Staying ahead of the technology curve A board-level perspective

Transcription

1 An Economist Intelligence Unit executive sponsored by Dimension Data and Oracle Staying ahead A board-level perspective A recent Economist Intelligence Unit survey* of CEOs and other senior executives revealed that advances in technology are seen as the single most important driver of change in the business environment. But what do executives see as the next wave of game-changing technologies? What strategies do they use to identify the potential opportunities and threats posed to the business by emerging technologies? And what are companies doing to stay ahead of the? To answer these questions, the Economist Intelligence Unit conducted a global survey of 17 senior executives drawn from a cross-section of industries. The findings show that while companies are enthusiastic about the power of technology, executives also harbour fears and uncertainties over how emerging technologies will impact on their business. Their ambivalence is justified: emerging technology poses risks as well as opportunities and, as this research shows, many companies lack the processes needed effectively to respond to changes in the technology landscape. *CEO Briefing, the Economist Intelligence Unit, January 00 The Economist Intelligence Unit 00 1

2 Staying ahead Early adopters versus nervous investors Many companies invested heavily in new technology in the dot.com boom, only to be forced to cut back heavily on innovation when the bubble burst. Has this experience made executives more reluctant to invest in new (and therefore less proven) technology? The answer is no, judging from the survey. Respondents are enthusiastic about new technology, and appear to believe that it is an increasingly important lever to help them achieve a competitive advantage. Most companies in the survey About the research Staying ahead was written by the Economist Intelligence Unit and sponsored by Dimension Data and Oracle. The author was Gareth Lofthouse. The survey, which was conducted in August 00, reached 17 senior executives, 3% of which were CEOs and over half of which were C-level. Participants were drawn from a cross-section of industries, with the largest number of respondents coming from financial services, manufacturing, professional services, healthcare and pharmaceutical companies, and consumer goods industries. Roughly onethird of companies came from Europe, North America and Asia-Pacific, respectively. describe themselves either as early adopters of technology (0%) or cautious adopters (%); only a small minority admit to being either reactive adopters (companies that invest in technology only when forced to by competitive pressures or customer demand), or laggards that are suspicious of technology. Levels of enthusiasm for technology differ significantly from industry to industry, however. Of the five most strongly represented Which following best characterises your company's approach to technology adoption? The company is enthusiastic about technology investment, and often adopts technology ahead of competitors The company waits until technology is proven, even if that means competitors get a head start The company invests in technology only when forced to by competitive pressures or customer demand The company is suspicious of new technology and the infrastructure lags behind the industry norm Source: Economist Intelligence Unit, September 00 The Economist Intelligence Unit 00

3 Staying ahead sectors in the survey, professional services companies emerge as the most enthusiastic and proactive adopters of new technology (1% consider their companies to be early adopters). They are followed by manufacturing executives, half of which also describe their companies as early adopters. By contrast, financial services and healthcare executives exhibit more caution over technology adoption: % of financial services and 0% of healthcare/pharmaceutical executives would rather wait until a technology is proven, even if that means competitors get a head start. producers are among the most reluctant adopters of technology: % of them say their company is suspicious of new technology and that their infrastructure lags behind the norm. The survey also sheds light on how companies will divide their spending between maintaining and upgrading existing infrastructures and systems, and purchasing new technology. When it comes to information technology (IT), it appears that companies divide their budgets fairly equally between procuring new technology and maintaining and upgrading legacy systems. However, spending on maintenance will diminish slightly in favour of higher investment in new technology over the next three years, according to the survey. Who drives technology adoption? As technology has become more strategically important to companies, the range of executives involved in technology decisions has expanded far beyond the IT department. Not surprisingly, the chief information officer (CIO) is nearly always involved when it comes to evaluating new IT solutions. Just under half companies, however, also say their chief executive officer (CEO) is always involved in evaluating new technology prior to investment, and 3% involve their chief financial officer (CFO) in the evaluation process. Moreover, over What level of understanding do top managers in your organisation have business implications of emerging technologies? Very good Good Moderate Poor Very poor Source: Economist Intelligence Unit, September 00 7 The Economist Intelligence Unit 00 3

4 Staying ahead Which following emerging technologies do you expect to have the biggest impact on your business over the next - years? (%) Business performance management technologies (eg, real-time business intelligence, executive dashboards) Security technologies (eg, firewalls, biometrics) Advances in functionality of portable devices Converged IP networks New wireless standards Open source software 3 7 Source: Economist Intelligence Unit, September 00 0 half companies involve their head of risk management in IT technology a decision that makes sense, given that IT network risk is now a key issue for companies. Unfortunately one important group is still frequently omitted from technology decisions: end users. Over one-quarter of companies only rarely involve users or user representatives when evaluating new technology investments, and % never do so. Considerably fewer companies involve key customers or suppliers in the process 39% doing so rarely, and 18% never involving them at all. Do business managers have sufficient understanding of new technologies, and their potential impact on the company, to make informed decisions? Most executives in the survey think they have a moderate to good grasp of technology issues. Of the bestrepresented industries in the survey, the senior managers of financial services and manufacturing companies are the least confident that they understand the business implications of emerging technologies, and those of professional services companies are the most confident. Tomorrow s hot technologies IT and communication technologies will have the biggest overall impact on business over the next five to ten years, no doubt because these innovations tend to be applicable to most industries. At the top list, business performance management technologies, such as executive dashboards that enable managers to track key performance indicators in real time, are seen as the most important emerging technologies for the future. Such innovations are a manager s dream, in that they have the potential to help improve decisionmaking and performancemanagement activities. In second place comes security technology, which includes innovations such as biometrics as well as electronic defences like corporate firewalls. This is not surprising given the heightened awareness of a range of corporate security threats, whether from viruses, terrorism, cyber scams or old-fashioned employee fraud. executives in particular see advances in security as one most important areas for new technology, while executives from all industries cite security as the area where IT and telecommunications companies could do most to improve their technology. Executives in the survey are also excited about the revolution in mobile technology. Most believe that advances in the functionality of portable technology will have a major impact on their industry, and over half have already invested in, or are evaluating investments in, this area. Converged and wireless networks are also cited as important technologies to watch, a finding that implies that the recent trend for companies to migrate from separate voice and data networks towards unified, Internetbased networks will gather pace over the next few years. Open source software (Linux being the most well-known example) attracts some interest, and a significant number of companies are also monitoring developments in autonomic technology (self-optimising, selfrepairing IT systems). Generally there is less excitement over the much-hyped area of The Economist Intelligence Unit 00

5 Staying ahead nanotechnology, except in the healthcare and pharmaceutical sectors where executives cite it as one most important technological advancements (along with biotechnology) over the next five to ten years. Weighing the risks of innovation Most executives in the survey are enthusiastic about the potential of new technology, but they also view it as a double-edge sword. If they select the wrong technologies to meet their business goals, or implement them poorly, they risk being saddled with a costly and problematic investment for many years. However, failure quickly to identify and adopt important new technologies can also leave companies struggling to catch up with their competitors. The respondents to the survey consider exposure to systems failure or digital security breaches as the biggest threats arising from advances in technology, a concern that is most pronounced among professional services companies. They also worry that the cost of maintaining an advanced infrastructure will become unsustainable and, in a related finding, that they will be outinnovated by their competitors. Other risks relate to uncertainty over the impact of disruptive technology on the business. For example, % of executives find it difficult to predict how new technologies will affect customer behaviour. Betting on the wrong Which following represent the biggest threats arising from advances in technology? Exposure to systems failure or digital security breaches The cost of maintaining advanced infrastructure becomes unsustainable Difficulty in predicting how new technologies affect customer behaviour 0 1 Competitors begin to "out-innovate" your firm The company bets on the wrong technology 0 0 Source: Economist Intelligence Unit, September 00 The Economist Intelligence Unit 00

6 Staying ahead *Corporate Risk Barometer, the Economist Intelligence Unit, June 00 technologies also emerges as a major concern for 0% of companies this rises to % and 0%, respectively, in the case of manufacturing and healthcare companies. Strategies to stay ahead If, as our previous research for CEO Briefing indicates, technology is the most powerful driver of change in the current business environment, what are companies doing to stay ahead? A large proportion of companies regularly monitor the emergence of new technologies (73%) and analyse the potential impact of this technology on their business (3%). Manufacturers are more likely than other companies to devote energy to monitoring new technologies, whereas financial services companies attach a greater need to monitoring risks to their IT infrastructure. More disconcerting is the fact that many companies have yet to put processes in place to manage risks and threats posed by new or disruptive technology. Half the companies in the survey fail regularly to monitor emerging cyber threats, such as hacking, phishing and data leaks. As companies become more dependent on technology to support critical business processes, these issues have become more important, a fact attested to by another recent EIU survey that rates IT network risk as one top-two risks facing companies today.* Many companies are also less than rigorous when it comes to ensuring new technology purchases deliver against business objectives. While almost two-thirds of respondents say their firms regularly conduct cost-benefit analyses of new technologies prior to investment, the proportion that regularly measure the value of technology once implemented falls to just %. Finally, the survey raises a question over how much information really filters up to top managers about emerging technology issues. While, as noted above, respondents seem to believe their top executives are reasonably well-informed about technology, only 0% of companies say they regularly brief the board and other key managers on new technology opportunities and threats. This implies that many top managers are left in the dark about emerging technology issues and risks. Conclusion This survey shows that most executives remain enthusiastic about new technology, and that they see it as an important lever for competitive advantage. However, enthusiasm can quickly turn to disappointment if companies invest in the wrong technologies, or fail to implement them carefully to meet well-defined business objectives. This appears to be a serious risk for companies in the survey, many of which reveal a rather haphazard approach to monitoring and managing the impact of emerging technologies. Which following activities does your company perform regularly? Choose all that apply? (%) Monitor the emergence of new technologies 73 Analyse the potential impact of this technology on their business 3 Conduct cost-benefit analysis of new technologies 3 Monitor emerging IT infrastructure risks (risk of systems, network failures/downtime) Keep track of competitors' technology initiatives Monitor emerging cyber threats (eg, hacking, phishing, data leakage) 1 Source: Economist Intelligence Unit, September 00 The Economist Intelligence Unit 00

7 Staying ahead The admission that many companies fail to ensure board executives are regularly briefed on technological developments should also signal a warning: it suggests many executives are a lot less well informed about new technological developments than they believe. Six emerging technologies Autonomic computing: Autonomic computing is a self-managing computing model that is inspired by the human body s autonomic nervous system. An autonomic computing system would control the functioning of computer applications and systems without input from the user, in the same way that the autonomic nervous system regulates body systems without conscious input from the individual. The goal of autonomic computing is to create systems that manage themselves, capable of automatically optimising network performance and diagnosing and repairing problems, while keeping the system s complexity invisible to the user. Business performance management (BPM) technology: As the name suggests, BPM is a group of technologies that helps organisations optimise business performance. Some companies see BPM as the next generation of business intelligence (BI). BPM is focused on business processes such as performance management, planning and forecasting. It helps businesses plan efficient use of their business units, financial, human, and material resources. Grid computing: Grid computing offers a model for solving massive computational problems by making use unused resources (computer processing power or disk storage) of large numbers of disparate, often desktop, computers. Nanotechnology: Nanotechnology is broadly defined as anything precisely fabricated with dimensions of less than 0 nanometres (a nanometre is onebillionth of a metre). It holds out the promise of manufacturing with atomic precision and the creation of molecular machines. Scientists have yet to master how to undertake the basic assembly of atoms into structures, let alone how to do it continuously, predictably and profitably. Some think carbon nanotubes will help chipmakers postpone the expiry of Moore s Law. Nanotechnology may also have many medical applications, such as helping human bodies to accept foreign implants. Converged IP networks: In the context of communications, the term convergence is used to denote the coming together of voice, data, video and other application on a single broadband delivery platform networks based on IP (Internet protocol), the technology that powers the Internet. Initially, adoption of converged IP networks was driven by the desire to reduce telephony costs, but another recent survey by the Economist Intelligence Unit indicates that executives also see converged networks as a vital platform to support innovative customer services such as multimedia communications.* Open source: Initially the term open source was applied to software developed by a community of programmers who shared code openly. Instead of licensing code for a fee, open source relies on revenue generated from related services like systems integration, product support, tutorials and user documentation. However, the same principles of sharing have started to be applied to other types of innovation and product development, for example in the field of biotechnology. *Competing through Convergence, an AT&T briefing paper in co-operation with the Economist Intelligence Unit The Economist Intelligence Unit 00 7

8 APPENDIX Staying ahead Appendix A total of 17 senior executives participated in our online survey on emerging technology trends and strategies. The survey was conducted in August and September 00, and our thanks are due to all those who shared their time and insights. Which following best characterises your company's approach to technology adoption? The company is enthusiastic about technology investment, and often adopts technology ahead of competitors The company waits until technology is proven, even if that means competitors get a head start The company invests in technology only when forced to by competitive pressures or customer demand The company is suspicious of new technology and the infrastructure lags behind the industry norm Source: Economist Intelligence Unit, September 00 Roughly what proportion of your IT budget was allocated to the following over the past three years? Procuring new technologies Under % -% -% -7% 7-0% Maintaining and upgrading legacy technologies Roughly what proportion of your IT budget will you allocate to the following over the next three years? Under % -% -% -7% 7-0% Procuring new technologies Maintaining and upgrading legacy technologies The Economist Intelligence Unit 00

9 APPENDIX Staying ahead What is your company s position on the following technologies? Nanotechnology 3 1 Grid or utility computing 3 Open source software 1 9 Biotechnology Renewable energy sources 11 Security technologies (eg, firewalls, biometrics) Advances in functionality of portable devices Converged IP networks New wireless standards 31 Location-aware technology (eg, global positioning, RFID) Autonomic technologies (eg, self-optimising, self-repairing IT systems) Business performance management technologies (eg, real-time business intelligence, executive dashboards) The Economist Intelligence Unit 00 9

10 APPENDIX Staying ahead What level of understanding do top managers in your organisation have business implications of emerging technologies? Very good Good Moderate Poor Very poor Source: Economist Intelligence Unit, September 00 7 Which following emerging technologies do you expect to have the biggest impact on your business over the next - years? (%) Business performance management technologies (eg, real-time business intelligence, executive dashboards) Security technologies (eg, firewalls, biometrics) 0 Advances in functionality of portable devices 3 Converged IP networks New wireless standards Open source software 7 Biotechnology 1 Renewable energy sources 1 Location-aware technology (eg, global positioning, RFID) Nanotechnology Autonomic technologies (eg, self-optimising, selfrepairing IT systems) Grid or utility computing ) 8 Other 3 As a priority, where do the IT and telecommunications industries need to deliver the greatest improvements to technology products over the next five years? Select up to two responses. Business intelligence and decision support technologies Security solutions Portable devices (eg, Blackberry, mobile phones, laptops) Customer Relationship Management (CRM) applications Network and communication technologies Data management and storage technologies (eg, databases) 3 Enterprise Resource Planning (ERP) applications Supply-chain management applications Operating systems (eg, Windows, Linux) Other The Economist Intelligence Unit 00

11 APPENDIX Staying ahead To what extent are the following individuals involved in evaluating new technology prior to investment? CIO/CTO CEO CFO The board Chief Risk Officer Heads of business units Always Often Rarely Never Key customers and suppliers Key users/user representatives 3 Other Which following activities does your company perform regularly? Choose all that apply (%) Monitor the emergence of new technologies Analyse the potential impact of this technology on their business 3 Conduct cost-benefit analysis of new technologies 3 Monitor emerging IT infrastructure risks (risk of systems, network failures/downtime) Keep track of competitors' technology initiatives Monitor emerging cyber threats (eg, hacking, phishing, data leakage) 1 73 In which region are you personally based? Asia-Pacific North America Western Europe Middle East & Africa Eastern Europe Latin America The Economist Intelligence Unit 00 11

12 APPENDIX Staying ahead Which following represent the biggest threats arising from advances in technology? Exposure to systems failure or digital security breaches The cost of maintaining advanced infrastructure becomes unsustainable Difficulty in predicting how new technologies affect customer behaviour 0 1 Competitors begin to "out-innovate" your firm The company bets on the wrong technology 0 0 What are your organisation s global annual revenues in US dollars? What is the total number of employees at your company worldwide? $0m or less 1 $0m - $1bn 1 $1bn - $bn 1 $bn - $bn $bn or more 1 0 or fewer ,000 1,000 -,000,000 -,000 3,000 or more The Economist Intelligence Unit 00

13 APPENDIX Staying ahead What is your primary industry? Which following best describes your title?, pharmaceuticals and biotechnology 8 Energy and natural resources Telecoms Entertainment, media and publishing Transportation, travel and tourism Chemicals Automotive 3 Government/Public sector 3 Education Logistics and distribution Retailing Construction and real estate Agriculture and agribusiness CEO/President/Managing director Manager Head of Department Head of Business Unit 8 SVP/VP/Director 8 Board member CFO/Treasurer/Comptroller CIO/Technology director Other C-level executive Other 1 What are your main functional roles? Please choose no more than 3 functions. General management Strategy and business development Marketing and sales Finance Customer service 1 Risk 1 IT R&D Human resources 7 Information and research 7 Operations and production 7 Supply-chain management Procurement Legal 1 Other 3 The Economist Intelligence Unit 00

14 Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any information, opinions or conclusions set out in the white paper. 1 The Economist Intelligence Unit 00