To innovate and build new business, keep technology front and center

The companies we see poised for success in the future are embracing technology not just to manufacture or communicate and connect, but as an integral part of their business plan. Building a self-driving car that communicates with the devices in your home or delivering medical treatment that is individually tailored to each person’s daily activities requires technology as the solution, not just as part of the process.

And just because you might not be running an auto company or a pharmaceutical business doesn’t mean those transformational industry plans don’t apply to you. It often fascinates me how many executives don’t look outside their industry worldview for lessons. Many become so entrenched in their own business and focused on maintaining their subject matter expertise that they fail to read broadly and heed warning signs from other sectors.

Some of the challenges that the auto and biopharmaceutical industries currently face are remarkably similar to those that the retail and airline industries must contend with—and offer lessons for executives in other industries as well. These industries face what we call compression disruption, which is a slow, chipping away of business from a variety of angles rather than a big bang. But it’s the same result: disruption.

For instance, the average tenure for a market-leading treatment in a therapeutic area has dropped 51% in less than two decades, from 10.5 years in 2000 to 5.1 years in 2017. Automotive revenue growth has slowed to 1% CAGR compared with 35% growth from 2009 to 2015. Yet the rise of ride-sharing revenue is expected to grow dramatically, achieving 21.8% CAGR from 2017 to 2021. Meanwhile, airline executives are preoccupied with how to differentiate and succeed in an increasingly competitive, commoditized market that is not always perceived as a level playing field.

As a result, companies must transform their businesses, at the core—across the whole of their enterprises. They can’t just dabble in change; doing proof of concepts, a little bit of social or a little bit of everything simply isn’t going to be enough. Executives must invest at scale to transform their core businesses—otherwise known as making a “wise pivot”—to stay relevant to consumers going forward. If they don’t do that, there’s a real threat of extinction these days. It’s not that you’re going to be a little less successful; no, you might disappear altogether. In fact, many retailers—remember Blockbuster?—have already disappeared. And that doesn’t bode well for some other industries.

Skeptics would say this has happened in the past, that change is inevitable. Yes, that’s true. But you don’t want it upending your industry, your company, on your watch. And change isn’t just more widespread than in the past, it’s faster, because technology today can disrupt and create new business models in a matter of months or a few years, instead of decades.

In the past, technology supported business; now it equals business. Today technology is a critical element of our clients’ core businesses. Regardless of the product they deliver—whether a car, a washing machine, a coffee maker or a thermostat—technology was always at the heart of making it. But now technology—digital technology—is at the heart of the business.  

Executives who keep their eye on the technology ball and make it the baseline for how they view their future business model will be more open to concepts that a decade ago would have seemed absurd. Let’s face it—the notion of your car talking to your washing machine wasn’t on most peoples’ radars just a few years back. While that seems like a gimmicky extra now, it’s not hard to imagine that the washing machine that isn’t connected to a car isn’t going to be the appliance of choice once people get used to the convenience it can provide. Even simpler concepts—binge-watching entire TV series in one day, or shopping from your living room sofa—were the dreams of couch potatoes not too long ago. Technology was core to making these now-common shifts in our behavior and essential to driving old businesses out of business.

Put simply, if you look across industries you might find new ideas that could work in your business. By keeping technology front and center of your thinking, you’re in a position to innovate and build new businesses.