Why ‘digital’ is no different when it comes to valuation
After the flurry of initiatives, brought on by COVID-19, many organisations now appear to be in a stagnate position, which is why this quote is very poignant:
“Ideally, all investment decisions should be analyzed against an alternative course of action. For digital projects, the alternative may be to do nothing. But especially in the case of digital projects, the do-nothing case may not mean net-zero change; it may actually mean a steady (or accelerating) erosion of value. Consider the decision many banks have faced over the years about whether to invest in mobile-banking apps: if all of a bank’s competitors have mobile apps and the bank doesn’t invest in one, its market share will likely fall over time as it loses customers or fails to attract new ones. Therefore, the base case is not stable profits and cash flows; instead, it is a decline in profits and cash flows—along with a reputation for being a stale brand.” McKinsey.