Technology s Value Proposition

Technology’s Value Proposition

Each new technology should be assessed on its potential business value or, more importantly, its ability to facilitate improvement along one of the three dimensions of business adaptation, as illustrated in Figure 1.1. The three dimensions can be categorized into discrete activities that the organization can embrace to realign the firm’s resources and adapt to changes in the business environment.

Figure 1.1: Technology’s value proposition to business

For example, a company can introduce a new product using the existing operating model, thus performing what is called ‘product leadership’; changing the fundamental process used to deliver existing products (performing ‘business transformation’); and/or bringing new products to the market by abandoning traditional methods previously used in the firm (what the industry calls ‘reengineering’). In each case, the role of technology is to advance or facilitate a change in direction. However, in all cases, technology is a temporary state of capability and its ability to be used as a bridging mechanism between old and new must be an integral part of corporate strategy.

Fortunately, the application of technology to generate value within a firm follows a somewhat predictable pattern which is recognizable when viewed in the context of society’s relationship with technology. Figure 1.2 depicts technologies employed by a firm as components of a spectrum that corresponds to the maturity, turnover or replacement upgrade rate of each type of individual technology category. The rate of refreshment obviously varies from company to company and by individual technology components. The rates in Figure 1.2 are based on approximated averages from industry sources such as Computerworld, Beyond Technology and various market sources. Technologies on the far left of the spectrum mature and reach stability at a slower rate, and are replaced over longer periods when compared to the technologies on the far right. Not surprisingly, they typically require greater capital investment, being more corporate oriented and least affected by changes in consumer sentiment, fashion or adoption. Conversely, specialized modules of core processing software that have direct links to customers or allow customers access to data (such as online brokerages, consumer goods shopping and banking) will change at a rate faster than the core system itself.

Figure 1.2: Stability and the technology spectrum

The volatility and rapid change in the lower priced consumer technologies, such as personal computers (PCs), mobile phones and personal digital assistants (PDAs), is largely due to the commercialization of the products to the mass market. For example if one examines television commercials for PDA technology during the two-year period from 2000 to 2002, one realizes that the focus switched from function to form as the technology shifted to appeal to a broader – and in some cases less sophisticated – group of consumers. The early PDA television commercials centred on the functions of the technology, speed in megahertz, storage capacity and memory. Later commercials imply that these functions are irrelevant, announcing rather that the product is now available in six different designer colours, and emphasizing the capabilities of the technology, such as eMail, in-room wireless messages and video/music reception, shifting the consumer’s focus away from the device itself towards how to use it in everyday life.

The same social shift in attitude towards technology can also be observed within business, as exemplified by the proliferation of PCs. Originally the purchase and installation of PCs was the sole responsibility of the data processing department. Nevertheless, over time users have become extremely computer literate and now the purchase of a PC and instalation of software require assistance from technology organizations only for the interoperation with the corporate infrastructure. From a business perspective, technology is mostly associated with the reduction of cost, and can be viewed and broken down across the four-part spectrum consisting of hardware and software combinations that perform core operational functions, devices to interconnect business processes, and mechanisms to interact with external entities, amongst others. Each band of the spectrum reflects not only a social shift in attitudes, but also a different rate of technological maturity.

Examining the technological implementation within firms across all industries during the last two decades of the twentieth century, it can be observed that different technologies mature and change at different rates. The rate of maturity can be understood by examining the technologies associated with core business activities, which change less often and remain relatively stable for long time periods, whereas end-user technologies tend to experience a higher degree of volatility and change due to the influence of employees (or users) and consumers (customers). Technologies associated with external linkages such as customers and suppliers can be labelled as delivery technologies. These technologies will continue to change at a faster rate due primarily to competitive pressures faced by hardware vendors. The number of firms that raced to experiment with the Internet during the late 1990s is evidence supporting this phenomenon.

The continued introduction of delivery technologies understates the requirement of greater integration with existing infrastructures. Implementation of consumer-driven delivery technologies will also require a value proposition focusing on the needs and desires of the end consumer. At the other end of the spectrum, the value proposition for core operations technology and, more importantly, infrastructure technology is shareholder value, the ability to reduce cost. Strategically, a robust infrastructure provides a stable connection to the core operations and anticipates continual changes in the delivery end of the spectrum.

It can be argued that within each category of the technology spectrum there are transactions that originate with one group of technologies and flow through to any and all other technologies. Within each type of transaction, a variety of partnerships or relationships will be required, unless a firm is prepared to invest in all the technologies necessary to perform all internal and external information functions. One alternative is to outsource each technology function to third parties that can deliver discrete components within a linked architecture. In the last five years, application service providers (ASPs) have introduced services that facilitate many discrete corporate information functions such as Web-servers, eMail services and eCommerce engines, thus reducing the need for firms to acquire the capabilities in-house.

One can observe that technologies performing core operation functions and inter-networking are reaching a greater level of stability due to the overall maturity of the underlying infrastructure technologies. The higher level of maturity can be measured by the lower amount of intrusion on systems surrounding the core technology when the core is replaced or drastically changed. This degree of stability can be clearly observed in the core processing systems of banks which have undergone a silent revolution from traditional batch processing to continuous real-time processing without a major redevelopment of associated systems.^[5] In fact, the relative stability of core operational systems allows organizations to refocus resources on new delivery mechanisms and concentrate on integrating new technologies. Nevertheless, devices on the far right of the spectrum – those providing conductivity for end-user computing such as PCs, PDAs, mobile phones and other consumer-driven technologies – will continue to be volatile, having ever-decreasing lifespans and therefore increasing the complexity of delivery systems.

^[5]J. DiVanna, Redefining Financial Services: The New Renaissance in Value Propositions (Basingstoke: Palgrave Macmillan, 2002) pp. 127–8.