Every so often I’ll try to read something a bit leftfield as it’s often the way I can unlock thinking in my own world. So it was with reading Simon Winchester’s Exactly: How precision engineering created the modern world.
There’s something fascinating about how the history of technological development can help to shape our understanding of the present and the future, something that I discussed earlier this week with another author, Tom Standage.
The thing that lodged in my brain from Exactly was that when making an investment in new technology if you want to get some sort of financial return you need to get some sort of scale. A machine that makes widgets more effectively than a human needs to either displace many humans’ jobs, and/or significantly increase your rate of production (which in turn needs you to be able to source raw materials at a faster rate).
For information technology, you need to also find scale. Technology doesn’t find scale magically. Installing new Digital “Machines” will only give a financial return if you do more, do the same or more with fewer other resources, or create new markets that also enable you to do (and sell) more. Simply plopping a digital thing into your business and expecting costs to drop or new revenue to be found is like buying a car and expecting it to be cheaper than walking.
Mulling on this at the weekend, the following 2×2 matrix came to mind:
There may be cases where you simply have to invest in technology to maintain your current operations, or for reasons of compliance. System upgrades and patching, for example. Or new legislation that requires new forms of governance. Yes, the latter might be “doing new things” but they are a cost of doing business.
The Maintenance and Compliance quadrant is about:
- minimising what you spend whereever you can
- buying products rather than building bespoke
- not dressing things up as cost saving where there are no costs to be saved, but more likely as risk mitigation and contingency
The traditional realm of IT cost-saving projects is “Doing more”. This is the production line model of thinking, scientific management that expects efficiency gains to come from the finesse of repeatable processes.
The Build scale and/or efficiency quadrant is alluring, but you do need to be sure that you really can scale services either by doing more, or by doing the same (or more) with fewer people. You need to think about:
- Whre is the scale going to come from?
- what “raw materials” will be necessary to achieve that scale?
- if you are displacing human activity through automation, what will those people be doing in the future (Person/hours saved is a personal trigger in business cases for me, a way of justifying spend without really committing to anything).
- building and integrating over buying. Factories buy machines to automate things, they don’t necessarily build bespoke. If you are just heading for volume, why would you do different for software?
We might want to invest in technology to do new things.
The R+D and Innovation quadrant is about sensibly making small bets to see what might work. A space where you want to:
- manage a portfolio of initiatives where you aren’t assuming any will necessarily work
- think about experiments with hypotheses to be proven or disproven
- develop a set of skills that might not feel comfortable to many people in many organisations.
Finally, for the experiments that work you get into building new business models.
The Build and scale new markets quadrant is where that happens. But don’t confuse this with simply putting a new bit of technology on top of an existing service. Questions here are:
- how do you scale demand
- whilst also scaling capacity at the right time
In my three decades of working in the technology world, the single biggest change has been how tech has moved out of the bottom left quadrant. Using technology to provide scale and to develop new markets is now well established – but not universally. For many sectors, it’s still new ground and there are two potential pitfalls:
- using practices that were appropriate to maintain and govern business operations can stifle the entrepreneurship necessary for doing more and doing new things
- maintain and govern project can end up wrapped up in the sheep’s clothing of entrepeneurship when they are nothing of the sort, and huge revenue or cost saving expectations can be built up around things that simply won’t deliver.
Understanding the true nature of an initiative can help make sure that appropriate approaches can be used in its lifetime…