OR YOUR LEGEND?
A CEO’s guide to getting the most out of new technologies
January 21, 2020
Our research revealed the five key decision points CEOs reach when they’re investing in technology. Making the right choices in these areas is how Leaders establish effective innovation models and build Future Systems—and get the maximum value out of their efforts.
|Decision Points||Sub-optimal and Optimal Solutions|
|Progress: How extensively/broadly should we apply new technology to evolve business processes across the enterprise?||
|Adaptation: How do we adapt our current IT investments to changing business needs?||
|Timing of Tech Adoption: How do we properly sequence and map our adoption of new technologies?||
|Human+machine workforce: How do we activate and enable the workforce to use and be augmented by technology?||
|Strategy: How can we intentionally manage the intersection of business strategy and technology strategy?||
New technologies, including AI and cloud, open up almost limitless possibilities for transforming business processes by lowering prediction and computation costs.
Yet Laggards and even Middlers generally choose to apply them to just a few processes, usually in marketing and sales.
Even when companies create hubs and blur organizational silos, they don’t establish connections from the hubs to elsewhere. As a result, the company has no way to ‘transfer’ these innovations, meaning they don’t get as much value out of them.
Ensuring that IT systems can adapt and respond to changing market conditions seems like an obvious priority. However, in most companies, it’s not. Driven by security concerns, for example, Laggards may choose to patch a legacy system. While patching works in the moment, it treats a symptom rather than the underlying problem.
Lifting and shifting applications to the cloud— the choice of many Middlers—is better, but still sub-optimal. Migrating to the cloud reduces data storage and computation costs. But it doesn’t provide strategic agility.
Laggards and Middlers take a wait-and-see attitude. That’s what we found when we asked the companies in our study about their adoption of 28 different technologies.
Most Laggards, for example, experiment with new technologies, but aren’t timing and sequencing them correctly.
Middlers might engage in experimentation and also double down on industry-specific, customized tech. Both options are sub-optimal: Failing to sequence tech adoption in the core decreases returns from technology investments. Doubling down on industry-specific tech locks companies into certain technologies. That inhibits their ability to pivot or combine technologies in the future.
Leaders adopt more new technologies than the rest, faster than the rest. And before they attempt to scale them, they put the systems in place that they need to capitalize on.
Consider SaaS, software-as-a-service through the cloud:
The most tempting choice for Laggards is to rely on time-tested, one-size-fits-all training regimens. That’s because they often believe that they can recruit already-trained professionals when new skills are required. But the reality is that skills now rapidly reach obsolescence, and job descriptions evolve faster than ever.
The decisions about progress, adaptation, timing and the human+machine workforce converge in the fifth and final decision point: Strategy. How a company weaves its tech investments together will ultimately determine how prepared it is to pre-empt disruption and seize opportunities.
When Laggards allow business units to address their specific pain points (the first option), they are effectively democratizing IT. This approach allows the units to move swiftly. But it leads to “shadow IT” managed by people outside of the IT department. As a result, systems can’t operate with each other, inhibiting strategic agility.
The same goes for concentrating on entering adjacent markets or exploring new business models. The problem is that disruption can come from anywhere, not necessarily the markets that a company explores.
Not yet on the PATHS to enterprise innovation? Here’s how to set yourself up for success so you’ll be ready to face decisions at every juncture:
Identify the technology investments that are specific to processes, geographies and functions. Measure their diminishing returns and opportunity costs.
Which can be consolidated or applied across other parts of the business to drive efficiencies and improve returns? Take this step along with your IT leads (including your Chief Digital Officer, Chief Information Officer, Chief Analytics Officer and, if you already have one, your Chief AI Officer). Also align around a set of KPIs to track progress.
One that is based on enterprise-wide needs and can adapt to the changing nature of employee, partner and customer habits. Demonstrate the financial case in terms of contribution to margin and revenue growth. Revisit the PATHS framework as you face each new tech investment decision. Remember that it isn’t enough to make reasonable decisions. Nor is it enough to be aligned with your IT leaders on decisions. There’s a real danger that you will all be agreeing on a seemingly justifiable, but suboptimal, choice.
Companies that wait to build future systems will find it increasingly difficult to catch up. Leaders enjoy a considerable head start, and they will not be standing still. The systems they have in place are specifically designed not only to accommodate innovations in technology and its application, but also to create those innovations and to scale them across the enterprise. Yours should too.
Our Future Systems Diagnostic, based on 1.6 million data points from more than 8,300 companies and driven by econometric and decision tree models, can recommend a custom plan for guiding companies in their evolution for future systems.
Our study involved engaging with C-level executives at more than 8,300 companies across 20 industries in 20 countries. Half of these executives were in IT roles, and half were in non-IT roles; 885 were CEOs.
We collected data on the companies’ adoption of certain technologies, those technologies’ penetration (the extent to which they were in use through the company), and the culture changes (for example, changes in mindset around experimentation and collaboration) that the companies made as they adopted those technologies. We then scored the companies on those three factors, calling the top 10 percent “Leaders,” and the bottom 25 percent “Laggards.” The companies that fell between the 40th and 60th percentile became our “Middlers.”
Just 8 percent of our CEO respondents represented companies in the Leaders group.