T. Rowe Price recently released its 2018 global markets outlook, for the first time including a section on technology innovation and disruption in recognition of the increasing importance technology plays across all industries. They site cloud computing, digitization, big data analytics, AI and IoT among the key trends driving value and disruption — seven of the ten largest companies today are the leaders of these technological trends. Over the past couple of years I have met with executives from many large and mid-sized businesses in the Midwest to review their strategy for dealing with the challenges and opportunities arising from this new digital and data driven world and its impact on their business, many of these enterprises in manufacturing and health care. Most of these executives are aware of the trends but remain unsure of the opportunities for their business or how to proceed. This is consistent with the findings in the McKinsey Global Institute report on the Age of Analytics (December 2016) where they note that most companies remain at the starting gate, some investing in data and analytics but not yet reaping the rewards and others still trying to figure out how to get started. The Big Data research published by McKinsey in 2011 had estimated that, by leveraging these technology trends, manufacturing (as an example) had the potential to lower development costs by 50%, operating costs by 25% and increase gross margins by 30%. Yet five years later they found that manufacturing had captured only 20-30% of that potential, and they sited siloed data and skeptical leadership as the two major barriers. The first of these can be a big challenge and needs to be addressed with the right expertise and technology investments. Skeptical leadership however is in my view an even bigger challenge and one that came across clearly in my discussions. Many of the businesses I met with have a long history of success, achieved over the years through carefully honed processes. The quickly evolving technology trends differ greatly from current processes, presenting a challenge that often times has no clear roadmap or ready examples to follow. Leadership’s efforts to understand the new technology trends and how they might impact their business ends up competing for attention with the daily pressures of running a successful enterprise. This combination of lacking roadmap and limited time to focus on new trends leaves many companies at the starting gate, unable to set themselves up for the future.

One thing that the majority of leaders I spoke with seem to miss is that even when they set a path to drive productivity and margin improvements with new technologies, it will still likely not be enough! Improvements can be derived from the application of new technologies as sustaining innovations which C.M. Christensen, in his book The Innovator’s Dilemma, distinguishes from disruptive technology innovation.  The former leads to improvements in current products and performance while the latter is a game changer. In his book Christensen presents examples and arguments of how very well managed and successful companies often end up losing out when faced with disruptive technological change. Cloud computing, digitization, data analytics, AI and IoT are great examples of disruptive technological innovations. Its cadre of successful disruptors that include Amazon, Uber and Airbnb have changed the game for very well established companies that are now forced to play catch up to survive.

When companies find themselves stalled at the starting gate of sustaining innovations, it not only impacts their ability to reduce costs and improve margins but more importantly it puts their future at high risk of being disrupted by the new trends. As Jeff Bezos said in his letter to shareholders last year – if you fight the trends you’re probably fighting the future, if you embrace them you will have a tailwind. Leaders need to invest the time to develop their roadmap for disrupting the future and invest resources to thrive with the trends. Given the accelerating rate of innovation – time is of the essence!