must be proactive. The danger is that when systems are working—or appear to be working—it’s easy to ignore them for more pressing issues. As a 2020 McKinsey study on tech debt said, “Almost every business has some degree of tech debt; the trick is knowing how to identify, value, and manage it.”

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