Investing: The strategic imperative of developing new business verticals

A well-defined investment policy is an integral component of any business, serving as the primary engine for its development and a catalyst for unlocking new horizons. However, to ensure the company remains on its intended trajectory and avoids derailment, this engine requires meticulous oversight. Strategic financial planning and robust management accounting are the fundamental mechanisms that empower business owners to maintain this control. We will examine how these disciplines can transform investment from a capital sinkhole into a company’s most productive habit.

After so many rounds? Always. Or not?

Prior to discussing execution, a critical first step is to determine the appropriate timing for capital allocation and when to exercise restraint. The answer is to invest continuously but prudently.

Often subconsciously, business owners and executives continuously invest in their project’s development. From an accounting standpoint, investments are not solely large-scale capital injections into new products or business units; they also encompass seemingly minor upgrades. For instance, the implementation of AI-powered tools for a design team can enhance both operational velocity and output quality. These types of recurring, strategic investments are a key indicator of corporate vitality, demonstrating that the enterprise is dynamically evolving rather than stagnating.

In contrast, large-scale investments require much greater caution. Before committing funds, it is essential to carefully assess all potential risks and limiting factors, such as:

Insufficient funding. If your cash flow or net profit cannot currently support investments, ensure they do not consume the budget allocated for fixed expenses. Otherwise, you may be forced to seek external financing.
Unclear investment objectives. It is easy to be swayed by an appealing idea. However, without a well-structured business plan or, at minimum, a clear understanding of the problem the investment is meant to solve, pursuing it risks wasting valuable resources.
Weak management accounting. Without reliable metrics, KPIs, and analytical tools, it becomes nearly impossible to effectively manage and evaluate investments.

When investments turn into expenses

In theory, the distinction seems straightforward – but in practice, the line between an investment and an expense is often blurred. Many companies mistakenly label as investments costs that bring no lasting value and merely sustain day-to-day operations. As a result, initiatives originally intended to generate returns risk becoming costly “expense items.”

A telling example is the attempts by advertising agencies in the mid-2010s to establish dedicated digital strategy consulting practices. On paper, the idea seemed highly promising: rising demand for digital promotion, client interest in structured approaches, and the prospect of long-term growth. In practice, however, the model ran into several contradictions:

Misaligned expectations. Agencies required months to develop strategies and conduct analytics, while clients – particularly SMEs – were looking for fast, measurable outcomes such as campaigns, leads, and sales growth.
High entry costs. Building a consulting practice demanded substantial investments in specialized teams and methodologies. At the same time, clients were reluctant to pay premium fees for strategy documents that lacked immediate impact.
Limited market size. According to AKAR, the share of budgets allocated to “pure strategy” in digital advertising was no more than 3–5%, with the majority of spending directed toward traffic acquisition and optimization.

The outcome was predictable: strategic practices remained niche, and for many agencies, the investments effectively turned into expenses with little measurable return. This challenge is not unique to advertising. Across industries, there are three common reasons why investments end up as costs rather than value creators:

Confusing the goal with the process. When companies invest for the sake of image or to follow trends, such as launching VR projects without a clear business objective, the spending fails to generate new products or profit.
Prioritizing internal ambitions. Investment decisions are often driven by management’s enthusiasm (“we need blockchain”) rather than by genuine customer needs or market demand.
Overlooking the time factor. Even strong products lose impact if they reach the market too late. According to McKinsey, companies that manage time-to-market effectively achieve 35% higher revenue growth and 10% greater profitability than their peers.

Investing in automation: How emerging technologies become strategic assets

One of the most promising areas for investment – particularly in the B2B sector – is the implementation of CRM and ERP systems. These technologies not only enhance the efficiency of sales operations but also enable comprehensive automation of business processes. As a result, companies can significantly reduce operational costs and improve profit margins. However, realizing these benefits requires a strategic approach: it is essential to plan ahead for implementation costs, marketing efforts, employee training, and integration with existing workflows.

In this context, automation investments go beyond technical deployment; they demand adaptation of management practices. Companies often encounter several key challenges:

Management processes: Traditional agile methodologies may not be well-suited to the extended cycles of enterprise solution rollouts. This often requires introducing additional checkpoints as well as a revised reporting structure.
Team structure: Major projects require a restructuring of team roles, the involvement of integration experts and business analysts, and the development of new competencies.
Internal business processes: The scope of implementation impacts workflows, document handling, and quality control. This prompts the need to revise internal regulations.

The first project in a new area should be viewed as an investment in business growth. Even if initial profits are modest, the resources allocated to process development, team training, and system implementation lay the basis for future success.

Turning investments into a tool for systemic growth

Drawing on cross-industry experience, companies can follow a structured approach to reduce risk and maximize the return on automation investments.

Step 0: Differentiate between investments and expenses

Clearly distinguish costs that support regular operations from those that generate long-term value. For instance, routine IT infrastructure maintenance is an operational expense, while investing in new data processing technologies is an investment.

Step 1: Conduct target audience preference analysis or market research

Before launching a new product or business initiative, conduct a research. A 2022 Deloitte study revealed that companies practicing regular customer development prior to investing were able to reduce project failure risks by nearly one-third.

Step 2: Define investment scope and timeline

Set clear expectations for both the funding amount and the duration of the investment round. This prevents projects from becoming open-ended initiatives that continuously drain resources.

Step 3: Establish KPIs and monitoring tools

All investments should be measurable. Whether you’re tracking customer acquisition, time-to-market, or profitability, clear metrics allow for timely course correction.

Step 4: Monitor progress and make decisions

If a project fails to deliver results within the expected timeframe, you should halt further investment and reassign resources. Conversely, successful initiatives should be scaled promptly because delayed action can lead to missed market opportunities.

An analogy may help clarify the importance of investment discipline. Imagine your monthly budget: overspending on entertainment could leave you short on essentials like food and utility bills – but over-restricting yourself can lead to stress and frustration. The same balance applies to business: cutting all development initiatives without exploring new opportunities may protect short-term cash flow but leads to the company overlooking current trends and being vulnerable to mergers and acquisitions. But do not overtly engage in chasing the investment market game: as we have found, investments not only present opportunities, but also come with a great deal of responsibility.