By Wendy Gittleson for Galvanize
In 1965, Gordon E. Moore put forth the idea that the number of transistors on a computer microchip would double every two years while the cost would cut in half. Technological growth, Moore postulated, would be exponential. Moore’s theory, dubbed “Moore’s Law,” might not be 100% accurate (for example, the number of transistors on microchips doubles about every 18 months). Over half a century ago, though, Moore hit on one absolute truth: Technology, and not just microchips, moves at lightning speed. If there’s one universal business maxim, it’s to ignore technology at your own peril.
According to Gartner insights, Mobilize Every Function in the Organization for Digitalization:
- 87% of senior business leaders say digitalization is a company priority
- 67% of business leaders say their company will no longer be competitive if it can’t be significantly more digital by 2020
How fast is technology changing?
As Moore had predicted, technological change is exponential. Even old fashioned brick and mortar businesses are learning to adapt or get left behind. Here is a taste:
- By 2020, 50 billion smart devices will be collecting, analyzing, and sharing data.
- The web hosting services market is to reach $77.8 billion in 2025.
- 70% of all tech spending is expected to go for cloud solutions.
- There are 1.35 million tech startups.
- The Global AI market is expected to reach $89.8 billion.
- There are 4,383 million internet users.
- Solar energy adoption has grown by around 50%.
There are currently 1.6 billion websites. Over the next few years, the Big Data market is expected to reach $103 billion in revenue. Web hosting is expected to exceed $77 billion. Cloud computing is worth more than $200 billion.
All of these numbers may seem abstract until you realize how tech influences every type of business and every aspect of our lives. Today’s consumers expect sophisticated connectivity that merges efficiency and accuracy with a perceived personal touch. That puts corporate IT departments in an endless race to satisfy those seemingly contradictory consumer demands and meet shareholder expectations, all while seamlessly maintaining daily operations.
Famous trendsetters who failed to keep up
Even the world’s most technologically innovative companies can’t afford to take their eyes off the road ahead. Just a few short years can take a company from industry leader to nostalgia brand, or worse. Here are a few businesses that spent decades at the top of their respective industries, only to be toppled by more technically savvy competitors:
In the 1990s, a casual weekend at home wasn’t complete without a trip to a local Blockbuster Video. At one time, they had more than 9,000 stores under their brand. Today, they have one, in Bend, Oregon. Blockbuster was not the first video rental store, but they designed a barcode system that let them track up to 10,000 video cassettes, which revolutionized the industry’s ability to collect late fees. At one time, late fees accounted for about a quarter of Blockbuster’s annual revenue. The sheer size of the company allowed them to build a massive distribution center, and custom tailor a store’s inventory to the area’s demographics.
Then along came Netflix with their DVD subscription-by-mail business model. With Netflix, consumers could say goodbye to late fees and they didn’t even have to leave their homes to get a movie. The movies were mailed right to them. In stark contrast to Blockbuster, Netflix’s overhead was almost nil.
Today, Netflix has more than $161 million paid memberships. It’s maintaining its technological relevance through in-home streaming services and unique content production.
In the early 2000s, before most had heard of Facebook or Twitter, MySpace pioneered social media. By 2006, MySpace beat even Google as the most visited website in the United States. By 2008, MySpace was overtaken by Facebook. Experts blame MySpace’s insistence on its narrow focus of music and entertainment, while Facebook and Twitter forged their business models on innovation and change.
MySpace is still operational, but it has a fraction of the page views of Facebook, Instagram, or Twitter.
When most people think of Xerox, they think of office printers and copiers, but the tech landscape would look very different today if it weren’t for researchers at the California company.
In 1968, a Stanford engineer named Douglas Englebart invented the graphical user interface, or GUI (pronounced “gooey”). Researchers at Xerox’s Palo Alto campus built upon Englebart’s GUI technology and developed the Xerox Alto, which introduced the world to windows, icons, and a rudimentary computer mouse. What happened next would go on to become tech legend.
One could argue that the Xerox case is less about getting left behind and more about a poor business decision, but the bigger picture is that Xerox failed to capitalize on its technology because they failed to evolve and upskill. “The entire corporation was based on the copier industry,” Michael Hiltzik, Pulitzer-prize winning columnist for the Los Angeles Times and author of Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age, said. “It had a whole bureaucracy and employee base built around that Xerox wasn’t nimble enough to transition to a brand new market it had no experience with.”
At #318 in the Fortune 500, Xerox is clearly still alive and doing quite well, selling copiers. But Microsoft and Apple, two of the most technologically innovative companies in the world (who might not be in existence without Xerox), are ranked #26 and #3, respectively.
What future trends should we look for?
CIO Magazine lists eight technologies that will disrupt business in 2020. Those include:
- Artificial intelligence
- Video and unified communication
- Containers and microservices
- Immersive experiences
- IoT and edge computing
If your company isn’t planning a digital transformation in the near future, know that your competitors are.
What happens when companies prioritize technology?
While most companies understand the role of technology in security and logistics, Deloitte’s 2018 Global CIO Survey of business leaders showed that just 29 percent of respondents felt that tech departments should have significant input into developing enterprise business strategies. As history has demonstrated, a reductive view of technology can leave a company in the dust.
Executives are slow to view technology departments as revenue streams because, in the past, they weren’t. In service industries, about 56 percent of the tech budget is spent on maintaining operations. Only 18 percent is spent on building new business capabilities. Rather than placing blame on IT departments, perhaps a paradigm shift is in order.
Companies with well-defined digital strategies see dramatically different numbers. For those companies, an average of just 47 percent of the budget is spent keeping the wheels on the proverbial truck, while 26 percent of their budgets are allocated for innovation. In the next three to five years, those companies expect to increase tech innovation spending to 38 percent.
In contrast to the executives surveyed by Deloitte, USAA, a company that specializes in insurance, banking, and financial services for military personnel and dependents (and a client of Galvanize, Inc.), equates technology with the entire customer experience.
One of their business tenets is “to innovate and build for the future,” according to Lea Sims, USAA’s AVP for Employee and Member Innovation. USAA looks at every employee, and every customer, as a consultant. USAA runs contests for innovators, and several of their employees from all departments hold patents, although USAA maintains intellectual property rights to most of the ideas.
For USAA, it’s paid off. In an industry that’s generally loathed by consumers, USAA is considered “the most beloved financial brand on earth.” Since USAA caters only to active and former military personnel and their families, their market share is small. Their $155 billion in assets and $30 billion in revenue is dwarfed by competitors, some of whom have assets and revenue in the trillions. According to research by Raddon, though, USAA beats all its competitors in one significant area: brand loyalty.
Raddon’s report identified seven factors that contribute to USAA’s customer loyalty, and several of them point directly at technological innovation.
- Offer products and services that customers want and need
- Ensure accounts are easy to open (hint: think digital)
- Be easy to do business with overall
- Provide fast and efficient service
- Develop innovative products and services
- Apply fair service charges
- Offer the latest technology for account access
As USAA has shown, future profitability and relevance will require adapting and adopting tech as a business strategy, and not just as maintenance. 21st-century companies need to embrace digital, and “middle management and executives need to align to drive a very large-scale transformation forward.”