Companies spend millions trying to forecast an unpredictable future. But no one knows which technologies will be ready, which will be inadequate, too expensive, over-hyped or even a threat to a company’s survival. No one knows when market demand will rise or fall or what the next huge market trends will be or when they will occur. So how can companies develop business models and processes that will work? They can’t so they should (1) move incrementally and (2) improve their ability to react to unpredictable changing technologies and markets through constant preparation. Real strategic leverage lies in caution and reactionary prowess – not in disruption.
The State of the Practice
Everyone I know has developed a technology strategy. Consultants sell them for buckets of money. Companies are only too eager to pay huge fees to understand how technology will – and should – impact their businesses over the next three-to-five years, or maybe longer if there’s enough money to peer further into the future. Then there’s the conversion phase when forecasts are converted into action plans, where value propositions are identified for everyone to see and where “digital transformation” and other acceptable goals are shouted from competitive rooftops. But do technology strategies work? Of course not. At best, they’re a flashlight or two in the darkness of business-technology uncertainty, a necessary tribute to the Board of Directors, a box for the CEO to check, or, when public companies are challenged about their future, something the analysts who cover the stock can chew on. Sometimes supply chain partners want to know what their partners plan to do with technology. Even bored employees with friends at competitors always talking about what they’re doing with AI, IOT and blockchain (which is usually very little) want technology strategies. But actionable? Hardly any of them are, and the ones that receive all the attention can cost a company millions if not billions of dollars. Just ask Sears, JC Penny and K-Mart about digital transformation driven by a business technology strategy. As Edward Cone notes, “the profound failure of Kmart’s ever-vacillating technology strategy was both a cause and a symptom of the problems that drove the retailer to bankruptcy.”
Making matters worse, McKinsey tells us that technology strategies fail because of process and purpose. Insightfully, they tell us that technology strategies are different from conventional business strategies because technology moves so fast! They state that while incumbent business models are under constant threat, the “majority of companies do not respond and ultimately fail.” In fact, “only 8% of companies believe that their business model will remain economically viable through digitalization.” Outcomes? We’re told that over 70% of digital transformation projects fail. So while companies know they’re ultimately doomed by digital, they cannot respond to the most important challenges their business models and processes face.
And who hasn’t developed a business strategy comprises of products and services that will “win” in a predictable market? The same consultants, pundits, academics and internal strategists create strategies all the time. Strategic planning is another enormous industry, though “strategy” is defined in lots of different ways. There are blue ocean, good to great, playing to win, artistic, and even safari strategies. And let’s not forget the lords of strategy and the strategy paradox. The point? There are lots of strategies out there. A new one captivates the business community about every year or so since Porter’s tome in 1996. Said simply, a business strategy “refers to the actions and decisions that a company takes to reach its business goals and be competitive in its industry. It defines what the business needs to do to reach its goals, which can help guide the decision-making process for hiring and resource allocation.” How many of these are any good? Not many. Said a little differently, how many executives or directors would bet the ranch on a strategy generated by some consultants? Not many (which is a good ting).
There’s other failures data out there, but the point is obvious. Business-technology strategies usually fail their sponsors and developers for a variety of predictable reasons, predictable because they’ve been failing for decades. While we can forecast that AI and machine learning will be “big” in the coming years and that everything will eventually be connected to the Web, there’s no precision about any of these predictions – because there cannot be any precision. Why? Because technology development, testing, scalability and adoption are unpredictable. There are also tons of internal variables that determine when a technology is “ready” for deployment, variables like money, talent, management and competition, among many other things that determine when and if a company avails itself of technology-inspired products and services. Not to mention business strategies, which are also usually poor. How many companies develop product and service roadmaps they proactively follow versus react to market forces, customer complaints and competitive moves.
Why Strategize About Business-Technology?
We strategize because we have stakeholders – everywhere – that need to know what we’re planning. Investors, employees, innovators, Boards of Directors and even competitors need to know what companies are planning. Not being part of the emerging technology discussion, for example, is unforgivable in the 21st century.
We also strategize because technology is business and business is technology. There’s no separating technology from business strategy. They’re forever integrated, interdependent and, like it or not, constitute the last competitive advantage, though companies find this aspect of strategy perhaps the most challenging. Companies therefore need strategies to help them optimize business-technology-enabled opportunities. Without optimization strategies, companies will suffer competitively. So why strategize? Because companies have no choice.
Everyone wants to develop business-technology strategies. Companies, consultants, pundits and research organizations, among others, love to tell everyone how to leverage technology to improve their current and future business processes and models. It’s big business. But we develop business technology strategies in a haphazard way. There are way too many players who seldom coordinate: Chief Strategy Officers, Chief Information Officers, Chief Technology Officers, Chief Product Officer, Chief Innovation Officers and Chief Executive Officers, among other chiefs, all own a piece of business technology strategy. We plan strategies, as if the results can be engineered. We treat strategies like manageable projects. We have status meetings where we ask “how’s it going?” “When will we have something we can do?” “Can we sprint to the finish line?” When the team finally comes up with something, and when there’s pressure to do something, somehow there’s never enough money, or the right implementation team cannot be assembled. (Or maybe, just maybe, there’s not enough confidence in the strategy to place any meaningful bets.) If the strategy recommends a bold or disruptive business-technology investment, lip service will be enthusiastic but implementation will somehow be stalled – which is good since most bold, disruptive projects fail – at least that’s what the failures data tells us.
Why They Don’t Work
The failures literature provides lots of reasons why business technology strategies fail. All of the usual suspects make their appearance: diffuse objectives, poor management, lack of executive support, poor talent, too complicated, weak innovation culture, poor organization, dysfunctional teams, budget issues and poor prioritization, among other procedural and organizational problems. Strangely, there’s little mention of the challenges around business-technology forecasting or the integration of business-technology strategies into coherent action plans. In order for business-technology strategies to work, companies must master technology forecasting, strategic coordination and integration and work from realistic, but competitive business strategies – all of which becomes one indistinguishable whole. They must also work with extremely talented professionals. All of which is why successful business-technology strategies are so difficult to develop and implement.
Incremental & Reaction Management Strategies to the Rescue
First, let’s stipulate that not all companies are capable of developing business strategies let alone business-technology strategies. Seriously, many companies, no matter how hard they try, just cannot develop actionable business or business technology strategies. These companies drift along, hoping their products and services will continue to satisfy their existing markets. But without a game plan, the moment the market hiccups – or a competitor introduces something new – revenue and profits begin to fall.
Incompetence aside, there is a way for even the most challenged companies to take some useful business technology steps — to refine the business-technology strategic planning process. Incremental strategic projects are the way for companies to develop and implement business-technology strategies. McKinsey calls this the pursuit of “low-risk moves.” Others refer to it as incremental innovation. But regardless of the label, the suggestion is to move slowly and deliberately into very calm uncharted waters where the bill for failure can be paid without going into serious debt. Failure – even with such low expectations – can thus become acceptable, and small successes exalted as important wins. What McKinsey calls bold steps in an agile structure should – sorry – be avoided, regardless of how bullish everyone is about a killer business-technology strategy that will disrupt their industry. Need we remind everyone that Tesla was founded in 2003, Netflix was founded in 1997 and Amazon was founded in 1993? “Disruption” takes time.
We associate “bold steps” with “disruption” and disruption with “digital transformation.” But digital transformation – everyone’s goal – has one of the highest rates of failure of all business technology projects. Anything that smacks of disruption or broad digital transformation should generally be avoided – unless there’s a financial gun to the company’s head. Instead, the focus should be on incremental strategic moves. Will this strategy sell? Maybe not. Executives want monetizable drama – even if they’re unwilling to pay for it – and incrementalism isn’t dramatic. Wall Street analysts want provocative, and slow-and-steady is anything but provocative. But given the problems with business-technology strategy, incremental, low risk investments are as good as it gets even if no one wants to publicly embrace slow, steady, incremental, low-risk strategies. Again, there are exceptions to this “strategy.” Companies in financial distress or those that find themselves in vicious competitive battles must bet big recognizing that they’re in high-risk territory, because have no choice. But the vast majority of others should go slowly and avoid high-risk technology strategies likely to fail.
They should also develop their reactive capabilities, that is, their ability to respond to changing market, technology and competitor conditions. Crisis management should be constant, not defined around permanent Tasks Forces on benches ready for deployment, but defined around investments made in broad teams schooled in the ways of reaction.
Here’s the problem. “During a crisis, a network of teams carries out responses outside of normal operations, as well as adjustments to routine business activities.” But mini-crises occur at least monthly; the constitution of fresh crisis management teams takes time, and the specific crisis management Task Forces focused on finance, supply chains, communications and technology, among other assignments, should already be skilled in restoration, pivots, reconstitution, deliberation and creative financing across all of the above areas and more. In other words, it’s not about creating a disruptive market or responding to crises, but how to respond to the unpredictable (but not the unknowable). The invocation of these skills and competencies should be “routine” – not something we reserve for a major event, like a pandemic.
Aggressive, disruptive business-technology strategies seldom, if ever work, at least for the vast majority of companies. (Remember that “disruption” takes time and lots of speculative money.) Companies should therefore take a more conservative approach to business-technology strategy, to incrementally modify, replace or automate their processes, products and services while investing in the ability to react deliberatively to the inevitable crises (of all kinds) that plague every company on the planet. These investments will return much more than those that swing for the fences.