Companies are increasingly aiming to become a technology company or to embed technology into all parts of their businesses. Some companies have made significant progresses in doing such transformation. What have they done well and what can we learn from them? Having observed many leading companies across the world embarking on such journeys, I have summarized the seven key habits where leading tech-empowered companies have been practicing.
As Marc Andreessen famously said in 2011, “software is eating the world”. Technology is becoming an essential part of every industry and every business. More and more companies are making the statement that they are becoming a technology company.
But what is a technology company? Unfortunately, there is no clear definition on this. One of the more quoted definitions of a technology company is by Alex Payne, where he said “You are a technology company if you are in the business of selling technology. That is to say, if your product – the thing you make money by selling – consists of applied scientific knowledge that solves concrete problems and enables other endeavors, you are a technology company”. By this definition, I would have to argue that most companies are not technology companies.
An alternative definition is what WSJ’s Andy Kessler calls “GRuMPS – Growth, R&D, Margins, Productivity, and Spending”. He argues that true technology companies have high growth, huge R&D spending, high margins, better productivity, and high digital spending. By his definition, only companies such as Facebook and Google are 5 out of 5, and are true technology companies.
Given that most companies are not going to be selling technology products or have the 5 out of 5 GRuMPS traits, I propose that the companies should aspire to be tech-empowered. They should aim to embed technology across the entire company and do whatever it takes to achieve the maximum benefits out of technology investment. The word “empower” implies that technology is essential to the company’s survival and success, even if the products the companies sell are not always true technology products.
For companies to become tech-empowered, there are seven habits that they should establish:
1. Create A Holistic Technology Agenda
Companies today often have different people managing the technology agendas. Chief Information Officers (CIOs) still manage most of the internal IT agenda, across ERPs and core systems. Chief Marketing Officers (CMO) are now increasingly deploying technology to drive marketing activities, with so-called Marketing Tech (“MarTech”). Some companies have Chief Digital Officers driving the digital technology agenda across the company, working side by side with CIO and CMOs. For manufacturing companies, Operations Technology (OT) that is deployed in the plants is increasingly adopting advanced technologies such as Internet of Things, IOT. And for IOT to become truly useful, OT must converge with IT so that IOT data can be effectively leveraged into ERP and other internal IT systems. Lastly, companies may also have Chief Data Officers and Chief Analytics Officers driving the data and analytics agendas.
Technology is going to be prevalent across the company: OT, R&D, IT, Data, analytics, just to name a few. Instead of debating who should own what and if there should be someone owning everything, it is more imperative to define a holistic tech agenda to ensure that all technology pieces fit together. A Tech-Empowered Company will have the right governance model to ensure there is a single holistic technology agenda while allowing individual owners to push the components. It’s no longer “Shadow IT” – it’s Technology embedded everywhere.
2. Enterprise Real-Time Data
There is an old saying that poor customer services show customers how companies are organized internally. Customers get transferred from one department to another to get their problems resolved. While most will argue that data is the new oil, in most companies, the way data is scattered across the enterprise also mirrors how the companies are organized internally. Data is often disjointed and stored in departmental silos. It’s estimated that 50-80% of data scientists’ jobs are actually trying to put all the data together, vs. trying to develop advanced algorithms to develop business solutions.
For a company to become tech-empowered, they must have the goal to create enterprise data where everyone can easily get to the right data. This would require companies to break through the siloed data ownership model to link all data together into an enterprise view of the data, even if the underlying data is still scattered in department silos.
The other data habit for a tech-empowered company is to create the real time availability of the data and analytics. A tech-empowered company can no longer afford to take days or even weeks for data to be available to everyone else. Data, just like grocery store items, is perishable!
3. Buy, Build, and Acquire – the new Technology Supply Chain
In the old IT world, there was often the debate of buy vs. build. Buy meant using commercial off-the-shelf software products such as SAP or Oracle. Build meant developing a custom application from scratch. For a tech-empowered company, it’s Buy, Build, and Acquire. Leading technology companies have been exploiting this Acquire technique for years to jumpstart new R&D. For example, Apple acquired Siri, Google acquired Android, and Amazon acquired Alexa.
A tech-empowered company focuses on what truly differentiates itself in the market, technology wise, and explores all possible organic and inorganic levers to launch the necessary technology. They don’t get hung up on “Not Invented Here” and they take whatever means necessary to make things work.
4. Platform and Products vs. Applications and Systems
Traditional IT is consisted of a lot of monolithic applications and systems. Those applications or systems, custom built or commercial off-the-shelf, were giant applications that often took years to implement and deploy. They also represented “stovepipe” architecture, where each business unit or product line would have their applications/systems end to end, from user interface to business rules to underlying business data storage and IT infrastructure. Massive investment was made to integrate all the stovepipe applications so that the business workflow can be bandaged together.
The future architecture of a tech-empowered company is often individual products built on top of a platform. This is the de facto approach taken by many tech companies such as Google and Amazon. The old stovepipe applications and systems approach will never be able to deliver the velocity required to react to ever changing customer needs. The right technology platform, more similar to Lego blocks, allows companies to quickly assemble the Lego blocks and launch new products and services.
5. Agile and integrated Business/Technology development
Here we need to go back to the roots of Agile Manifesto that was published 20 years ago. We are not just referring to the product organization and scrum teams. We are not just talking about the Spotify and ING teaming models. We are referring to the original 12 principles behind the agile manifesto where “the highest priority is to satisfy the customer through early and continuous delivery of valuable software”, where “business people and developers must collaborate together daily throughout the project”, where “agile processes promote sustainable development. The sponsors, developers, and users should be able to maintain a constant pace indefinitely”.
The keywords are the integration of business and technology – there is no more business vs. IT, demand vs. supply. It’s about business and developers working together to use technology to drive business growth. It’s no longer about a project and a program, it’s about continuous technology upgrades to meet ever-changing customer needs.
6. Continuous Technology Application
Most non tech-empowered companies view technology as a one-time event. They invest in multi-year projects and programs to install commercial off-the-shelf software products or custom develop new applications. Even though the success rate for such systems is low (for example, Gartner estimated that 75% of IT projects fail to accomplish their originally intended values), companies would still take on those one time events and celebrate when the efforts were completed.
Technology today, however, doesn’t allow such one-time herculean efforts anymore. What companies need to do is continuous technology application. This would require three new traits:
- Continuous technology upgrades – companies need to monitor the usage metrics of the technology applications continuously and constantly, and identify ways to upgrade the functionalities to ensure new customer requirement changes are reflected and accommodated quickly.
- Continuous technology evolution – technology’s shelf life is getting shorter and shorter. Companies need to have the right infrastructure in place to ensure the underlying architecture of the applications get adjusted or even replaced to support newer, cheaper, and more robust capabilities.
- Continuous technology adoption – companies need to monitor emerging technology and identify business areas to apply them continuously.
7. Experiment with Technology-Powered Products and Services
Even though most companies don’t always sell true technology products, opportunities abound for tech-empowered companies to experiment with products and services that are based on technology. There are three key options for most companies:
- Sell analog products online – This is typically where companies start by creating eCommerce operations to sell their current products online, over the Web or using mobile technologies. Today, it’s hard to identify a product that we can’t sell online.
- Create digital products – Companies can also try to create new products that are tailored for the online world. The product might be simplified to ease the buying complexity, it might be issued real time vs. offline world’s days or even weeks of processing. But how companies make money off those products might still be the same
- Launch true technology products – This is where companies challenge themselves on how they make money and create innovative technology driven products to attract new customers and create new businesses. Think Marriott’s Homes and Villas product, Marriott’s answers to Airbnb. Instead of the traditional Marriott branded hotels, Marriott ventured into vacation rental of luxury homes. The product is completely online and omni-channel.
With technology becoming the driving force behind all industries, it’s imperative for companies to explore opportunities to embed technology into every facet of their business. Companies should investigate the seven habits of Tech-Empowered companies and create their specific roadmap to implement them.
