Dangers Loom for Late Emerging Tech AdoptersBy Brian P. Watson | Posted 08-20-2007
Dangers Loom for Late Emerging Tech Adopters
As Marriott International's Steve Wolf watched a recent documentary on the setbacks in development of the world's first jet fighter, he saw some striking parallels to modern-day corporate innovation and competition.
The Messerschmitt ME 262, the German jet aircraft that might have given the Nazis aerial superiority in World War II, stalled in development as government officials withheld funding, betting--incorrectly--that their existing air fleet would win the skies. That decision, says Wolf, the hotel operator's chief enterprise architect, resembles the difficulties today's businesses face in deciding how quickly to invest in emerging technologies.
Becoming an early adopter of new technologies requires companies to take significant risks--grappling with unproven tools and vendors that may not survive, for instance--in the hopes of getting an edge on the competition. But stalling those investments based on fear, uncertainty or confidence in existing technologies, or worse, doing nothing at all, can destroy a company's ability to compete. "Some organizations will be successful and some won't," Wolf says, "but they wouldn't be successful if they just watched it go by."
Adopting emerging technologies appears to pay off, and on the face of it, sooner rather than later. More than 90 percent of respondents to CIO Insight's latest Emerging Technologies Survey who claimed to be early adopters said their companies saw significant payoff from adopting emerging technologies. Meanwhile, about three in four mainstream adopters (businesses that lag behind early adopters) replied in kind, while less than half of late adopters realized benefits from emerging technologies. (See survey results, page 27.) By those results, it's easy to assume that diving in early yields the biggest splash. But success as an early adopter requires a process of evaluating risks and potential rewards, testing, planning and ultimately deploying the technologies. And even then, it demands a leap into the unknown.
Still, despite different strategies for emerging technology adoption, IT executives and academics say one thing is clear: Reliance on new technologies is risky, and companies should implement them primarily to create competitive advantage or solve critical business needs.
ROI Isn't Everything"
ROI Isn't Everything
"It's really hard to see which emerging technologies are going to turn out to be big hitters," says Robert D. Austin, associate professor of business administration at Harvard Business School and chair of the school's executive program for CIOs. "At the most fundamental level, it must be an outgrowth of the company's business strategy: Are you trying to get ahead? Or be a fast follower?" Either way, return on investment becomes a crucial factor. The problem with new or unproven technologies, however, is that it's difficult to calculate the financial benefits, since there are few documented case studies, Austin says.
But that's actually something of a blessing. By relying too heavily on ROI metrics and projections, companies tend to opt for proven or "incremental" technologies instead of zeroing in on potential breakthrough tools that could deliver greater long-term returns. "You have to get over the sort of mindless application of metrics biased toward efficiency and cost reduction," Austin says. John Petrey, CIO of TD Banknorth, describes his financial services company as a fast follower. One exception came in 2003, when the company learned that its middleware vendor would no longer support the software integrating its online banking and backend systems.
At that point, Petrey saw an opportunity: Web services could provide an alternative to existing options. What's more, he figured, they probably wouldn't be obsolete before they were deployed. Rather than discuss the technology in terms of bits and bytes, Petrey pitched the business side by explaining how Web services, operationally, could pay dividends long term. Quantifying ROI posed a challenge. Instead, Petrey and his team analyzed the potential operational gains, as well as how to mitigate any implementation and execution risks. "The business first had to convince itself this wasn't just an IT organization that saw some cool technology it wanted to go after," he says.
Marriott tends to be conservative about adopting emerging technologies. "The only time we'd rapidly adopt [an emerging] technology is if it's low risk and wouldn't disrupt our business," Wolf says. When a new technology piques Wolf's interest, he and his team do an internal evaluation to classify the technology as "core" (fundamental to operations), "mandatory" (not crucial, but consistent with architectural standards), "optional" (could be used if a clear business case is presented) or "emerging" (under evaluation). Usually, he says, the new technology remains in the "emerging" bucket; occasionally it's moved to "optional." In rare cases, though, the technology is elevated to "mandatory" status.
To prevent missing the boat on technologies, Wolf recommends creating an internal "innovation center," staffed with expert developers and programmers who can test and evaluate technologies as they emerge. He's looking to develop this capability at Marriott.
"We're the largest hospitality company in the world, so we have everything to lose," he says. "Everybody's gunning for us, so we have to have enough technology to deflect those shots against us."
Adopting Early and Often
Adopting Early and Often
Roughly one in five companies are early adopters, according to our survey. But before becoming early adopters, companies must overcome obstacles such as perceived risk--the reluctance to buy based on the uncertainty of the product's performance capabilities. "Perceived risk, if not the killer, is often an impediment to adoption time," says George Day, professor of marketing and director of the emerging technologies management research program at the Wharton School. "Any time you introduce uncertainty, people are going to hesitate."
That uncertainty begets more uncertainty. If companies aren't adopting the technology, it has no chance of becoming truly "disruptive" to the marketplace, Day says. And with little sales revenue, vendors and developers can't invest in improvements; it's a Catch-22.
For some, though, the rewards of early adoption outweigh the risks. Ruby Tuesday CTO Nick Ibrahim consistently seeks new technologies to automate operations and improve efficiency for the 900-restaurant chain. Two years ago, the company bought a software display system that guides cooks through step-by-step food preparation-- when to put a burger patty on the grill, when to flip it and when to plate it, for example. A DOS-based version of the program had been in use there for some time, but when the vendor built a Windows-based version with better functionality and graphics, Ruby Tuesday was among the first to take the plunge.
The early adoption paid off: The new technology eliminated Ruby Tuesday's need for kitchen managers; it also improved customer service, and speeded table turnover, helping cut average dining time from 55 minutes to 45 minutes. It eliminated the need to print and distribute instructional cooking posters, too, saving the company $1 million a year, Ibrahim says. The risk of early adoption may have been uncommonly small; the company could have reverted to the DOS version. But the reward, making progress on an important business goal, is not uncommon for companies that adopt emerging technologies with care.