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Can Digital Debt Sabotage Your Startup?

digital debt concept
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The current trend toward digital operations has brought to light the idea of digital and technical debt, highlighting the weaknesses of companies that have mishandled digital transformation. Mature organizations that have built enormous digital debt due to their failure to adopt IT technology are now paying the price. However, what is only a noteworthy operational issue for established businesses may be an overwhelming challenge for startups.

What exactly is digital debt?

Technical debt, which refers to the expenditures associated with no longer relevant or inadequate technology, must be separated from digital debt.

Digital debt, on the other hand, means the loss of profit and momentum caused by a failure to adopt digital channels or technology. It is measured by the difference between a company’s digital development and its competitors, indicating how far behind it has slipped in critical digital transformation activities. 

Is it likely for a startup to fall into digital debt?

Digital debt may accumulate in startups in two ways: 

•    Incorporating bad habits taken up from other companies. Founders and startup team members frequently have prior experience from somewhere else. When replicating learned practices, they frequently include wrongdoing in deploying digital solutions and transferring challenges from established organizations to freshly formed startups.

•    Spontaneous digitalization. Startup members tend to make their new businesses cutting-edge. It also reflects how frequently they are adopting digital solutions. Together with amorphous processes, digital solution deployments come with chaos. Despite establishing procedures, startups tend to deploy technologies first and then figure out how to orchestrate them all. The danger of improper adoption increases when processes are not covered by adopting digital technologies, but newly deployed solutions affect the way the processes are being shaped.

Undoubtedly, startups that do not embrace digitalization cannot capitalize on digital channels and attain their full potential. Digital debt is more likely to emerge when startups adopt many solutions supporting their business activities.

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Also, in a more extreme case, a startup might fail to integrate technology critical to its potential commercial success. Consider, for example, a retail startup that has yet to build an e-commerce footprint, but its competitors have already tapped into the potential of online platforms.

In both described situations, digital debt is increasing, necessitating significant resources and effort to catch up and maintain a strong market position.

How workday tasks are carried out leads to digital debt accumulation.

Startup owners and team members are all too familiar with the pressures of a hectic working day. According to research, much of our time at work is spent on communication and business relationships, leaving little room for concentrated, uninterrupted work. According to studies, around 68% of startup professionals struggle to find enough time for focused activities, while 62% struggle with finding information efficiently. So founders must solve these time and productivity barriers to establish an atmosphere beneficial to innovations.

Startup meetings can be a productivity bottleneck.

Meetings, both virtual and in-person, have the potential to generate digital debt in companies. Whereas it is not such a major concern for mature corporations, startup meetings may waste too much time that could be allocated to speeding up the business. When huge performance-driven companies have talented individuals on board who can keep teams on track, startups may overlook the need to manage team meetings effectively. And they may need such abilities since the founders are more visionaries or narrow-domain specialists than efficient team managers. Inefficient meetings, too many appointments, and long brainstorming sessions decrease productivity. That’s why startups should rethink their meeting practices to avoid the risk of collecting incremental digital debt.

AI as a destabilizer or a savior?

We live in an era where innovators may use artificial intelligence to prevent digital debt and its negative influence on innovation. By embracing AI-powered tools and methods, startups may improve their processes, streamline communication, or have more focused and productive meetings. AI may be a helpful companion, allowing startups to find the necessary time and energy for tasks that promote innovation and strategic thinking.

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On the other side, so many AI solutions are being developed that it is often pretty tempting to experiment with each one. It is critical to stay cautious and avoid becoming overly enthusiastic about AI, considering the new technology to optimize the startup’s operations rather than pile up systems. 

Here are some techniques to explore to reduce digital debt and boost startup innovation:

•    Promote prioritization and efficiency: Start by identifying and fixing productivity disruptions within a startup. Identifying pain points early on may be difficult while processes remain in their early stages. However, using digital solutions to solve problems rather than adding more commitments seems a far better idea.

•    Leverage AI-Powered tools: Explore AI-powered solutions that help speed up operations and provide insightful data. Adopting technologies that allow the team to focus on high-impact work might bring real value to the business. AI may be tremendously advantageous in startups by freeing team members from fruitless efforts.

•    Stay agile: Startups must sustain momentum in their digital journey by staying on top of changing trends and technology. Staying adaptable and agile prevents companies from being held back by obsolete legacy systems constraining innovation.

Even though Agile techniques emphasize delivering value quickly, they frequently lead to a focus on short-term goals and a possible disregard for technical expertise. This trade-off may result in the buildup of digital debt over time when aiming to achieve strict deadlines. Startups must emphasize creating a balance between speed and technical expertise to solve this obstacle. In this regard, it is critical to spend on sustaining the quality of digital infrastructure while providing iterative value to all the processes.

In a competitive startup environment, where change is only fixed, those confronting and conquering their digital debt will emerge beyond the others. What startups can learn from mature companies is more than just how to increase equity; they can also learn how to manage debt, even digital ones. It may build effective and robust structures that keep working well when scaled up.

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Pawel Poltorak is an experienced CMO and Strategic Advisor in the tech sector, driven by a passion to help founders, entrepreneurs, and investors to succeed. As an author, he explores and writes on CEE startups and new technology through the lenses of marketing, economics, sociology, and geopolitics.