Welcome to this, the first article from our seventh Brickendon Journal. If you like what you read, then watch this space for new articles to be added each week…..
“It is their lifeblood, in their veins and their competitive advantage”
During the third quarter of 2015, Amazon overtook Walmart to become the world’s largest retailer: a retailer worth a staggering quarter of a trillion US dollars, but one that doesn’t make any of its sales in stores. Moreover, this company that is now the world’s most valuable retailer is not spoken about, valued, or even perceived, as a retailer. It is in fact, a technology company.
The source of Amazon’s growth and its competitive advantage is technology. It is even technology that defines the organisational structure, its offering to clients, and how it interacts with them. All companies now face a very simple and stark choice: think, adapt, and evolve to be like a technology company, or face the real proposition that another company who does, will come in and dominate your market. It might not have happened yet, but it will, the only question is when.
The current business landscape is being transformed by a new wave of companies who don’t think like traditional businesses, but are competing for traditional businesses’ customers. Instead, they think like technology companies. Software is not just something they have in a back room somewhere, it is their lifeblood, in their veins and their competitive advantage. They innovate, try new things and motivate and recruit their staff in unconventional ways.
In the past five years alone, consumers have changed the habits of several lifetimes, no longer making a phone call or traveling to interact with a business. Now, retail customers expect to tap an app to order a pizza, arrange a taxi, or book a table at their favourite restaurant. Why then would they call the bank to book a trade or pay a bill? The bottom line is, they won’t.
Industry by industry these changes are taking hold and business-to-business users are following suit. They expect companies’ products and services to be at their fingertips to digest and consume as and when they wish.
History is littered with companies that failed to recognise the march of technology on their market. Take Kodak for example: the US firm actually invented the digital camera, but didn’t believe it would surpass the film-based model and underinvested in the digital space. As a result, it was decimated and filed for bankruptcy in 2012. Meanwhile, Fairfax Media in Australia, owner of the two main weekend papers in Sydney and Melbourne which were once the only place to look if you wanted a job, to buy a car or find a house, is currently reviewing whether to continue printing them after failing to embrace the rise of the internet.
So how do software companies think? Well, first and foremost from the top down they view their technology as their main business. They don’t view technology development as an overhead, they view it as a profit centre. Some financial organisations have done this with their e-trading divisions, seeing their technology investment as an opportunity to drive revenues. To be successful, a company will need to apply this kind of thinking across their organisation.
According to Brickendon Managing Director Chris Burke, one of the worst mistakes a corporation can make, is to view their technology investment as a separate cost or overhead that isn’t core to their business.
“Outsourcing the technology department could be seen in years to come as the greatest act of commercial suicide ever committed,” he said. “They will have given away the skills and expertise to run their business technologically and for the financial services sector this is the most critical competitive advantage they could have.”
Secondly, they look to innovate. For example, they might set multiple teams against each other, attempting to find a technological solution to a current problem or opportunity; or they might try radical ideas and unconventional methods to find a new approach. In order to do this, they need to set up an environment which fosters creativity and empowers employees to think. Technology firms often have games rooms with table football, computer games and TVs, or nap centres and free food for employees. To think outside the box, companies need to behave outside the box. A great example of this is Netflix, the US internet streaming company, which famously offered employees the opportunity to choose how many days holiday they would like to take per year. (See Brickendon Journal 02)
Thirdly, they structure their organisation to embrace technology throughout the business. Many companies have started down this path by adapting some agile methodologies in their software development lifecycles, but this is not enough. The teams are often only part agile, with existing organisational hierarchies imposed on them thus limiting their ability to determine their own work and be creative.
Finally, money is becoming less and less tangible and is for many people, a virtual currency stored on their Apple Pay, contactless credit card or online account. As a result, this is a critical point in the relationship between money and technology and financial institutions need to take note.
Now is not a time for complacency. Traditional barriers to entering markets are being eroded as legal frameworks are often years behind the technology innovators. Companies in highly-regulated markets such as the financial services sector, may feel protected, but so were Black Cabs until Uber came along – and that is the perfect example of what a technology firm can do to a traditional market.
If your company is not thinking or innovating like a technology firm, then there is a real possibility that a technology competitor will come along and seize an opportunity. Whether it’s Google Bank, an Amazon Hedge Fund or Uber Insurance, it is only a matter of time…