The need to manage the strategic business risks, opportunities and threats emerging technologies and technological change pose for companies – managing technological innovation
We know that…
• Technological change is a fact of life. Technologies will always change and continue to develop. New technologies will always emerge and existing technologies continuously improved. Incremental improvements are prevalent, but every so often radical and disruptive changes come along. These industry-changing shifts are often the result of the impact of combinations of several emerging technologies and their interaction with more mature technologies and other types of innovations.
• All companies are technology-based in some way or another – either through the technology they (or their customers and their suppliers) use, produce or manufacture, as well as the technologies underpinning their raw materials, supply chains and logistics.
The combination of these two principles leads to the challenge that all companies continuously face…
All companies are continuously exposed to the strategic risks – opportunities and threats – of technological change, including those presented by emerging technologies. The risks and opportunities are real, ubiquitous, very often come from unexpected quarters – and should be managed as part of the broader corporate innovation strategy.
Risk is as much about the probability of missing a good opportunity as it is about the threat of an adverse event. Technology and innovation are subject to many different types of risks – DeltaHedron focuses on identifying and managing the strategic business risks – opportunities and threats – presented by technological change, innovation and emerging technologies, and the new industries they spawn; and assessing the impact these can have on the growth and survival of our clients’ companies and industries. Competitive technological intelligence allows companies to also assess the risks faced by their competitors.
The engine of progress is vested in technological change, which come about through the process of technological innovation. Technological innovation is, however, a two-edged sword with the potential for transformational impact – creating the new and simultaneously destroying the old. This ‘creative destruction’ characteristic of technological change and the emerging technologies that invariably follow, present inherent strategic business risks – opportunities and threats – to companies and indeed to entire industries.
A spectrum of emerging technologies present risks, opportunities and threats to companies’ products, operations, supply chains, logistics, business and manufacturing processes. Although these technologies are often IT-based technologies, the disruptive opportunities and threats can just as well come from technologies such as new materials, drones or 3-D printing that are not digital per se, although they are often digital and IT linked or related.
On the one hand there is the business risk that the new innovation and emerging technologies can lead to the obsolescence, replacement or the demise of mature technologies and destroy established companies, industries and business models. On the other hand, new technological innovations and emerging technologies also bring new opportunities, new markets and new sources of prosperity. Here the business risk is in missing these opportunities or yielding the field to established or new competitors, either by not embracing the new, steadfastly clinging to the old or fumbling the transition. There are many examples that illustrate how those that have been in denial, ignored the precursor indicators or misread the signals, deployed ineffective strategies or whose organisational cultures could not embrace the technological change and transitions, have perished. Similarly, there are many examples of those that have created a new future with new technologies, spawning new industries and new markets, and created great prosperity.
As is the case with all business risks and processes, the process of technological innovation and its associated business risks should be managed, particularly regarding the risks presented by emerging technologies and technological change. The strategic business risks presented by technological change and innovation should be managed as part of the company’s formal risk management processes and reflected in the corporate risk register. The innovation strategy should account for these risks, and be an integral part of the corporate strategy. The impact of technological change is clearly a strategic business risk that can affect the company’s survival, growth, competitiveness and ability to sustain profitable business as a going-concern.
It is not surprising that industry leaders recognise the importance of the ‘innovation premium’ and consistently rank the management of innovation as one their highest priorities.
The nature of the creative destruction that technological innovation and emerging technologies bring
Technological innovations are manifested in many shapes and forms, each of which requires a specific and different innovation strategy. Very often the disruption is the result of interaction at the interface of combinations of different technologies together with innovations in other fields such as ‘finance, fashion or fitness’. Radical and disruptive innovations often come from a completely different industry or area than the one in which they impact.
Technologies are continuously being improved, which leads to ‘better, faster and cheaper’ and often to new ways of doing things. This all contributes to the obsolescence of older technologies. Most innovations are small, incremental changes and improvements that happen over a long period through contributions by many people all across the world. Think for example, how the bicycle has evolved over many centuries. Yet every improved new model contributes to the obsolescence of previous versions. From time to time, however, radical innovations bring about significant change and discontinuities which completely disrupt the dominant technological regime and established order, including markets and applications – ‘creative destruction’.
A new technology brings with it new opportunities, new business models, new industries, new companies and new ways of doing things; and often leads to new organisational and even societal cultures. When a new technological regime becomes dominant, the industry hierarchy typically changes and new companies become the industry leaders – often those that had no position in the old technology. The established structure is destroyed, often through redundancy or obsolescence as the next technological order is established. The ‘wave of creative destruction’ not only stimulates the growth of new technologies and causes the demise of old technologies, but has the same effect on labour markets, jobs and skills. New jobs, career paths and labour markets are created, and old ones destroyed. This invariably requires changes in organisational structures and cultures in order for the technological innovations to be successfully developed, adopted and implemented. Such is the nature of the strategic business risks that emerging technologies and technological change and innovation bring.
“…the strategic business opportunities and threats presented by technological innovation should be managed as part of the company’s formal risk management processes and reflected in the risk register. These are strategic business risk that can affect the company’s survival, growth, competitiveness and ability to sustain profitable business as a going-concern”
Innovation, and specifically technological innovation, encompasses the creation or invention of new products, processes or services and their successful adoption by users – it is where ‘technology meets the market’. Inventions create new knowledge but innovations create new wealth.
Case study – Strategic business risks and opportunities presented by emerging technologies in the photography industry
The emergence of digital imaging combined with the use of mobile phones have changed the world of photography radically. Digital imaging has replaced the use of film and chemicals in the photographic consumer market. Digitisation enables instant viewing, digital editing, storage, presentation and communication, all by the user without the need for an intermediary to develop, process and print the photographs. The use of photographic film in the consumer market has practically disappeared and with it once large companies in the photographic film industry that relied on and stuck with this technology as its core competence. Digital imaging has also enabled the integration of cameras in mobile phones. Mobile phones are replacing cameras as the consumer’s instrument of choice for taking photographs, and the ‘new camera companies’ are the manufacturers of mobile phones. The combination of digital photography and mobile phones has, in turn, given rise to a new social media industry that did not exist a decade ago. ‘Creative destruction’ at work.
The ubiquitous use of mobile phones with integrated cameras has inevitably led to the ‘invention’ of the selfie. The latter’s popularity is no doubt fuelled by people’s desire to accumulate souvenirs, but also by their desire to and ease of posting on social media platforms – a blend of social and technological innovation that is worthy of a case study in own right. The quest to improve selfies, in turn, led to the development of the selfie-stick, a rod which enables the user to place the mobile phone/camera some distance away so as to get a better shot of him/herself together with a desirable background, VIP or friends. Separately, the use of aerial drones have become very prevalent in private and commercial settings, with application in areas such as inspection of buildings and power lines, imagery and entertainment. Note the use of the drone as a platform to carry imaging devices and cameras. It should not be surprising that it did not take very long for the ‘selfie innovation’ and the ‘drone innovation’ to emerge, resulting in the ‘selfie drone’ – device that doubles as a mobile phone case but can transform itself into a small drone carrying the mobile phone a small distance from the user to enable better selfies (and eliminating the need for a selfie-stick). Another example of the dynamics nature of the blending of innovations coming from different industries – the Medici effect at work.