Tech-driven business strategy is a concept whose time has come. Today, with a few exceptions, most companies are tech companies. Since technology is the underpinning for growth (and survival), does it not make sense to make technology-driven business strategy the way forward?
For example, a bank is no longer a bank. Instead, it is a technology company that delivers banking services. Likewise, a retailer is much more than brick and mortar – it is an extensive technology company with smart shelves, direct linkage to supplier networks, cashier-less checkouts, etc.
Historically, technology was a backroom function with guys with glasses and pocket protectors fixing bulky desktop computers or arranging boxes on racks in cavernous data centers. Except in very progressive companies, the IT leaders did not have a seat at the corporate strategy table.
But things have changed drastically. Today, technology is the great disruptor, a great un-equalizer, and a source of creating sustainable competitive moats. The corollary is if your company does not get its tech strategy right, you are toast.
What is Tech-driven Business Strategy?
Technology-driven business strategy is reimagining your strategy with technology as the core and incorporating and harnessing the disruptive emerging technologies as an inherent part of corporate planning and business execution.
Today, it is technology, data, people, and process – in that order – that will help your company survive and thrive in this volatile economy where each day, a new digital-native disruptor is upending established markets.
However, when we say technology-driven business strategy, it is not about purchasing all the shiny new objects on the market, far from it. Technology-driven business strategy is not about putting tools first. Instead, it is about rethinking the value chain and economic value-add from a technology-centric perspective.
Companies are failing not because they don’t have a serverless architecture or a low code application platform or because they did not deploy a voice bot. Instead, companies fail because they do not know how to harness these technologies for the right business situation and market context to drive top-line growth, optimize operations, or reduce costs.
That perspective of “being a technology company” versus “doing technology” or “buying” technology is a vast difference.
Principles and Perspectives of Technology-Driven Business Strategy
Typically, companies develop 5-year corporate plans with an annual refresh. But, honestly, in today’s world, it isn’t easy to see what happens in five years. So, instead of rigid years-based corporate strategy planning, companies should engage in horizon planning.
For example, it is not the same context, but McKinsey’s Three Horizons of Growth model could be a guiding framework.
According to Steve Coley, the originator of the concept and a McKinsey consultant and co-author of the book The Alchemy of Growth:
“Horizon one represents those core businesses most readily identified with the company name and those that provide the greatest profits and cash flow. Here the focus is on improving performance to maximizing the remaining value. Horizon two encompasses emerging opportunities, including rising entrepreneurial ventures likely to generate substantial profits in the future, but that could require considerable investment. Finally, horizon three contains ideas for profitable growth down the road—for instance, small ventures such as research projects, pilot programs, or minority stakes in new businesses.”
Of course, while the model is not explicitly built for the technology-driven business strategy paradigm, we can use it to frame how a company can develop strategies, initiatives, and plans around these three horizons.
For example, quantum computing is at a nascent stage. But, it is definitely a horizon three opportunity. Legacy large corporations may have a small lab experiment going on somewhere. Still, no one at the executive committee level or the board is thinking about how quantum computing could generate new revenues or lower costs ten years from now. That is a massive problem as the tech giants are seriously focused on harnessing these technologies. And upstart startups are looking at upending things and disrupting the markets.
While quantum computing may or may not lead to new business lines and revenues for some companies, practical implications exist. For example, quantum computers can break today’s highest encryption standards. And for most companies, that is a horizon one problem.
Similarly, enterprise Blockchain (beyond crypto), machine learning, computer vision, 3-d printing are technologies that can fundamentally alter the balance of power.
So, is the technology-driven business strategy a treatise on emerging technologies and speculation about how a company might use them? Partially, but that is only a tiny part of the story. Partly because each shiny new object may or may not matter to your industry and your company. Secondly, it is not the tool itself but the business context and the problem space that matter more.
Best Practices for a Technology-driven Corporate and Business Strategy?
Rethink Assumptions: Most of the time, we operate on muscle memory and a set of preconceived notions and assumptions. It will be essential to leave them behind as a new normal necessitates new assumptions.
Ten years ago, for a consumer product launch, a 30 second TV commercial was the way to go. Today, it may be a ten-second snippet in conjunction with a brand influencer on TikTok or Instagram.
For years, companies have outsourced functions like call centers near or far shore as that made economic sense. But today, where customer satisfaction and NPS (Net Promoter Score) is the holy grail and the emergence of conversational AI, insourcing the call center may be a prudent option. But, again, old notions and assumptions about cost and benefit need to change in the tech-enabled business world fundamentally.
Rolling and Evolving: Please realize that long-horizon planning does not mean down to the dollar detailed plans and forecasts. Think of your corporate strategy as something that has three horizons – short, medium, and long, but the planning and execution have to occur in a continuous and virtuous feedback loop.
The shorter the horizon, the firmer the plans, budgets, and projects. However, over the longer-term horizon, you will have to be comfortable dealing with ambiguities, betting on multiple things, none of which may pan out, and the ability to discard something quickly if that is not the right path or decision.
Agility and Flexibility: A top-down corporate strategy does not work any longer. While the vision, mission, and values are still the domain of the leadership, with inputs from all of the ranks, divisions, and locations, the strategy itself should be a federated model with company-wide centers of excellence and communities of practice.
Tech Team at the Table: It is essential the CIO, CTO, and CDO (assuming you have these roles and if you don’t, probably you should) are a part of the corporate strategic planning team and not order takers and implementers. The top-tier tech executives should lead or be an integral part of the planning exercise even if customer-centric goals drive business goals and technology priorities.
Tech-Savvy Executive Leadership and Board: It is not enough to hire a CIO, CTO, and CDO, though it is a good start. Today’s CEOs, heads of marketing, sales, finance, and operations must be tech-savvy for companies to be at the forefront of tech-enabled innovation and disruption.
If a CEO needs their secretary to print emails to read and help find “Click “Any Key” to proceed,” it is time to say goodbye.
Of course, being tech-savvy does not mean they have to be engineers or scientists, even though that helps.
Ecosystem Approach: Today, platforms and ecosystems harness the power of networks and synergies and warrant high valuations. Legacy companies cannot box themselves into going it alone. Furthermore, there is no longer a strict bifurcation between competitors and partners.
When Apple and Microsoft can collaborate even as they compete, so can your company.
Acquisitions for Technology Accretion: Recently, acquisitions were for top-line growth or cost reduction through synergies. But from now on, companies must focus on acqui-hiring or acquiring talent as a cornerstone of M&A strategy.
Such acquisitions can focus on adding technology or teams, preferably both. However, given the tech talent scarcity, you may have to pay a high premium depending on the strategic nature of the assets.
Linkage to Universities: Universities like MIT, Stanford, and others are the source of countless innovations and billion-dollar companies. Technology giants cultivate deep and abiding relationships with these universities, and there is no reason the traditional enterprises should not follow suit.
From sponsoring chairs to events, organizing campus placements, and funding research, companies have several ways to establish and nurture relationships with institutions. Therefore, as part of corporate planning, it is vital to specify educational institution relationships as a fundamental way to commercialize innovations.
Innovation Culture: Companies need to foster a culture of innovation. Just setting up a “Lab” and a couple of COEs (Centers of Excellence) is not sufficient. Instead, companies should codify practices and policies that foster and nurture innovation along with the liberty to experiment, fail fast and iterate.
Embrace Tooling: Do not think of your corporate strategy document as a PowerPoint presentation along with an Excel sheet. Embrace technology tools if you are engaging in developing a tech-enabled business strategy. For example, collaboration tools (Slack), low-code platforms (Notion or Coda) could be the repository of your “living strategy document,” which will evolve constantly.
Let us know if your company is embracing the concept of tech-driven corporate and business strategy?