Technologies: new opportunities
As we are entering the Information Age, we can see changes are happening everywhere. But few people know how much impact information technology does to the businesses. If you look at the list of 500 largest companies in the U.S (The Fortune 500) for the year 2000 and compare with the list for the year 2014, you will find that only half of them are still on the list. What happen to the other half? Most have dropped from their positions due to management mistakes that led to their failure. Overall the common cause can be attributed to the lack of technology knowledge of their senior management. In other word, they failed because they underestimate the emergence of the Internet and the speed of technology change. And this is not just in the U.S. A business analyst explained: “Even we do not have information about other countries but if half of the largest and most powerful companies in the U.S failed, it is likely that the same thing is also happening in other countries too.”
There is an urgent need to understand the impact of information technology to companies’ business fortunes. The concern is how company management can change quickly before competitors do. But how can management change when their mind is still in the past? How can they change when they do not see the urgency? How can they change when they still believe that nothing will happen to them? To get the answers to these questions, it is important to look at the companies that succeed. In a study of 200 largest and most successful companies around the world, the author found that all senior executives believed information technologies are new way to connect their businesses with customers. In addition, they all invested in Internet, mobile technologies and hire younger, more aggressive managers to replace the old ones, as the most strategic factor in their success. Among all companies that succeed, 98% have senior executives to lead information technology strategy so there is never a problem with leadership. The author also found that most of these companies also changed their organizations into a “Flat” structure to focus more on the new economic reality that embracing technology is the only way to transform the business.
The implications of these changes are so profound because these leaders understand that business rules have changed and to survive they must adopt the digital five forces: cloud, mobility, big data, social media, and robotics. For example, by set up social media using big data, they can collect opinions of million customers, which can help them to develop products and services that meet customers’ needs before their competitors. By using data-driven business processes, these companies can also eliminate the traditional management model of the 19th century as works can get done without the interference of hierarchical management systems. With data is collected and analyzed in every process to identify problems to be solved without management interference. Today workers who have grown up with technology understand this data-driven process and make decision based on data rather than wait for management decision. This new approach already increase efficiency five to ten folds and reduce costs, and increase profits for companies.
Technology also opens new opportunities for successful companies to expand into other businesses. For example, computer companies like Apple and Microsoft expanded into mobile phones and music distribution businesses. Internet companies like Google, Amazon also expand into telecommunication and movie rental businesses. On-line business like Amazon and Netflix also quickly become television and movies production companies. This new trend completely disrupts the entire old industry. An analyst wrote: “The expansion is logical as these technology companies know technology well and they have the knowledge and capital to do it when other “old style” companies are struggled to survive. Few years ago, Amazon sold books and CDs, its profit is low but when it expanded into cloud computing services, then movie production its profits soared. The reason was television and movie companies did not know much about technology and their management could not change so it opened the door of opportunity for others to come in and reap the profits. For many years, the music industry suffered big loss due to piracy until Apple moved in and completely took over the entire industry. Today 85% of people buy music from Apple store and Apple made a lot of money on it. All over the world, there are stories of new startups capture certain industry because they use technology to force massive change, transform the entire markets, and prosper when old companies continue to fail and disappear.
Currently we are at the beginning of the information age as there will be more changes. Soon we will see some technology companies take over car companies such as Google is working on self-driving car technologies. We also see Amazon and Facebook get into unmanned-airplane (Drones) business. Cisco is moving fast into Internet of everything with smart kitchen, smart washing machines and smart refrigerator etc. There are hundreds of startups trying to capture new business; new market and they are very aggressive. Of course changes can be very uncomfortable to many people but it is inevitable. The Internet revolution has triggered the development of hundred new startups; some of them such as Google, Facebook are multibillion dollar companies. It is predicted that with more advanced technologies, there will be more opportunities for startups to become very big by changing the market, create more wealth for the entrepreneurs, and bring prosperity to the economy.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
