Connecting the Dots: Technology Capability to Strategy
From augmenting our lives (mostly for the better) to improving productivity, technology has penetrated every corner of our globe, from smartphones to a typical car, which now has 200 pounds of electronics and more than a mile of wiring, and processors and peripherals creating a complex network. With Covid-19, we are experiencing an acceleration of digital transformation, including a shift in consumer sentiment towards higher acceptance of automation and robotics. Recognizing technologies’ wide-ranging impact, the Amish established a deliberate process to evaluate the adoption of new technologies for their community. Similarly, this post argues for a mindful assessment of technology capability and aims to outline a framework to better align technology and business strategy.
Technology is a multi-dimensional concept. Definition of technology: why it matters gives a broader perspective on how the way we view and frame technology can help shape and mold the way we integrate it into our products. Similarly, Technology Management: A Brief Introduction highlights how the activity of managing technology is at the heart of the business, encouraging us to go beyond technology creation to managing its application, dissemination, and impact for delivering business advantages and benefits for society as a whole. So, how do we tie this back to business strategy?
“Because its purpose is to create a customer, the business enterprise has two, and only these two, basic functions; marketing and innovation. Marketing and innovation produce the results; the rest are costs.” — Peter Drucker
The purpose of business is to create and keep customers — I love the crispness of Druker’s quote! Michael Porter furthermore gives us the insights and tools to build sustainable competitive advantage: what is distinctive about a company in the way it performs different activities from rivals, or performs similar activities in different ways.
In other words, at its core, business is about delivering value to selected groups of customers in the form of products and services. And, the competitive strategy ensures value delivery is done better or more uniquely than other rivals. As Gibson Biddle simply states, your product strategy should support the DHM model: “How will your product Delight customers, in Hard to copy, Margin-enhancing ways?”
“A systematic way of examining all the activities a firm performs and how they interact is necessary for analyzing the sources of competitive advantage. … The value chain disaggregates a firm into its strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation.” — Michael E. Porter from Competitive Advantage
Value-chain Analysis, Activity Map, Customer Journey Maps, and Experience Maps are tools that can help untangle and analyze how technology can play a role in increasing the competitiveness of the firm: increase user delight, make it difficult to copy, improve margins.
Generally speaking, technology can support business strategy via:
- Keeping present products and services healthy
- Enabling new products and services
- Increasing the operating effectiveness of the business
Keeping products and services competitive: With frameworks such as value-chain analysis and customer journey maps, we can frame up our current vs. the desired state. Furthermore, we can augment our analysis with additional insights such as SWOT, competitive market research, market drivers, emerging technologies, and business KPIs including capturing product/process baseline metrics.
Enabling new products and services: Identifying new product opportunities and designing for product adoption is an area of study on its own. However, Recognize Technology Expectation Gaps highlights areas specifically relating to technology management.
Improving operating effectiveness: Aside from supporting your products and services, technology can also improve business efficiencies and effectiveness, such as use of data for decision making. While we can use technology to do more with what we have, in my experience any new technology is a change and requires cultural adoption for success.
Technology Capability Analysis Vectors
So, where do you start? To go deeper into our assessment, I suggest augmenting brainstorming with factors that drive competitive advantage. In his classic Diffusion of Innovations, Everett M. Rogers identified 5 product factors influencing customer adoption: relative advantage, compatibility, complexity, trialability, and observability. Coupling these insights with your prioritized bullet list of competitive advantage sources will broaden your analysis. Here is a starting point.
- Functional performance of your product/service relative to others
- Acquisition costs from raw materials to new customers
- Ease of use, upgrades, maintenance of your products
- Operating costs of both from your and customer perspective
- Reliability and serviceability
- Compatibility and ecosystem support
- IP (Intellectual Property) strategy
Furthermore, we can dive even deeper in each of the areas to better understand the impact of related technologies:
- What are the associated technologies and are they being exploited appropriately?
- What is coming up on the horizon, and the potential substitution timeline?
- What are the external forces, policies to societal trends, that are influencing technology adoption?
- What is the current cost vs desired profitability?
During this analysis, it is important to establish a sound foundation for a shared understanding of the “why” for building this technology capability.
- How is the given technology expected to deliver value to the business and customers
- What are the assumptions and baseline metrics that can support periodic evaluations
- How the identified technology capability needs to be integrated into the business financials for appropriate resource allocation
Regardless of where you decide to focus, technology initiatives must deliver unique differentiation for strategic advantage.
What is Next?
There is a lot to unpack here… Technology, especially emerging technology, is full of uncertainty and thereby risk.
“Prediction is very difficult, especially if it’s about the future.” — Nils Bohr, Nobel laureate in Physics
Technology development has accelerated along with policies and regulations that will influence its dissemination. Regardless of our in-depth assessment to achieve greater understanding so we can maximize our future returns, our crystal ball is crappy… There are too many variables that we don’t have in our control. As technologists, it is our duty to balance the investment into technology so we are not developing just for technology’s sake. Future-proofing and reusable designs are great in theory, but certainly come with a high-cost and no clear payback. So, keep it simple, streamline the process, and iterate often.