The future holds thriving growth for tech companies that rise now to challenges new and old. In coming to terms with disruption, leaders are discovering that the solutions are found in technologies.
“Technology disruption presents a two-sided coin — opportunities and complexities,” said Steve Perkins, national managing director of Grant Thornton’s Technology Industry Practice (TIP), in the recent webcast, The Future of Growth and the Technology Industry. In order to flip the coin to the opportunity side, consider these issues and the technological actions to address them.
New challenges lie in regulatory pressure and customer wariness
Two new issues that must be faced come from government — in the form of mounting regulations — and from customers that fear their privacy and security are not guarded.
Domestic and global expansion brings with it a multitude of regulatory issues. Around the world, regulatory authorities are becoming more adept at using smart tools to analyze corporate data and exchange it with peer organizations. They monitor compliance here and abroad, with countries imposing separate rules about data and cyber. Regulatory complexity, volume and risk are rising, according to Grant Thornton’s report The Future of Growth and the Technology Industry: Reinventing the “New,” Again.
With compliance mounting in importance, it is critical to construct a compliance business model, advised Bill Johnston, TIP sector leader of Aerospace and Defense, and Government Contractors. He recommended that companies leverage technology to strategically examine the entire compliance process and move from a defensive to an offensive position.
A second key challenge relates to customer confidence. Trust is under constant assault, so it must be continually earned. Customers know that threats are continuous, and they fear that security and reliability won’t keep up.
Tech companies, as all organizations, must protect their own assets, but they have exponential obligations to protect those of their customers. As-a-service companies are particular targets of criminals, cautioned TIP National Tax Leader Joel Waterfield; hacking rewards are high because of the troves of data from multiple businesses.
Grant Thornton’s report suggests these steps to protect your company and its customer data and systems:
- Employ high standards for encryption, reliability and performance
- Institute safeguards against exploitation of personal data
- Demonstrate proactive vigilance to differentiate your company in the marketplace
Recognize changes in familiar challenges
As companies deal with new challenges, it’s just as important to address existing ones. Leaders are wise to take a new look at those old standbys and be ready to readjust approaches.
It used to be R&D had specific tasks — Go to work on a new chip, add speed and get more transistors on it, then sell a faster computer, said Andy Ross, TIP leader of national valuations. R&D investment was in making existing products better. Now, R&D not under technology’s control is a lost opportunity.
Rather, it’s time to see R&D as a much broader asset, not intellectual property in the sense of patents but instead an entire business model, said Ross. He offered an example in Zara, the Spanish fast-fashion company that engineered a process to spot trends, and prototype and manufacture latest-style clothing for rapid delivery. For Zara, R&D is about discovering how to put technology to use in undercutting department stores and their lengthy design processes and supply chains.
Ross said leaders can expect more out of their technology, assigning it to drive R&D in innovating business models, value, market position and revenue streams. Your competitive advantage, too, will come not from a faster computer but a better algorithm.
Disruption continues from traditional U.S. tech competitors, but some, like Google and Microsoft, are growing larger in a winner-take-all model, explained Perkins. In addition, he said, previous “outsiders” — those beyond U.S. borders and the tech industry — are increasing the competitive pressure. As an example, Perkins described how multinational conglomerate General Electric is not only manufacturing devices for connection to the internet of things (IoT), but also managing them in the marketplace through technology built for this purpose. Further innovation is driven by analysis of data collected by the devices.
According to Perkins, disruption is also surging via the network effect, with technologies brought together in community platforms communities such as Apple and Amazon. A network effect springs from the IoT, as well, with billions of intelligence-capable devices acting in a closed loop of communication.
How can your company ensure it’s a disruptor and not a disruption victim? Keep it in the technology loop. Use data analytics to uncover insights and efficiencies for creating or transforming products and services to meet target market expectations, and reach a larger and evolving marketplace by managing the innovation process. Gain competitive advantage through community platforms, controlling and leveraging data to shift the value chain.
The pace of challenges and change is clearly accelerating, with waves coming in months, not years. The model going forward is bound to be winner-take-all for those mastering technology’s speed, ubiquity and power.