Leadership

The New Technology Elite: How Great Companies Optimize their Technology

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Editor’s note: Vinnie Mirchandani, president of Deal Architect, and widely respected advisor and author on innovation and disruptive trends in technology, is set to release his next book in March. In “The New Technology Elite: How Great Companies Optimize their Technology Consumption and Production” (John Wiley & Sons, Inc., 2012), he describes the “technology elite” phenomenon that will turn the technology world upside down.

In more than 100 examples and interviews, 17 case studies, and four guest columns in this must-read book, Mirchandani details the 12 attributes shared by the new technology elite. He discusses the book plus additional insights in this SandHill interview.

SandHill.com: You did a lot of research and interviews for this book. Had you already recognized the trend you now refer to as the “technology elites” and then did the research to identify the 12 attributes, or did the recognition of the trend of these new kinds of companies result from your research?

Vinnie Mirchandani: In the book’s Preface I describe an event where I was presenting about technology-enabled innovation, but to a much younger audience than I typically present to. On my flight back, I began wondering what was going through the minds of the 20-30 year old tech-savvy consumers in the audience. They associate themselves with Facebook or Twitter, they’re used to iPhones, Kindles and USB drives – and I was up there talking about GE, BASF and other global corporations.

And two things kept coming up. How are larger companies innovating for these younger, tech-savvy consumers? And how is consumer tech able to deliver tens of millions of these users when we’ve always been challenged by that scale in the enterprise world? Of course there are order-processing systems that can handle millions of transactions. But iPad – 20+ million units sold in Year 1, Facebook with 800 million + users. That’s off the charts. Those two high-level trends became the genesis of the book.

In my research and interviews, it was clear that “buyers” – consumer products, automakers, banks are embedding technology in their products and services. In that sense, traditional technology buyers are becoming vendors. On the other hand, the consumer tech companies are vendors that are learning to scale to humongous levels, so they’re becoming like the GEs of the world. My research then evolved into identifying the key attributes that these companies have. Many of the attributes are skill sets that traditional IT has not thought about or has certainly not delivered consistently.

SandHill.com: Let’s say an exec at a non-tech enterprise reads this book and realizes he wants to transform his company to be one of the technology elites. How does he go about transforming the company? Does he look at internal resources or outside the company first?

Vinnie Mirchandani: If you’re not a technology company, the first step is to start thinking about how your product or service can be transformed to include some technology. In the book I cite examples of smart eyeglasses, smart hotel rooms, smart restaurants, smart everything. Think about how to make your product or service more contemporary, more attractive to that 20-year-old. If he walks into a “smart restaurant” he is going to gush, “Cool, I like using an iPad as my menu.”

Then you have to start thinking about how to get there. That involves talent decisions. Do I have the internal capabilities? Do I do it with my IT group? My R&D group? My product engineering group? Should I partner with external vendors?

Nike leveraged Apple products as they rolled out sensors in their shoes. Other companies do it by themselves. Daimler, the Mercedes folks, has over a thousand software engineers that are doing nothing but thinking about how the user interface in the Mercedes evolves, how the telematics work. So they are doing it more with internal resources.

But many companies stumble when they try to do it themselves. Consumer Reports’ evaluation of the MyFord Touch interface was critical as it caused drivers to fumble at the controls when they should focus on the road.

SandHill.com: What else is involved other than creative talent?

Vinnie Mirchandani: It goes way beyond product engineering. Apple is a good example. They basically rethought the whole retail experience. As I discuss in the book, they’re running a retail operation that is absolutely mind-boggling. The average Apple store in a mall grosses twice as much as Macy’s in 1/20th the square footage.

One of the other things I point out in the book is the importance of an ecosystem. The App Store has more than 600,000 applications, and they came from entrepreneurs that Apple encouraged. Shouldn’t automakers create a similar ecosystem so their dealers, consumers and other entrepreneurs can create automobile-specific applications?

SandHill.com: I really enjoyed reading your insights in the section where you described the non-tech companies having been granted their wish to be successful with embedding technology in their products and now suddenly they have to deal with a very volatile world of technology half-lives, licensing and so forth. How can they get that information so that they can make the transformation quickly? Do they just bring on board a technology partner?

Vinnie Mirchandani: One of the attributes in the book is a chapter about being Pragmatic, which goes into landmines that companies will encounter when they launch a product that has technology in it. They better have some strong lawyers to help them think through a variety of intellectual property, global trade and other issues.

And I point out in the chapter called Paranoid that companies need to get ready for product teardowns, rooting and hacking that are a given with new products in the technology world.

SandHill.com: It seems to me that the non-tech company becoming wanting to be a technology elite will need to change its risk appetite.

Vinnie Mirchandani: Yes and no. Any company that’s been around for a couple of decades is accustomed to going through evolutions of its product or service. The big difference is that now the “new and improved” has to involve some technology. Now they suddenly have to think about the next three releases of that product because that’s how the technology world works. When things are digitized, they change fast; you can’t just think about a five-year cycle.

The other aspect is that the business model needs to evolve. That is so challenging for most companies. It’s low risk to introduce a new product within the old model, old channel, and old pricing model. Take the widget you now sell at $2.50, put technology in it and sell it for $4.00. That’s not what GM did with OnStar. They used to sell it as part of a car, part of a $20,000 product. But it has evolved, and they now sell it as a service priced at about $20/month. The good news is now they can sell it to owners of other non-GM automobiles, so their market has expanded. But selling it as a service was a huge business model change.

SandHill.com: Let’s say you’re an exec at a large technology company who reads this book. Will you view these new technology elites as a competitive threat, or will you have tunnel vision and think they’re not a problem for your business?

Vinnie Mirchandani: I think it’s more of the latter. If you talk to SAP, they’ll say Oracle is their competitor. If you talk to IBM, they’ll say Accenture is their competitor. But as my book shows, industries are changing rapidly. What Apple has done around books, music and telephones shows that technology companies can change industries.

Tech companies need to start looking at the world through a different lens, not just their traditional magic quadrant of competitors. Take Whirlpool. They have traditionally viewed GE, Sears and Electrolux as their competition because they make similar home appliances. Increasingly they have to factor Samsung from Korea, which is much more of a technology company. Samsung has realized the guts of an oven, washer or dryer are increasingly electronics and software. I don’t think that Whirlpool was ready for such an outsider to be a competitor.

Similarly, when an SAP or IBM says, “We’re a software company,” they forget that people are embedding software into their product or service and software doesn’t even become a purchasing point.

Part of the reason for their tunnel vision is that Wall Street wants to see short-term results. So long as they deliver to Wall Street, they think they’re doing okay. They don’t often see the bigger competitive threats. Tunnel vision is a big challenge for the big technology vendors in this new world of technology elites.

SandHill.com: Having done your research and seeing how many companies are already succeeding as technology elites in many industries, do you have a prediction regarding the companies that aren’t headed down this path already? Will they be able to compete in five years?

Vinnie Mirchandani: My next book, for which I’ve done some early research, is tentatively titled “Parity” – as in the NFL where weaker teams get better draft picks and become stronger. It’s about how industries or companies that we thought were dead are reinventing themselves using technology.

Silicon Valley often has a condescending view of technology in corporate America. That’s dangerous because, as you can see in my book, there’s a lot going on in these non-tech companies.

The New Technology Elite: How Great Companies Optimize their Technology Consumption and Production” (John Wiley & Sons, Inc.) will be out next month. Amazon is now taking pre-orders.

Vinnie Mirchandani has been called “The King of Wow” for his keen eye for technology-enabled innovation. His blog, “New Florence. New Renaissance.,” has cataloged 2,500 posts of innovative products, projects and people in work, life and play. He has presented at a number of innovation and technology events. His last book, “The New Polymath” (Wiley), was widely praised as an “innovation firehose.” He is president of Deal Architect Inc., a technology advisory firm that helps clients take advantage of disruptive trends like cloud computing before they go mainstream. Between this firm and his previous role at Gartner, he has helped clients evaluate and negotiate over $10 billion in technology contracts. He spent his early career as a global consultant at Price Waterhouse.

Kathleen Goolsby is managing editor at SandHill.com

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