Shouldn't Technology Make Things Faster?

Quantitative vs. Qualitative Returns

Over the last two weeks, I've described ways to earn quantitative, monetary returns from technology investments - through reducing expenses, containing expenses, and generating revenue. And hey, money's great (I'm not going to argue with money), but you know, sometimes, it's not all about the money.

In my classes, I like to tell my students that technology should also do three other important things - three things that aren't money and are more qualitative in nature - and, if your technology investments aren't doing these things, then listen: there's a whole heck of a problem. Something is really, really wrong, and needs to be corrected.

Speed, Accuracy, and Reliability

Shouldn't technology ... make things faster? I mean, really. If you spend a bunch of money on a new computer and if it slows your business process down, how is that helping?

While we're on the subject, shouldn't technology ... make things more accurate? That's what computers are for, right? Reduce error rates? If a ton of money is spent on system upgrades and the computer system spits out bad information (and leading to bad decision-making), how is that helping?

Finally, shouldn't technology ... be more reliable? System's up. System's down. Wibbly-wobbly, undependable, reset this, restart that, pound it until it's working, how does that help anyone?

These are qualitative metrics in the sense that, off-hand, they generally are more felt than measured. Now, you can break this stuff down and attempt to measure time, accuracy, and reliability to give yourself more concrete metrics, absolutely, but intuitively, we can sense if something is faster or slower, more or less accurate, or, generally unstable; our feelings and gut reactions are pretty useful when understanding technology return as well.

In fact, it's the intuitive reaction from staff that gives management's first impression of its return on technology spending.

The Problem of Confidence

If the solution isn't faster, more accurate, and more reliable, there'll be no confidence in the system; users may even develop work-arounds or "shadowsystems" to do something the first solution was supposed to do!

That stuff eventually leads to even more complexity, more processes out of control, more time, more cost, more inefficiency and more waste.

Technology investments should improve confidence in the information system and the business processes it supports, not weaken it, no?

If This Ain't Happening ...

... something is seriously wrong. The implementation went south. The design was bad. The configuration isn't quite right. When implementing technology solutions, management's expectations of their vendor or solutions provider should be clear - the technical solution should do at least one of the following quantitative things:

• Reduce Expenses
• Contain Expenses
• Generate Revenue

And at least one of the following qualitative things (hopefully all three):

• Improve Speed
• Improve Accuracy
• Improve Reliability

Think about it. If you're a small business owner, why would you invest in technology if it was more expensive, cost more than adding additional labor, or generate money? Why would you invest in technology if it slowed stuff down, made data useless, or was inherently unreliable? How could you have confidence in the solution if your provider couldn't demonstrate these aspects of your return to you?

Next time: the power of perception.

R 

The Z-Curve: the Timing of Technology Spending

Does IT Spending Matter?

Nicholas Carr is one of the more controversial voices in my industry. Over over a decade, Mr. Carr has provided a contrarian view of IT spending and has even asked if IT spending really matters. His premise being that every technology eventually becomes ubiquitous and   adopted by all, yielding businesses no competitive advantage. Crazy, eh? So his message begs us to ask, does tech spend really matter in the first place? If everyone eventually adopts technology at a ridiculously low cost an earns the same competitive differentiation from it's adoption, why are we interested in spending money on it ourselves?

Timing is Everything

(C) 2004. Nicholas Carr. 

Core to Mr. Carr's observations is understanding where your industry is along the Z-Curve for adopting new technology.  

This is his Z-Curve of Strategic Value. Yes, it looks more like an X-Curve but put that aside for a moment. You'll notice the S-Curve (ubiquity curve) shows that, over time, there is a relatively limited number of early adopters who embrace the technology, but during that early adopting period, they earn the highest potential for competitive advantage because nobody else has it yet. That's the Z-Curve you're seeing there, and the gap is very wide. 

(C) 2004. Nicholas Carr.

Now, over time, as more and more people adopt the technology, the competitive advantage gained from reducing expenses, containing expenses, or generating revenue slides off. You have a smaller range of competitive advantage because more people are applying the technology. Its cost and complexity is coming down, and more and more companies are beginning to install it. Over time, the technology becomes cheap and ubiquitous: everyone can afford it, everybody can have it, and it's now just a common aspect of doing business. What this is telling us that there's a timing involved for investing in technology that's earning first-mover and follower advantages.

What's the Difference and Why Do I Care?

That's a great question and it matters from a strategic standpoint:

• If we're looking to earn the highest rate of return on our technology spending, we would want to make investments early on in the adoption curve for proprietary advantages;
   
• If we're looking to earn a modest rate of return on our technology spending without taking on unnecessary risks associated with first-movers, then we'd be making investments mid-stream in the diminished advantages stage of the curve;
   
• And if we're looking to just stay in the game and be relevant - to have the same technology that everyone else does in our industry and what our consumer expects us to have - then we'd be investing in the weak advantage stage of the curve.

Small business can take advantage of the Z-Curve by innovating with technology: adopting new technologies that are in the proprietary advantages segment of the curve and gain the highest rate of return. They can also plot where the weakest advantage may be earned from the technology dollar should they continue to wait for adoption. This kind of awareness is all about managing IT problems instead of just reacting to them. It's what I help my clients do every day.

R

Generating Revenue

Over the last couple of weeks, I've been talking about the impact of automation for small business. I've been talking about being an owner and making rational decisions that help to either reduce expenses or contain expenses associated with the growth of a business. But today, I'm going to talk about a strategy that rarely applies to small business ... makin' money with technology investments.

Generating Revenue

What I'm referring to here is to use technology to create technology products. Technology products could be things like hardware or software. Example: your company makes cell phones or software apps that can be installed on cell phones. You make the products and sell them, making a little money off of each unit sold. 

You can also make money off of intellectual property: patents, trademarks, trade secrets, or even books. Example: your company could have a patent on a critical business process that it licenses to other companies. You could have written a piece of software that gets licensed to other companies. Either way, you make money off of the licensing. Also, maybe you wrote a very successful book. Every time a book is sold, you're making a little bit of a royalty. That's money earned from intellectual property. 

Why This Traditionally Doesn't Matter to Small Business ...

Usually, the generating revenue strategy isn't a good fit for small business because they're not making technology products, or, they don't own any intellectual property. It's a great idea it's usually not applicable. The small business is too busy doing small business things - things that matter to it and its customers - than focusing on making technology products.

... But Why It's So Cool!

The cool thing about this strategy is that it doesn't suffer from diminished returns as the previous two strategies.

On the one hand, when reducing expenses, you can never get expenses down to zero, and the closer you get to zero, the harder it is to earn any kind of return. Using the reducing expenses strategy, the earliest returns are the largest returns, and it's not a viable long-term approach to competitive advantage.

On the other hand, when containing expenses, you're dealing with the net present value of money. The money you earn in the future by investing in technology won't be worth as much as it is today. So relying on containing expenses also isn't the best strategy for long-term competitive advantage either.

Then there's making money! You can generate as much money as you want and there's no diminished return - with one exception: you'll pay more taxes, but still! Everyone likes making money. It's just kind of hard to do for small businesses because very often they're not a technology company in the first place.

Can Tech Pay for Itself?

The small business, though, isn't entirely out of this poker game. Let's say, for example, your company develops an app for a mobile device. There's nothing else like it out there. And in your commission agreement with the developer, you've retained the copyright IP (intellectual property) on that app. 

With a slight modification to the app, not only could it fulfill your purposes, but it could be resold to other companies with similar problems, and your firm can earn money back from the IP investment. It's a residual revenue flow that helps to both offset the R&D (Research and Development) cost of the app, plus, it earns the company a little bit of pocket change over time. 

Of course, the small business will eventually have to ask itself: are we a technology company? Are will going to continue to develop, distribute, and maintain software products for other companies in the future? That's where new ventures can be spun-off or sold to help pay for the risk taken when developing the IP. 

Think about it: has your firm created unique pieces of software that it could market to others? Have you developed proprietary business processes that nobody else can easily emulate? Do you own patents, copyrights, or other forms of intellectual property that can be exercised to earn a residual income stream for your business?

Next time: what technology should be doing for you in the first place.

R