Ways to Invest in Emerging Technology in the Age of Digital Disruption

Brian Hopkins September 27, 2012
Ways to Invest in Emerging Technology in the Age of Digital Disruption
In today's world, digital disruption can strike in the blink of an eye, which has IT executives rethinking competitive strategies. In order to compete with digital disruptors businesses must take a new investment approach to emerging technology.

While there is an insatiable appetite for new technologies that fuel growth, most emerging technology investments languish -- and ultimately fail. But, the ones that succeed cause rapid and dramatic disruptions that would have exceeded our imaginations a decade ago.

Past disruption followed a classic pattern: Innovators created a new product or service at a dramatically lower price point than currently exists. Eventually, buyers abandon the old products for cheaper upstarts. But in today's world, digital disruption happens in the blink of an eye. Consider Amazon.com's disruption of the print media industry and Apple's disruption of the music industry via iTunes. Compared to other disruptions, these happened almost overnight.

Digital disruption has executives rethinking competitive strategy, and has sent product strategists scrambling for ideas on how to use digital and software capabilities to leverage new products and complement existing ones. While firms are counting on these technologies to have a big impact, they tend to fail, wasting resources and damaging relationships. In fact, in 2011, only 9% of enterprise architects said their businesses were completely satisfied with the level of new technology introduction, and 26% were totally dissatisfied.

In Forrester's Emerging Technology Playbook, my colleagues and I maintain that in order to compete with digital disruptors, firms must take a new investment approach to emerging technology.

Step 1: Categorize and Prioritize Opportunities
To justify investment, firms must realize that emerging technology impacts their business in different ways and requires different approaches. For example:

Business critical investments require project discipline. Technology investments that have a high operational impact and low potential for growth typically touch critical systems and processes. These require project management discipline to ensure that inappropriately managed risk and scope creep do not jeopardize service or create delays.
Back-office investments require tangible returns. Investments in back-office and support areas (such as human resources and infrastructure) almost always have two objectives: be more efficient and reduce service cost. The bottom-line nature of these investments requires tangible benefits and a relatively short payback.
Strategic technology investments are part of larger business transformation. Strategic emerging technology opportunities have both high business growth potential and operational impact. They often require bet the business moves where failure is not an option. For this reason, it's critical that these decisions be part of a larger business transformation program that deeply considers all elements of change needed for success.
Future potential investments require experimentation. Technology investments with low operational impact but high growth potential offer the most opportunity to experiment because failure is not catastrophic and potential benefits are high. Ideas that begin as experiments in future potential can mature into other impact areas before commercialization. Success means the potential for more profit, and if significant enough, an initial investment in future potential could lead to substantial business transformation.

Source: CIO (US)