Executive understanding of technology is incomplete and sometimes even dangerous to the pursuit of corporate strategies. If you doubt this, ask yourself how many executives understand "technology" as well as they understand sales, finance, marketing, and human resources.
Technology literacy requires executives to understand the range of existing and emerging technologies and how they might impact business processes, models and strategies. This understanding is not at the engineering level or how a computer scientist might explain AI and machine learning, but at the contextual and purposeful levels.
The backdrop is not encouraging. Huge gaps about all things digital remain among executives and even CIOs and CTOs9,14; the italics are mine: "The analysis of almost 2,000 large companies find only 7% have digitally savvy executive teams. Even more surprising, only 47% of CTOs and 45% of CIOs could be considered 'digitally savvy.' This percentage drops to 24% for COOs and 23% of CEOs. Only 12% of CFOs were up to speed digitally."
There is additional survey and interview data about executive shortcomings and "misunderstandings"3,4,5,10,14 that informs some ways executives should understand technology—which are explored here.
Most executives see technology through an operational lens. Technology to them is hardware, software, networks, applications, and cloud computing. It is about "IT." Most executives still think about technology across a narrow spectrum of functionality, which spans from wires and devices—phones, tablets, and laptops—to applications—like ERP and CRM—to networks—such as 5G communications. While most executives have only a high-level understanding of operational technology, the understanding they have focuses way too much on technology that has already been commoditized. Yes, it can still be done poorly, but there is little or no competitive advantage in operational technology investments. Executives should leave operational technology to IT support personnel who seldom if ever think about how wires, devices, and networks enable corporate strategy.
Technology should enable strategy. Executives should never separate technology from strategy, which is what an operational understanding of technology encourages. In order to optimize the business-technology relationship, executives must insist upon an actionable strategy, a robust business model, and a business process inventory. Many companies have a business strategy that is abstract, an ill-defined business model and business processes that have not been inventoried. These shortcomings challenge any company's ability to strategically leverage digital technology, so step one is the development of an actionable strategy, an explicit business model and processes that can be "mined" and improved with technology. Executive understanding of "technology" should connect directly to strategic objectives—not operational efficiency.
Misunderstanding #2: Technology Is Digital Transformation
The vast majority of digital transformation projects are not transformative at all. Most of them actually fail.8,11 At best, they are incremental improvements of processes that have been neglected for years. Some of these projects, such as the replacement of legacy applications, are pure modernization projects. If executives understand technology as digital transformation they are boxing their understanding of technology way too restrictively. Worse, way too many public-company earnings reports and calls refer to delayed digital transformation projects or projects that had much less impact than the executives once promised. While the number of digital transformation projects continues to grow, boards of directors, stock analysts and selected stakeholders see the number of digital transformation projects as an imperfect metric.
Understanding #2: Technology Is Much More than Digital Transformation
Executives should understand that "digital transformation" is one limited application of technology that by no means defines the totality of what technology can do. While distinctions among incremental, modernization-driven and disruptive "transformation" are helpful, executives should see technology much more broadly. In fact, distinctions among different flavors of digital transformation and other technology investments have always been small. A better understanding of digital transformation sees transformation subsumed in strategy, a business model and an array of business processes that can be improved, automated, or even replaced. Executives should also manage the messaging around their technology investments way beyond stories about how numerous and "successful" their digital transformation projects have been. Executives should free themselves of narrow definitions of transformation and invest in a broad suite of projects they can describe as the company's overall business-technology strategy—not their slate of transformation projects. They should also condition their stakeholders to see technology as strategic, not tactical.
The vast majority of digital transformation projects are not transformative at all.
Misunderstanding #3: Trends Tracking Is Technology Literacy
Many executives understand technology as the technology trends someone tells them to track. The Gartner Group,6 among other research organizations, believes executives must understand broad technology trends to understand how technology will impact their companies. Executives who chase technology trends are looking for validation (perhaps among their peers who want to talk about the trends they see on X/Twitter) rather than strategic due diligence. Technology trends tracking creates solid optics but seldom translates into value because the tracking process itself becomes more important than the solutions, and without a deeper understanding of the technologies business solutions are impossible to find. Companies that subscribe to research organizations such as Gartner, Forrester, and IDC follow the technology trends these organizations anoint every year. But trends change annually, the trends are different from source-to-source and the "advice" around the trends is usually inconsistent. There is also a huge gap between high-level trends and actual problem solving. Trends in cloud computing, for example, tell executives very little about what they should do about multicloud delivery models. Technology tracking for the sake of tracking feels good but misses the mark.
Understanding #3: Emerging Technology Is Technology Literacy
The short list of emerging technologies includes machine learning, natural language processing, the Internet of Things, advanced analytics, quantum computing, 5G/6G, cybersecurity, edge computing, data lakes, robotics, augmented, and virtual reality and, of course, generative AI, and tools such asChatGPT, Bard, and Copilot. But as suggested, it is not about the lists, but about the kinds of problems the technologies can solve. While no one expects executives to talk code, architecture, or APIs, they should be able to discuss how, for example, augmented and virtual reality might improve their products and services, and how they plan to prototype emerging technologies.
Executives should especially understand the applied potential of "data" and analytics. They should understand how data powers their internal and external processes. They should understand the strengths and weaknesses of structured and unstructured data. They also must understand the premise of analytics, what it seeks to do, and how it works at a functional level.2 Executives should understand how the role of data has fundamentally changed. "Database management" yielded to "data warehouses" which yielded to "data lakes" which all now live within "data fabrics." Executives should define their company's commitment to "data-as-a-service" and all of the enabling technologies that make this service possible.
Misunderstanding #4: Technology Is a Slate of Projects
Companies spend crazily on technology projects. Big projects, including ERP and CRM projects, and smaller ones, such as prototyping new minimum viable products (MVPs). Executives who track projects become faux project managers, not strategic technology leaders. Executives who play project managers on TV are poor project managers back at the ranch primarily because they do not understand the nuances of technology project management. For example, the movement from waterfall to Agile application development must include the uncertainty and ambiguity of application development. Executives unfamiliar with development methodologies—which includes most executives—will misinterpret project updates. But much more importantly, executives who track technology projects understand technology at way too granular a level which separates them from their strategic purpose. Worse, slates of projects do not constitute an integrated technology investment plan.
Understanding #4: Technology Is an Integrated Investment Strategy
Technology is as strategic as sales, customer retention, and R&D—perhaps even more so because technology enables all three of these activities. The whole notion of "projects" threatens the advantages companies generate from integrated technology investments. "Projects" have their own start/finish dates, budgets, objectives, and teams. They are also conducted in organizational silos. Executives should understand technology as a comprehensive investment strategy that extends well beyond individual projects. Wholistic, top-down investment strategies link projects. All project business cases should therefore track to other projects and strategic value. This means that "one offs" or so-called "science projects"—well known in industry—never get funded. While this requires some executive discipline, it ensures technology investments serve the greater good, not some faraway corporate lab obsessed with projects that make little or no strategic sense.
Misunderstanding #5: Technology Is a List of Management Questions
This understanding of technology is often suggested by consultancies as a way for executives to demonstrate their technology gravitas. Questions such as "How long does it take our company to deploy new applications?," "What % of business decisions are we making with help from AI?," or "Have we placed high-quality engineers in roles that contribute the most value to the company?" are good management questions, but they are detached from what the questions—and nuanced answers—actually mean. Worse, executives who try to demonstrate technology prowess with management questions—without sufficient technology grounding—can be misled or downright deceived. Operational performance questions are wasted on executives who have much more important things to do.
Executives should understand the relationships among emerging technologies, problems, and strategy.
Understanding #5: Matching Is the Only Important Question
Executives should understand the relationships among emerging technologies, problems, and strategy. They should be capable of "matching" technologies to problems. This means they should have the ability to reverse engineer solutions from desired strategic outcomes with realistic technology solutions. The executive matching process should be proactive: it should not be unusual for executives to suggest how specific technologies could be leveraged onto specific business models and processes. Executives should not wait for suggestions from their teams. They should be active participants in the matching process. For example, executives should be quite capable of suggesting how AI might automate parts of the recruiting or training processes. They should help suggest how augmented and virtual reality might improve their marketing strategies. The ability to match technologies with problems should become a core competency for executives who live in the digital world—which they all do. The only management question that matters is the one that focuses on how technology can solve specific problems.
The five ways executives misunderstand technology and the five ways they should understand technology is an exercise of old versus new. No one underestimates the pressures on senior executives or the extraordinary range of their corporate responsibilities. Adding "technology" to their core competencies—in the five ways discussed here—is not just another activity. Technology touches every internal and external process there is. It is not hyperbole to say that without technology there is no business. Executives must dismiss their misunderstandings of technology and replace them with much more strategic ones.
There is a purposeful throughline from misunderstandings to understandings. Executives should abdicate operational technology to traditional "IT" and force technology to enable its corporate strategy, its business model and the processes that inhabit the model. With the right operational talent, the trains will run on time. Executives should focus on the development of new destinations and next generation train technology.
Steve, Great article for an under-served topic. Tech orgs are implored to understand the business, but non-tech business leaders are (still) not implored to develop intuitions about technology. Adding to your list, two concepts that organizations with traditional IT mindset have difficulty grokking IME: customer-centricity and product mindset. Customer-centric orgs believe in deeply understanding customer needs versus wants and use this information to sustain product-market-fit. Orgs with a product mindset eschew project-thinking ("one and done") in favor of test-and-learn (continuous improvement). Interested in your thoughts.
December 30, 2023 04:43
Yes, customer-centricity and product mindset are definitely two that could be added! We could think of some others as well, I'm sure. Technology drives both perspectives, but ideally it's customer-centric focused. That said, I'm a big believer in market context and the inability of companies to understand what customers need until they need it -- versus telling them that they should really want what they're selling. This is the iterative journey I think both product- and customer-centric organizations take -- and hope for the right results. I am not sure there's enough distance between marketing and reality, that is, money spent on convincing customers that they really "need" something when what they're really selling is "want." Does anyone "need" an EV or is marketing (and some environmental conscience) telling them they should "want" it? At the end of the day, there may not be much distance between need and want, at least as the marketing gurus will tell us!