As new technologies are developed so we see businesses springing up to capitalise on new market opportunities.
Technology can often create a market need that didn’t previously exist. Before large volumes of data were created, we didn’t need data storage; and before people became wise to the danger of data loss from local-only storage, we didn’t have data storage in the cloud.
New market entrants can move relatively quickly to establish their position and market share when a need arises, and they start from the beginning with a business model devised with the market situation in mind.
For existing companies it can be a different matter. It isn’t always clear which technologies they should back or the business strategy they should adopt. Will a new technology integrate simply into their existing business model? It’s unlikely. Should they build a new business model around the new technology and go up against the start-ups? This can be difficult – start-ups can move faster while incumbents have established systems, processes and staff trained to work in a particular way. Change can be a slow process.
Value and relevance
To avoid the pitfalls when considering whether to adopt new technology, businesses should ask themselves a few important questions. Does it add value for the customer? Does it reduce operating costs? Is it relevant? Will it help us excel in our core competencies?
If it’s yes, it could be worth it. Let’s consider an example.
The automated teller machine (ATM) was a new technology when it was introduced back in the late 1960s and rolled out during the 70s. It took some time for the technology to be widely adopted but now, when we visit the ATM it wouldn’t cross our minds to think about the impact it would have had on the way banks worked at the time. ATMs have become such a fixture in our lives as a way for us to quickly and conveniently get access to cash.
During the adoption phase however, ATMs had an impact on the banking business model. They had to be integrated into the way banks do business with their customers. The banks stood to gain and to lose. They gained business efficiencies and cost reductions through the need for fewer staff to deal with day-to-day low value cash withdrawal transactions, but they lost the opportunity to generate potential additional business that face-to-face time with customers brings. They also stood to generate customer dissatisfaction every time one of their machines didn’t work properly.
On balance, banks adapted their business model favourably with the advent of the ATM. Through them customers are able to self-serve – and perceive value in doing this – while cost-per-transaction is brought down for the banks. Banks stayed relevant by adopting the new technology but remained true to their core business.
As far as potential customer dissatisfaction goes, this can be true of course if machines are out of order but if – as is more often the case – it takes a long time to withdraw money because there’s a queue at the machine, how many people put the blame for their frustration on the person ahead of them in the queue rather than the bank? With a face-to-face transaction it is the bank teller who takes the silent blame, not the fellow customer.
Avoiding the pitfalls
To avoid the pitfalls when adopting new technology, businesses should know the market well, know there they’re going as company, consider the value it will bring to customers and the business, roll it out in sensible stages, and outsource for efficiencies where it makes sense to do so.
All companies need to make sure that they are looking at their products and services critically with a view of how the technology will add value. Will it reduce the cost, improve the quality or provide a set of functions and features that did not exist before? The ‘so what?’ test is very important.
Secondly, pushing the customer base to ‘self-service’ mode using web/mobile will enable scaling of the business. In the last few years we’ve seen the telcos adopt this strategy by cutting call centre support and providing a platform for social support (customers supporting each other) and reducing the cost of subscription.
Small businesses can be better placed to be at the cutting edge when it comes to technology disruption. In fact some of the small companies have now overtaken large giants; Google and Facebook are two examples of how a nimble footed, innovation inspired and technology powered company can do in a short span of time.
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They can be more nimble and agile in adopting a new or altered business model. Medium sized businesses need to be more cautious – they have to demonstrate to customers that they are adding value if they want to keep the existing customer base.
Meanwhile, large businesses need to have a longer-term strategy. They need to maintain their existing business while phasing in a new approach. Working with specialists in technology integration can free up the business to focus on its capabilities in serving the customer.
Change has to be well thought out, executed and sustainable as it isn’t quick or easy to alter course part way through, or to make changes after implementation if the new technology has unexpected consequences.
Sourced from Subramanian Gopalaratnam, global head of innovation and technology, for Xchanging