Digital Distractions

As a team at Elemental Concept we have years of experience at helping organisations innovate, scale and transform. Over those years we have created a proven methodology to help companies embrace technology. We help them understand how to enhance their business models and to differentiate themselves by using or building tools that help them better solve the customer problems that created their business in the first place. That is the core of what we do, ‘the Elemental Concept’ – so whats happening in the world now should be great but its actually surprising.

Since we got involved in the technology consultancy business there has been a paradigm shift. Everyone has charged down the technological path and now the whole world not only seems to demand a digital transformation but also needs to be(come?) a technology company. This uncontrolled rampage towards digital is insane, as I will explain, but what’s even weirder is that we at Elemental now find ourselves in a place where we are trying to stop the profligate spending on tech because there is so much waste.

You’d think that I should enjoy this waste- I mean what kind of nutty CEO of a technology consultancy doesn’t like customers spending wads of money on tech – but its not in our business model to make money when we aren’t creating value for our customers. I realise that this might seem the intro to some kind of sermon, but I just want to share some observations with the outside world so that you can tell me if you think I’m going mad.

Digital Transformation

Those two words used to irritate me as they seemed to symbolise everything wrong with what was becoming the new vogue: to cloak a business in a miasma of how it did its business digitally rather than why it used the new tech or what the tech (or business) did to add value.. It is true that there are huge benefits to businesses in using digital tools to engage with their customers, improve processes and better understand their resources, risks and opportunities. However, if you analyse the history of technology spend you will find a trail littered with the corpses of failed transformation projects (and defunct companies as a result).

In the early days (take e-borders as an example) they used to attribute failure to the waterfall style of implementation. There are definitely many things wrong with waterfall; you spend too long over -specifying a system, creating a price war and then implementing something that by the time it’s ready it is out of date (you still see this in big company procurement processes). The problem is that people don’t seem to look at the underlying reasons for the failures and keep blundering along.

What agile did as an implementation philosophy is bring in a way of coping with continuous change. By delivering things in small cycles where you test, learn and iterate so you can keep pace with the speed that technology and users’ behaviour changes.

All this learning seems to have been forgotten in the digital transformation gold rush. Instead of small iterative changes we are seeing large scale implementations that may take years to build, will still be out of date and are going to cost a lot of money.

There seems to be an abnormal focus on the word digital in these programmes, in our sprint (sic) to embrace apps, big data, blockchain and AI we seem to have forgotten that transformation is bigger in terms of impact to people, processes and most of all customers. A company may build the best system in the world but if they don’t train and reskill their team, change their processes and educate their customers the whole digital effort will be a disaster as they forgot that it wasn’t the technology that was transforming: it was the company.

The other thing to think about is that we shouldn’t get obsessed with the word transformation. Why aren’t we learning from the big failures and implementing a business strategy more. What’s wrong with evolution? If we think about evolution we might think about smaller iterative changes that carry the people, processes and customers at the same time.

So in reality we need to keep our feet on the ground. Or perhaps, one foot on the ground as that’s the whole essence of a pivot rather than a leap or entrenchment. There are some unbelievable advancements that technology can bring to a business but it is the business and all it consists of that is likely to require the evolution.

We are all technology companies

If you look at the stock market there are a number of companies that are classified as a technology company and you have to ask yourself whether they are really a tech company or simply using technology to deliver their business model.

Examples that spring to my mind – AirBnB (it’s really a house letting business), eBay (its an auction and marketplace), UBER (it’s a logistics play). I know I’m doing them a disservice as like Amazon they have ventured beyond the core strategy they started with, and in order to do this have moved closer to being a ‘tech company’. There are however some fundamental principles that make me think these are not technology companies. AirBnB make money from allowing people to let homes, if there are no homes advertised they make no money regardless of how great their matching engine is. Uber needs drivers and people who want to use them. Without them that beautiful user interface is pointless. So I’m sure you get my argument these are traditional businesses – holiday lettings, taxis, food delivery, auctions aren’t new- it’s just some people were smart enough to use technology to deliver their business model. This doesn’t make them a technology company.

There are companies that have evolved. Transformed even. Amazon went from being a bookshop to a provider of cloud services. Ocado went from being a grocery store to also a provider of technology for online grocery stores. It’s really only at this point in their evolution where they are actually executing a business model that sells tech that in my mind can they be classified as a tech company.

So why are we obsessed with calling these companies tech companies? Part of it is simply history.The dot com bubble in the late nineties was led by the innovators who wanted to revolutionise every business by taking them to the internet. All of those companies were classified as tech stocks. The investors that picked well made a lot of money as these companies succeeded as they essentially tapped in to a new, more effective and cheaper distribution model. These investors were tech investors – ones that had quite often taken a bet on (or had recently cashed out their options in) the higher-risk, actual technology companies, like Apple.

The few successes out of the dotcom era spawned a new wave. They were executing traditional business models but using tech to give themselves greater potential. This meant they were valued higher. And that in itself has led to the classification problem I see today.

All businesses now want to be classified as tech companies because in theory they are worth more. This is nuts, soon every company will be classified as a tech company because natural progression means each and every industry will use digital technology more and more.

We have the priviledge of working with Prudential on one of their game-changing initiatives. There is definitely a large element of digital but it doesn’t make them a tech company as that forgets all the other key pillars such as product, pricing, sales, operations and reinsurance.

So let’s end the madness

Returning to my problem with every company being called a tech company, in reality I don’t have one – its more about the herd’s obsession to be seen as one. Much like digital transformation there is maybe too much focus on being a tech company and appearing digital. Too much time will be spent on talking AI, Blockchain and UI when its really the business model and its total delivery that should be focussed on.

In summary I don’t want my dentist worrying about his tech stack, or call himself the digital dentist. I want him to look at my teeth. If he wants he can bring in someone like Elemental Concept to help him understand whether technology can enhance his business, work out whether it would be worth the investment and then help him enable his digital evolution.