1.5 Contemporary Technology Transformation

A few inventions have had a profound impact on the social structure of man and the operation of businesses and government, such as the windmill and the stirrup in medieval times, the printing press of the late Middle Ages/early Renaissance, and PCs, the Internet and the mechanisms for electronic currency in modern times. The requirements of the new technological state make it possible for contemporary society to question the very underpinnings of how business, government and social structures are organized and – more importantly – how they function. In business, the quest is for a continual addition of value in the exchanges between trading partners. In government, the objective is to provide a suite of bureaucratic functions that provide services to the broadest number of the population. In a capitalistic society, the goal of an individual is to accumulate as much wealth as one’s abilities will allow. The aspirations of business, government and society are predicated on the continued evolution of technology and its ability to enrich the world population’s standard of living by adding value in our everyday lives. The rate at which technology in general affects society was observed by Buckminster Fuller, as discussed in Section 1.1, and by Gordon Moore, of the Intel Corporation, who unravelled the rate at which microprocessing technology advanced in 1965. Moore observed that each new generation of computer chip contained approximately twice as much capacity as the previous generation. Considering that each new generation was being introduced into the marketplace every 18–24 months, Moore concluded that the rate of computing power would increase exponentially over time. This rule which still holds true today is known as ‘Moore’s Law’. The implication of Moore’s observation is not that computer technology would simply produce faster machines, but that the size and cost would decline as a by-product of the production process. Since the advent of the computer, technology has been faithfully applied to every aspect of business activity in an effort to increase profit continuously.

Organizations have recently learned from the dot-com experience that simply investing in technology does not ensure profitability if it does not convey a distinct increase in value added in the eye of the customer. The value proposition must centre on several elements, such as unique product offerings, cost efficiencies, regular returns on investment, optimization of a business process to increase productivity, top line growth and benefit to the customer relationship.

Section 1.4 argued that technology is a temporary state following an evolutionary pattern. The temporality of technology is due to two factors: firstly, that of science, resulting in a seemingly endless display of new capabilities and the ceaseless thirst for continuous improvement. Secondly, from a business perspective and, more importantly, from the perspective of generating value, the temporary nature of technology must be factored into any product offering. For example, it is rare to see a retirement plan for an existing computer system or any indication of how and when a software application will be phased out when the original cost benefit analysis is developed. In fact, many firms during the acquisition of a new technology treat the purchase as something that will continue to add value indefinitely, despite the historical evidence to the contrary. Inherently, technologists know that a system or, more specifically, a collection of hardware and software components, has an expected lifespan but rarely is that lifespan considered at any length beyond that of simple financial depreciation.

In contrast, technology historians offer a large body of discourse on how the advancement of technology does not follow a linear path, but rather a chaotic sequence of events and actions. Figure 1.7 depicts a simplified view of technology trends that should be considered in the development of a firm’s value proposition and internal technology strategy. In a business context, technology trends fall into four broad categories: networks, hardware, software and user behaviour. Network technology links similar and dissimilar technologies through a common mechanism for the exchange of information. The basic trends in network technology are its increasing ability to connect greater numbers of associated processes or transaction sources used to continue to drive down the cost of an individual transaction. Hardware, and all its subcategories of types of device, continues to increase the speed of processing data while reducing the cost of acquiring traditional components. Software, on the other hand, is not only continually expanding the capabilities of corporate functions, but also creating new, previously unimagined functions to add value. However, the issues of licensing, intellectual property and privacy will challenge software development and, in some cases, inhibit businesses’ ability to explore new avenues of value. This can be observed, for example, in firms such as Napster, whose technology changed the underlying value proposition in the music industry and became the recipient of the wrath of a well-entrenched institutional bureaucracy. Whilst users are seeking greater levels of sophistication to supplement the increasing complexities of their jobs and lifestyles, they are also demanding lower cost of ownership and reduced operating expense.

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Figure 1.7: : The evolution of technology

As Internet technology matures and the initial excitement of its creation and adoption begins to wane, users are shifting their focus, trading cutting-edge technology prestige for less glamorous profit improvement. This can be attributed to increased familiarity with the technology. Now that users are applying this familiar technology to a wider variety of uses, they are beginning to realize that the rising incremental cost of technology may limit its overall application. Table 1.2 provides a convenient framework in which to apply technology as part of the value equation.

Table 1.2 : Technology’s value proposition
	Operational excellence	Product leadership	Customer intimate
Consolidate overheads	Centralize services	Combine sales and marketing functions	Blend customer services
Pool resources and technology	Reduce variations to minimize maintenance	Combine research and development functions	Create standard interface for consistency
Optimize infrastructure	Common information transfer	Ability to plug in new features quickly	Common look and feel
Economies of scale	Better purchasing	Reduce product cost	Lower overall cost
Combine knowledge capital	Best Practices	Incorporate customer needs into designs	Know more about the customer
Source: Adapted from Treacy and Wiersema (1995)

Determining a value proposition is sometimes not as straightforward as it may seem. Treacy and Wiersema define a value proposition as: ‘the implicit promise a company makes to customers to deliver a particular combination of values – price, quality, performance, selection, convenience and so on.’^[35] For example, the former consulting organization PricewaterhouseCoopers (PwC) has developed tools such as the value proposition calculator (VPC)^[36] to assist clients who are engaged in maintaining and managing their physical assets. The VPC helps a firm in its initial search for value and, more importantly, the establishment of a quantitative side to the value equation. Although PwC’s tool is illustrative not definitive, it permits individuals to begin to construct tangible measurements for an intangible subject, that of value to a customer. It educates an individual about the key performance indicators and their relationship to elementary business processes. The measurement of value is in many cases not a quantitative measure, but the product of combining quantitative and qualitative properties mixed with simple customer emotion.

Technology’s value proposition is often elusive because it is a relative measure of a business need, want or desire that requires varying degrees of justification to an organization as a whole. One can equate the use of PCs to that of the value of diamonds. Diamonds are valuable because they are rare. ‘Rare’ typically means uncommon or unusual; yet almost every woman you meet has a diamond ring. Diamond exchanges and jewellers sell millions of diamonds each year, so when did millions of anything become rare? Diamonds were rarities in the Middle Ages, thought to have curative powers; later they became a symbol of love. Today they are no longer rare. In fact, diamonds are a commodity, just like the evolution of the PC’s value proposition; it is relative to how the item is applied by society. The relativity of value as it applies to technology with global customers is discussed in Chapter 4.

Therefore, determining a value proposition is a process of orchestrating a complex combination of qualitative and quantitative characteristics into an offering that can be easily accepted and adopted by a customer group. In this process, technology often plays a dual role, as a physical component of the offering or as a mechanism to facilitate the business processes that result in a product. In either case, developing a value proposition for technology is no longer a task restricted to systems analysts in the technology department. Technology’s value proposition must be derived by a collection of individuals within the business in partnership with the technology group. The collaborative process of determining technology’s value proposition within the firm, to the products of the firm and as an extension of the firm with external entities becomes more complex when applied to doing business in a global commerce environment. It is to this environment that we now turn.

^[35]M. Treacy and F. Wiersema, The Discipline of Market Leaders (Reading: Perseus Books, 1995) p. xii.

^[36]See PricewaterhouseCoopers, value proposition calculator (VPR). Available at http://www.pwcglobal.com/pam/solutions/valpropcalc.html.