86% of CEOs say technology advances will transform their business over the next five years. But every executive who has been around for any length of time has lost time and credibility by betting on a “very promising” technology. That is their dilemma; large technology bets are fraught with risk but the push to invest, and invest big, in the next great wave of technology is overwhelming. On the one hand, their technology function assures them that they can deliver on the promise of the new technology that will lead to major streams of revenue. And, they see that incumbents are dying at an ever-increasing pace as new entrants arrive on the scene with fresh paradigms in cost or performance. But on the other hand, most of these bets fail.
Here are three thoughts on how to avoid major pitfalls as you invest in a new technology:
1. Make sure you understand critical assumptions in your business case and work hard to convert these assumptions to facts - you’ll find many assumptions are wrong!
For example, it commonly happens that you have either underestimated the switching cost to your great new solution or you have overestimated the cost of the incumbents solution. The incumbants often go to a great length in dropping their price on an existing solution to effectively compete with a new technology solution.
2. Be clear on the critical capabilities that will be needed. And, find them. You can hire them, acquire them or partner to get them.
The technology function of the largest corporations simply don’t have all the tools needed to deliver on a new solution. It is likely that a bold new technology will demand some capabilities that do not exist within your organization - after all to this point, some of these skills would have been redundant in your core technology organization!
3. Invest to early stage milestone and not distant outcomes.
The technology takes much longer than expected to develop and consumes all of the funding and patience of the organization. Just look at graphene. It was touted as the greatest thing since slice bread, certain to revolutionize any area that required the movement of electrons and was a high profile winner of a Nobel Prize. And here we are 13 years after its discovery, billions of dollars and more than 10,000 patents later, and we still await its first meaningful use.
It is important to engage with new technologies because delivering them is crucial to long-term health of your business and if you accept the risks and manage them well you can win.
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