The value of digital expertise at the very top of corporations has had recent media visibility. Separately, the media has also been reporting on promising new technologies. Since both can critically impact a company's success, it is worthwhile to examine the strategic role of digital expertise and new technologies.
Examples of the recent media include the First Quarter 2013 issue of Directors and Boards, which ran articles related to the need for corporate directors who have digital expertise. Not long afterward, the Wall Street Journal also ran an article on the subject ("Wanted: More Directors with Digital Expertise" by Jo Ann S. Lublin, May 15, 2013). Of late, there was also news about General Motors vowing to stay on top of driverless car technology, with the goal of avoiding competitive disadvantages like GM experienced after its slow response to the popularity of smaller vehicles. And, in Bloomberg Businessweek's May 20-26 issue, the Bloomberg View section proclaimed that a promising new technology, 3D printing, "will transform modern industry" and according to Washington think tank the Atlantic Council, "has the potential to be as disruptive as the personal computer and the internet".
All of these technology related topics can impact strategy and markedly affect a company's success. Changing technology can spawn entirely new industries, as the phenomenal growth of companies like Google and Apple illustrates. Furthermore, avoiding the downside of being disrupted by promising new technology is an issue many companies must deal with. Yet, whether it's new technology or some other type of change, companies that respond well to changing conditions can thrive. And, their counterparts stuck in the status quo can easily stagnate. On the other hand, companies that shift too quickly into areas far beyond their expertise also stumble badly, and this can be a real concern regarding new technologies. Thus, the right response to change is essential.
That's why the well-balanced way the most recent issue of Directors and Boards addressed the topic of digital directors is especially commendable. The publication has several articles discussing the tremendous value of adding directors with digital expertise to corporate boards. But, the publication also covers the dark side. For example, an article by the former CEO of AT&T Broadband points out that the benefits of social media are often overstated. And, another article in the publication also encourages caution. Furthermore, the publication takes a brief look at technological change of the past and excerpts a 1985 article titled "A New Role: Director as EDP Advisor". Thus, by blending the urgency of the need for board level digital expertise with the potential pitfalls, and by recognizing the value of looking at history, Directors and Boards helps set the stage for more effective response to technological change.
The advantage of a well balanced approach is that it encourages companies and their boards to embrace digital technology, but to do so in ways that are beneficial. And, not all adoptions of the latest technology are. Overzealously misapplying new technology with poor strategic fit can be just as harmful as moving too slowly. In fact, adopting the latest technology in a strategically unsound manner can lead to disaster. And, such disaster has not been limited to the infamous dot-com bubble that burst years ago.
For example, look at what happened when the toy industry adopted video game technology. Back then, some major toy makers invested heavily in the new technology. But, video game technology was far from their core expertise, was expensive to adopt and develop, and took resources away from the core business. Soon, toy companies that pursued video game technology were losing lots of money pursuing an area where they lacked the expertise to succeed. Years later, technological disaster again struck the toy industry when Mattel had huge losses after straying from its strengths and acquiring The Learning Company, a producer of educational software and computer games.
So, getting the strategic elements right is crucial when dealing with technological change. And, as always, building on strengths is essential for strategic success. For many companies, this will mean deploying new technologies primarily in support of, not as a replacement for, their current business. Almost all companies did this with personal computers, for example, adopting the technology to support their own business, not to compete directly with Apple, the IBM PC or its clones. The toy industry, on the other hand, got burned by adopting technologies in ways that focused too heavily upon what might have replaced their existing business. This took toy makers too far from their strengths and put excess emphasis upon the new technology.
In contrast to the unfortunate plight of the toy industry, the digital directors featured in that May 15 Wall Street Journal article seem to be recommending new technologies to support, rather than replace, the current business of companies on whose boards they serve. Still, as I see it after years of studying business success, boards must remain aware of potential challenges that can arise when companies stray from their strengths. And, although digital expertise is valuable, boards that add digital directors must not ignore differences between their own company's strengths and the strengths of the organizations where newly appointed directors' digital skills were honed.
Also unlike the toy industry, encyclopedia seller Britannica accomplished a successful technological transition by shifting to new technologies in a way that built upon its prior strengths, not by trying to directly compete with technology vendors. And, building on prior strengths also fueled the success Meredith, a media company that has thrived at a time when much of its industry has been struggling with challenges related to digital disruption. Rather than getting dragged down by changing technology, Meredith successfully parlayed its Better Homes and Gardens brand into a licensing deal for a line of products at Wal-Mart, according to the February 16-17 Wall Street Journal article "Meredith: A New King of Magazines" by Keach Hagey.
Thus, not losing sight of company strengths is a key component in successful response to new technology. This is the case for corporate boards adding digital expertise. Likewise, not losing sight of its strengths is important for GM as it pursues driverless car technology, especially since its vowing not to repeat past missteps may not necessarily stop future mistakes of an entirely different nature. And finally, if 3D printing takes off as a major disruptive technology, not losing sight of company strengths will be important there as well.
In summary, changing technology can offer attractive opportunities. But, success comes when new technologies are pursued in ways that are strategically sound.
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