“With engineering, we’re tasked with the long term maintenance of a piece of software, and we also become concerned with many lower-priority properties, such as its performance. With wizarding, we’re often best served by designing for ease of throwing code away rather than maintaining it.”
“If it's in a fountain it's free, if you put it in a bottle it's $2, if you put gas in it’s $2.50, if you put in a minibar it's $5. It's the same water. .. Your customers are different. They have different needs, they have different values, and they have different WTP (willingess to pay).”
“The root of all innovation evil is the failure to put the customer’s willingness to pay (WTP) for a new product at the very core of product design. Most companies postpone pricing decisions until after the product is developed. They embark on a long, costly journey of hoping they’ll make money rather than knowing they will.”
Being an early adopter for new technology is not for the faint of hearts. True. But often decision makers are subjected to fear mongering tactics that make it seems far riskier than it needs to be. Despite the best intention to measure return on investment, technology investment is wrought with political manoeuvres and myths, especially when the new technology is placed face-to-face against established technology. At the same time, it is unwise to dismiss the opportunities that can be made possible by new technology.
The latest technology is historically referred to as leading edge or cutting edge. Sometimes it is referred as bleeding edge, cynically referring to the pain and “bleeding” that the early adopters endure when implementing the latest technology. The phrase sticks, further reinforcing the perception that it is very risky to be an early adopter. What got lost in the message is: what did those “bleeding” companies do that made them “bleed”. Was it purely due to the technology or was it exacerbated by their mis-management of the technology adoption project?
Technology is a tool; it cannot perform or fail on its own. There is always the people factor that influenced the outcome – good or bad. And yet people misunderstand this factor and generalise away. This eventually creates a fog of myths.
Myth #1: Leading edge technology is unproven
When a technology is so new, leading edge implies that not very many companies or users would have bought and used it. However to state it is unproven, the statement needs to be understood in context. The burden of proof rests on both the vendor and the consumer. The vendor always have to back up their claim about their new technology and for that they will claim it in as narrow a scope as they can get away to avoid extra liability, while at the same time aggressively promising benefits to lure the consumer. Which means that most of the burden of proof needs to be born by the consumer, i.e. the consumer must prove that their intended use can indeed be performed to specification by the technology.
This is where many companies fail. Often, they do not have specification of their intended use or if they do, not good enough. Sometimes they do not even know or agree among themselves what the intended use is supposed to be. In the occasion that they have good specification, they may not have good and repeatable ways to test the technology against the specification. In other words, they themselves cannot prove if the technology can perform to their intended use or not.
In these cases, it is actually irrelevant whether the technology is new (i.e. leading edge) or widely used (i.e. established). If the technology implementation does not live up to expectation, they would blame the technology anyway. When the technology is new, they would claim the reason is because it is “unproven” and when the technology is not new, they would come up with other excuse.
Opportunities await companies or consumers who have the discipline in understanding and specifying their intended use of any technology and proving the fit methodically before actual use. These companies or consumers have the ability to try out any leading edge technologies that may benefit them ahead of their competitors, whether the pundits think it is proven or not.
Myth #2: Leading edge technology is for start-ups
The perception is that start-ups are more willing to take risks than larger companies. Out of necessity, this is often true. Ironically, it is actually the larger companies who usually have better means and resources to “prove”, prior to use, any promising new technology against their need or intended use – as discussed above. And this is the exact opposite of risky, because the fit for purpose can be assessed beforehand. Companies or consumers who think leading edge technology are not for larger companies are generally the same ones who were misled by myth #1 above.
Once any company or consumer can get over the provability complaint, it all comes down to standard portfolio risk management. Start small, start with non mission-critical use, start with change-ready users, or any combination of these. Then learn from the pilot project before enlarging the scope in order to make corrective actions. If the pilot project proves the new technology does not work for them, they can move on and use the knowledge for the next new technology evaluation.
Many large companies rely on analysts to help them “understand” new technologies and wait until it is in widespread use before they start trying them out. This approach is actually riskier than trying the technology hands-on when they are still new. First, analysts are blind to the nuances and complexity of a large company. They can only make generalisations of what large companies need and how a given technology will or will not fit their needs. Second, waiting means that other companies who successfully use the new technology will get the competitive edge over those who wait.
From the perspective of portfolio risk management, large companies have more cushion than small companies to take on the calculated risk of doing a pilot project on the new technology.
Myth #3: Leading edge technology gives less ROI than established technology
If the intended use is merely to maintain the status quo, then there is a lot of weight in this statement. But maintaining the status quo is the wrong objective. The objective should be about acquiring competitive advantage. And when observed in light of this objective, the ROI (return on investment) calculation takes on a different nuance and the time horizon extends longer.
When a technology is new, the market size is still relatively small and there is not enough economy of scale. So cost tends to be higher than established technology. And even with technology where economy of scale does not necessarily reduce price (e.g. computer programs), there are still the secondary services (e.g. availability of programmers) that are directly or indirectly affected by the market size and priced accordingly. This is basic supply and demand.
Therefore, new technology – due to relatively higher cost on the outset – its ROI needs to be assessed from the perspective of benefit in giving competitive advantage over the medium to long term. On its own, a new technology may not generate enough ROI. But when looked in the context of what it potentially brings to the company's competitive advantage, the medium or long term ROI will shift favourably.
The opportunity cost from the failure to use a relevant new technology for competitive advantage can be hard to recoup. At the same time, this does not mean that every new technology is relevant and needs to be implemented widely and immediately – far from it.
Leading edge technology brings an opportunity, not a promise. If it works as intended, does it have the potential to give competitive advantage?
Every decision maker needs to be curiously open minded and cautiously pragmatic at the same time.