Technology Strategy 101: Planning for the Future

Introduction

Technology is changing our world. This has been the case since people could remember, but the pace and depth of change has rarely been more apparent than in the last few decades - for example, with the success of the internet - years - with cloud services and digital ecosystems or the new class of digital assets - and months - with the incredible rise of generative AI systems.

In contrast to what are often called IT applications, i.e. systems that make our work easier, a new technology have the potential to fundamentally influence what we want, how we work and how we develop.

Thus, a new technology brings opportunities for companies not only to become more efficient, but also to develop new, innovative business models and build a growing, loyal customer base through new ways of engaging with customers.

Of course, this potential does not come without risks. A new technology has to prove itself in the market, its safety aspects have to be understood, and its acceptance, also by legislators and regulators, still has to be worked out - which is not an easy undertaking given the many conflicts of interest that a disruptive technology entails.

Nevertheless, companies cannot ignore these developments if they want to remain successful in the future. It is important to weigh up the potential and risks of new technologies, to understand the possible medium- to long-term effects on the industry and one's own company as far as possible, and to learn through this process. It is also important to understand that a new technology only develops its full potential for a company over time. Therefore, foresight is needed.

In this article we will look at approaches to responding to new technological developments, how to analyse them, and how to match them in a structured way to the business strategy. This ultimately leads to a technology strategy that takes into account the short-term needs of the company, but also gives it a competitive advantage in the long term.

What is a Technology Strategy?

The technology strategy document, which should be part of a far-sighted IT strategy, refers to a plan or framework that outlines how an organisation will leverage technology to achieve its objectives and gain a competitive advantage. It involves making decisions and setting goals related to the selection, implementation, and management of technology systems, infrastructure, and resources. A technology strategy typically includes considerations such as technology adoption, innovation, resource allocation, risk management, and alignment with business objectives.

A technology strategy can set the direction of development on many levels: It can define the fundamental technologies that provide the basis for a company's further development, it can designate technologies on which new innovative offerings will be developed, or it can define very specific components of the infrastructure, such as the interface technology or the programming languages to be used.

In any case, the technology strategy should take into account both the current needs of the company and the business objectives set out in the business strategy. Ideally, the technology strategy, as part of the IT strategy, should be developed together with the business strategy, as we will see in the next chapter.

Exploring the Importance of Technology Strategies in Business

(1) Alignment with Overall Business Strategy & Business Objectives

Traditionally, IT, which was also solely responsible for the selection of a new technology, was a service function that had to fulfil the requirements set by the business. This relationship has changed fundamentally in recent years. Today, new technologies are both shaping customer behaviour and enabling innovative business models. This requires close cooperation between business and IT.

To ensure such close cooperation, IT should be appropriately represented in strategic management. It is often not enough to leave the task of technological development to the CIO. The CIO is more than busy with operational tasks. Such a role can, for example, fall to a Chief Technology Officer (CTO), who should then, however, be represented on the Executive Board.

The inclusion of a CTO in the strategic planning strengthens the exchange of knowledge between IT and business. This also means that the strategic management actively engages with new technologies. This is a challenge for many executive board members, but one that more than pays off in the medium to long term.

If this integrative idea is to be implemented consistently, the technology know-how should also be represented on the strategy-setting board of directors. And I believe that this will increasingly be the case in the future - successful digital companies exemplify this. However, most traditional companies have still a long way to go in this respect.

Furthermore, as already mentioned, the IT strategy, and thus the technology strategy, should be developed in close cooperation between IT and business. This requires an interactive process in which business defines its initial business strategies. IT proposes a technology for their implementation, and business adapts its goals based on the potential of the technology. I go into more detail about this interaction in a separate article (https://digitalleadership.com/blog/it-strategy/).

(2) Gaining a Competitive Advantage

New technologies offer companies an opportunity to differentiate themselves from their competitors. In the short term, existing offerings can be brought up to date and, in particular, customer interaction can be brought into line with the most recent standards.

In the medium to long term, however, a well thought-out technology strategy will realise its full potential. It will allow the company to react quickly and effectively to new demands, to recognise new customer requirements and implement them efficiently, and also create the basis for entirely new, innovative business models.

Most notably, the company will have built up a lot of valuable know-how, as well as the appropriate internal structures to secure a place at the forefront of its industry for a long time to come. I always say to my clients that it is less important for a company to identify and implement the future, new, lucrative business model. Those are difficult to recognise in the initial phase anyway. It is more important to be ready when they become apparent!

(3) Boosting Operational Efficiency

Just as many new technologies introduce a paradigm shift in terms of the design of new offerings or customer interaction, this is often also the case in terms of their operational characteristics.

Whether it is the use of external solutions - for example, in the use of cloud services - or closer cooperation with technology providers - for example, in the development of services based on a new technology platform, new technologies often require adjustments to operational structures.

This initially requires additional effort, but offers a lot of potential to make future organisations and processes more efficient, and thus to reduce operating costs - so it is worthwhile to prepare a detailed full cost calculation for new technologies over the various integration and runtime phases.

In doing so, it should not be forgotten that future requirements can be implemented faster, more efficiently and at lower cost on the new basis!

In addition, new technological approaches usually provide an opportunity to introduce comprehensive, quantitative monitoring frameworks. This provides additional tools to continuously improve operational efficiency.

(4) Improving Customer Experience

But apart from all the financial, operational and organisational benefits that new technologies can bring, the key one, in my opinion, is that it enables the company to better meet the ever-changing needs of its customers!

Customers are used to a world where the companies they interact with most - which will currently be social media - know them intimately, are constantly improving their services, and are developing ever more personalised offerings. They then carry these expectations into your business.

Even though many companies still have a lot to learn before they become truly customer-centric, a first step is to listen more to these customers and accept them as equal business partners. And of course they are, because they are the ones who finance your business and ultimately pay your wages. All the same, they then reward a good relationship with loyalty and the willingness to extend the business relationship.

(5) Driving Innovation and Creativity

Developing innovative business models and services requires different structures and approaches than improving and expanding existing ones. A good basis to understand this is, for example, the 3 Horizons Model, which describes the fundamentally different requirements between digitisation (improvements to existing structures), digital transformation (redesign of existing structures) and innovation (development of new business models).

A new technology can have an impact on all three change horizons, but this impact is strongest on horizon 3, innovation. This is because the development of new innovative business models should be largely independent of the company's core organisation and infrastructure in order to allow the necessary creativity, flexibility, risk-taking and entrepreneurial spirit. These characteristics make it possible to explore the possibilities of a new technology to the greatest possible extent.

Likewise, these characteristics allow a technology to be explored without imposing additional risks on the core business. In this way, valuable know-how is built up that can later be transferred to the entire company.

(6) Developing a Long-term Vision

As already mentioned, a new technology only develops its full potential over time. In order for it to optimally support and help shape the strategic vision of the company, this potential must be explored and understood as well as possible. In doing so, one should ask oneself fundamental questions such as - the list is of course not exhaustive:

• What role should customers play in the future? How strongly - and how - do you want to allow them to help shape the development of your services?

• To what extent should the company open up for cooperation with third parties?

• In which areas does the company want to distinguish itself from the competition?

• Which know-how has the potential to give the company a competitive advantage in the future ?

• What are the principles that should form the basis for the further development of the company (these can be security principles, sustainability, modularity, API approaches, etc.)?

• What are the strengths of our employees and where do they want to develop?

In addition, there are of course business criteria, as well as operational ones, both short-term and medium- to long-term. While the short- and medium-term form the core of the IT strategy and thus the technology strategy, the long-term vision allows us to look even further into the future and to lay the groundwork now for future developments.

The long-term vision, whether strategic or technological, prescribes not so much the immediate development of the company, but much more the direction in which the company should develop, as a beacon into the future.

Key Components of a Technology Strategy document

Vision and Goals: The technology strategy should align with the organisation's overall vision, mission, and business strategy. It should outline how technology can support and enable the achievement of these objectives.

Business Alignment: The strategy should emphasize the alignment of technology initiatives with the organisation's core business functions and processes. It should identify areas where technology can drive efficiencies, create competitive advantage, or enable innovation.

Risk Assessment: A technology strategy should assess and address potential risks associated with technology adoption, such as cybersecurity threats, data privacy concerns, and regulatory compliance. It should outline measures to mitigate these risks and ensure the security and integrity of technology systems.

Technology Roadmap: The technology strategy should include a roadmap that outlines the planned technology initiatives over a defined timeframe. This roadmap can include the introduction of new technologies, upgrades or replacements of existing systems, and integration of technology solutions across different business units.

Resource Planning: An effective technology strategy should consider the necessary resources, including financial investments, skilled personnel, and infrastructure required to implement and support the technology initiatives outlined in the roadmap. It should identify any resource gaps and provide plans for acquiring or developing the necessary resources. This is especially important in case of technological knowledge rarely found.

Innovation and Research: The technology strategy should promote a culture of innovation and continuous improvement. It should encourage research and development efforts to explore emerging technologies, evaluate their potential impact on the organisation, and identify opportunities for competitive advantage.

Collaboration and Partnerships: Technology strategies often emphasize collaboration and partnerships with external entities, such as technology vendors, research institutions, and industry associations. These collaborations can provide access to expertise, shared resources, and opportunities for joint innovation.

Governance and Management: The technology strategy, though this is often covered in the IT strategy, should define the governance structure and processes for decision-making, implementation, and monitoring of technology initiatives. It should include mechanisms for project prioritization, performance measurement, and regular review and adjustment of the strategy based on changing business needs and technological advancements.

Change Management: A technology strategy should address the people and cultural aspects associated with technology adoption and change. It should include plans for communication, training, and change management activities to ensure smooth transitions and user acceptance of new technologies.

Measurement and Evaluation: The strategy should establish key performance indicators (KPIs) and metrics to assess the effectiveness and impact of technology initiatives. Regular evaluation of these metrics helps track progress, identify areas for improvement, and make informed decisions for future technology investments.

Developing a Successful Technology Strategy

Step (1): Defining a Technology Roadmap

The first step in developing a technology roadmap is to identify technologies that have the potential to support the implementation of the company's vision and strategic goals, but also to meet its current requirements. Often the search is initiated by a specific need in the company - for example, when customers ask for a new class of products, when competitors offer a more customer-friendly service, or when the regulator reprimands patchy controls.

More general requirements, such as reducing costs in the medium term or strengthening data security in the company, can also provide the incentive to achieve this through the use of new technologies. And if a company wants to strengthen its position in the market by developing new, innovative business models, this would be doomed to failure today without taking new technologies into account.

So, as with any transformation, the current needs should be identified first, then the desired medium-term development of the company should be considered, and finally the long-term vision. Of course, as the time horizon grows, the requirements become less concrete.

In the process, each new technology must be analysed according to certain criteria for its suitability for use. Such a technology audit will have a different focus for each company, but should ask the most important questions:

Does it fulfil the principles defined in the company (e.g. security, technical structure, transparency, performance) ?

• Is it mature enough for the intended purposes?

• How flexible is it to meet evolving requirements ?

• What would its application mean for the dependency on third parties?

• Does it fit into the intended operational structures ?

• What are its costs - for set-up and operation ?

• Are the legal and regulatory issues sufficiently clarified ?

• Can it be integrated into the current infrastructure ?

• What would such integration mean in terms of available resources ? To what extent are these available on the market ?

In doing so, technologies already in use should not be written off too quickly. These have proven themselves (in part), the know-how is available and every transformation is associated with costs and risks. A renewal should therefore always be approached cautiously.

Once new technologies have been identified that meet the criteria and have the potential to support the growth of the company, their introduction must be prioritised. The effort required for implementation, the dependencies within the infrastructure, the complexity and risks, the resources required, but also the impact on business development must be taken into account.

Here, of course, it is recommended to prioritise technologies on which further developments are based. This is not always easy, as they often provide an important basis but no direct business benefit. Through close cooperation between business and IT, such prioritisation processes can be designed in such a way that tensions are minimised.

Just as the whole selection process should be as transparent and collaborative as possible, the technological goals and objectives should be openly communicated and discussed. New technologies have a big impact not only on infrastructure. Large parts, if not the whole organisation and staff can be affected. Of course, this raises uncertainties and fears that can only be reduced through openness and involvement as early as possible already in the selection process.

Step (2): Designing Technology Solutions

Once the selection of technologies has been completed - whereby decisions can also be returned to as insight grows - the more concrete step is taken, where solutions based on the technologies are looked at. In doing so, it should also be considered in each case whether such should be procured from third-party providers or developed in-house.

We will not go into detail here on the in-depth analysis for solution selection, as this also differs from company to company and can be very time-consuming.

It should only be mentioned that besides objective criteria such as functional coverage, flexibility of the solution, security, operational fit, implementation and running costs or even counterparty risk, subjective criteria such as cultural fit (you have to be prepared to work closely with the provider) or the corporate vision of the third party provider (you will be tied to their future development to a certain extent) are also important.

After the selection of the solutions, or the decision to develop such solutions in the company itself, the integration process starts. A well-planned selection process can even prepare this, for example by requiring the providers to integrate some important components for testing purposes during a Proof of Concept (PoC) phase.

The integration process will rarely be planned on its own. The company will have many other initiatives that need to be combined into a robust integration plan. This is also a larger topic for which there are efficient quantitative approaches. In any case, especially with new technologies, a phased implementation is recommended to gain experience, minimise risks and build the necessary organisation. Close collaboration with the users and customers affected is also advisable, and will ensure that the right goals are achieved at each further stage of development.

The first deployment of solutions based on new technologies will typically be in areas where higher risks can be absorbed. Especially with technologies that have not yet proven themselves in the market, there is little experience to fall back on, so surprises are to be expected. With good planning, however, this should be largely under control, and in an agile organisation, also quickly remedied.

Step (3): Tracking Progress and Measuring Success

Note that a technology strategy is not a static document. With the emergence of new, and the further development of existing technologies, the development of new solutions based on them, with the growing market experience and also the growing experience within the company itself, and of course with changes to the business strategy, the technology strategy must be adapted continuously.

However, these adjustments should only be made carefully and cautiously, as they can quickly lead to major efforts and also trigger uncertainty among those affected. Therefore, every adjustment should be accompanied by a well-defined approval process in which all affected parties are involved and the implications of the adjustment are transparent.

It helps to make the success of a new solution measurable through the use of meaningful performance indicators. These should cover business, technical and operational perspectives, as well as user feedback. If set up well, these can also prove to be valuable tools for business steering.

Mitigating Risks in Technology Strategy Formulation

The use of new technologies is naturally associated with risks. The newer a technology is, the less it has proven itself in the market - even in other sectors - and the less is known about the customers' response to it, the greater the risks. Also, the know-how available in the company and the access to external experts are crucial.

In order to keep these risks under control, the technology strategy should consider risks at different levels, taking into account the specific situation and needs of the company. In doing so, the following categories should be addressed:

• Business-related risks: Risks that are related to business fit, acceptance, costs and the development of the market environment. This includes, for example, the question of how dependent the company will become on certain future developments with the chosen technology strategy, or how well the current and future needs of customers are known.

• Technology-related risks: These are risks that arise during the integration of the new technologies. How does a new technology affect the security of the infrastructure ? What risks arise from the adaptations to the operational processes ? What are the risks of integration ?

• Organisational risks: Risks can arise from the need for new organisational forms - for example, if new technologies require close cooperation with external providers and this has not yet been practised in the company in this form. But also if the necessary know-how is missing in the company, there is the risk of a lack of acceptance or the problem of not being able to build up this know-how sufficiently.

• Legal risks: Is the regulatory landscape clear enough ? Is it clear enough in all the countries where you intend to operate ? Is it possible to contractually cover all the main aspects to the full satisfaction with the third party provider of the new technology ?

Of course, the more important the area of infrastructure affected by the new technologies, the more relevant an in-depth risk analysis becomes. This is another reason why it is advisable to introduce new technologies gradually and, if one wants to build up new, innovative business models, to do so as independently of the core business as possible.

Conclusion

New technologies always carry risks, but just as well great potential to secure a company a place at the forefront of the competition. Nowadays, companies cannot escape technological development. It is not so much about recognising and building the new, big business model today, but being ready when future needs emerge.

A robust technology strategy, as part of a far-sighted IT strategy, should take into account the short, medium and long-term business strategies of the company. This can only happen with close collaboration between business and IT, and consideration of technological developments in the strategic planning bodies.

If a company deals with new technologies at an early stage, it builds up knowledge as well as the necessary internal structures, thus reducing risks and being ready first to seize the opportunities for a new, successful future!