Leadership Dilemma : A Dark Side of Data or Technology Organization

Do you know what kills the large organizations, from Hertz Corp, Polaroid, to Kodak?

You would be wrong, if your answer is ‘they were not able to catch up with the technological disruptions’, like what happened to Blackberry (RIM) or Nokia. Surprised?

In contrary to Research in Motion (RIM), both Kodak and Polaroid identified the upcoming digital disruptions very early and invested heavily on digital photography & printing. So, they invested heavily on developing digital technologies and holding various patents till date.

However, if you look at their revenue, pre- digital photography, it did not came from selling camera but from selling film roles and photo printing supplies. When, their leadership team decided to move on to digital with investments, the middle and management people in the lower ranks, were sceptical about losing the revenue from photography consumables.

So, unknowingly, the leadership team was split into two parts, one for the digitization and second for the traditional income. Rest is history!

Similar situation can be observed in the car rental business. It's not only technology based aggregators, like OLA or UBER, it's a different financial model like Zipcar, where instead of hiring the car for the entire day, you can hire the car for few hours, killed Hertz! A small change in the way revenue is generated but with a big impact.

There are plenty of such disruptive innovations in the history. However, what we learn from history is ‘no one learns from history’. Our example would be incomplete, if we do not talk about one example from the financial services sector.

You are probably aware of " Index funds” innovation". Vanguard virtually killed lot of managed funds, who used to charge high management fees to outperform the indices. When the index funds were launched by Vanguard, it just matched the indices returns, rather than outperforming them and obviously the investors saved on the high “management fees”.

The next part of creating ETFs or ETNs, can perhaps be termed as incremental innovation that enabled the investors of these index funds as stocks during the day instead of waiting for the next day.

The next big innovation is silently on its way again in the financial services i.e. managing the financial data, both data collection and data management. There are many incumbents this business for hundreds of years, like Kodak and Polaroid in photography; Bloomberg, FactSet, Refinitiv, Moody's, and lately S&P (The Capital IQ data management division).

They are not exactly an apple to apple comparison as they some of them have blessings to be numbering or rating agency businesses but the core of all these companies is ‘data’. They too have identified the threat from technological disruptions early on. yes, some of these companies had made non-strategic acquisition and subsequent sale of many garage firms that they hoped will transformed them into a technology company!

However, they all have a common problem. They need to decide, are they data companies or technology companies? Interestingly, most of them don't know the answer yet!

The top management team if they came from other mainstream financial companies like CITI Bank or BoA, they tend to believe they are a data company, however if the top management came from any recent acquisition of small technology companies, they believe they are the technology company.

What difference does this make?

It divides the leadership team in two opposite directions for talent, investments, vision, and philosophy and innovation. Also, every company needs to know what they are up against, is it Amazon, Google, Apple, and Facebook or a garage shop in silicon valley, who can programmatically read and parse the data from semi-unstructured data with 0.001% of the cost, these companies spend for collection and management.

If you focus on surviving as data company based on fundamental and alternate data, you are again up against the technology giants for data collected sensors or transactions.

In addition it would be immensely difficult to attract and retain the right technical talents to work on 100 years old FoxPro based data collection tools or translate the old codes in new language.

Why should technologically talented, people join these companies to work under a technically challenged leadership and not work on artificial intelligence, machine learning, or cognitive automation technologies, in big tech or an agile start-up?

To make the situation worse, almost each year most of these companies decide, if they are data company or technology company as a result of leadership change. This leaves the middle managers wonder and interpret the vision in their own way. Some time technology becomes the support function and data becomes core or the other way around.

Are you finding this same as Polaroid or Kodak? It just waiting for the time before they follow Kodak, Polaroid or Hertz.

No, it’s not the innovation or investment on disruptive technology that would kill some of these but it will be a leadership dilemma and split workforce. – Yes, this is one of the dark side of innovation.