Every Company a Tech Company?

By David Dean

After last month’s All Things D: D11 conference, it is hard not to conclude that the pace of technological innovation is becoming far more rapid—and its impact more far-reaching—than at any time since the PC became a household device three decades ago. The companies driving this innovation have sweeping visions of an ever-more-connected, digital, mobile, wearable, new-age industrial, there’s-an-app-for-just-about-everything future. Many of these companies are led by men and women with the track records and scale to turn their visions into near-term reality.

But will others follow? Will every company, as Cisco’s John Chambers put it, use technology as their core point of differentiation?

The incentives are there. In any industry, companies that embrace digital innovation have more potential than ever to gain access to new markets, get closer to more customers, operate more efficiently, and scale more flexibly, to name just a few benefits. General Electric’s Jeff Immelt spoke of the enormous profit potential of applying just “some of the same productivity benefits consumers have today” to the “industrial arena.” At the same time, however, there are thousands of companies that are still grappling with the impact of the Internet on their businesses; they are daunted by mobile and social and nowhere near coming to grips with the prospects of wearable. Is it realistic to think they will all propel themselves forward by adopting high-powered new technologies?

Of course not. But for those that do, the future could be pretty exciting. Let’s look at where tech leaders believe we are going.

Mobile. The conference was full of talk of  “mobile first.” Facebook’s COO Sheryl Sandberg said that mobile represents a “better opportunity” for her company “than we had on desktop.” Twitter’s CEO Dick Costolo said, “When we think about developing for mobile—we’re all about speed of innovation.” Google’s Sundar Pichai said, “We are trying to think about where computing is going in the next five to ten years and set up Android for that.” There’s also the fact, as BCG’s CEO Rich Lesser pointed out, that mobile is enabling emerging markets to catch up quickly with the rest of the world on connectivity, “rebalancing the world’s digital economy toward its economic engine room.” As BCG has Through the Mobile Looking Glass, there’s no doubt that mobile will continue to be a game-changing technology that companies of all stripes need to determine how to harness.

Wearable. If smartphones are the tech industry’s defining device of the past five years, many feel that “wearables” will define the next five. Several D11 participants wore Google Glass. Twitter is a launch partner. Tom Staggs of Disney Parks and Resorts announced new wearable devices at Disney parks aimed at creating a more personalized and customized visitor experience—meaning, for example, that Mickey will know who you are when you meet him. Apple’s Tim Cook believes wearables “could be a profound area for technology.”

Industrial. The “Internet of Things” and the “Industrial Internet” got plenty of attention from the likes of John Chambers and Jeff Immelt. Chambers sees $14 trillion in potential profits that are up for grabs as the Internet enters its “fourth generation, which will be “bigger than the first three combined,” and companies in all industries work out how to connect the industrial world. They can improve the efficiency of existing business models, create new ones, and use big data to create new sources of competitive advantage.

Immelt described how Internet technologies and big data are radically changing GE’s medical-equipment and aircraft-engine businesses, pointing particularly to “additive manufacturing,” also known as 3-D printing, as another game-changing technology. He spoke of cutting the development cost of an aircraft engine by 50 percent—an astounding notion—and the huge value to GE’s customers of even a 1 percent improvement in key areas of operations.

Innovative, Futuristic, Disruptive (and Possibly Digestive). Tim Cook claimed his company has “incredible plans... We have several more game-changers in us.” Google and Motorola will launch an “ultra-low-power consumption” phone, the Moto X, in the fall. Motorola is experimenting with new methods of user authentication, such as electronic tattoos and pills that, when swallowed, are powered by stomach acid to produce an 18-bit internal signal. Elon Musk, cofounder of PayPal and now CEO of Tesla and SpaceX, is thinking about how to move human life to Mars.

On the disruptive side, Barry Diller, a big investor in Aereo, which streams live broadcast TV online, not surprisingly wants to move TV “from fixed-line or satellite closed systems” to “open” IP (Internet protocol) systems. Also no surprise: this idea has its detractors. CNN’s Jeff Zucker, sharing the stage with Diller, played his own IP—intellectual property—card, asserting that broadcasters, not unreasonably, want to be paid for their content, and “if they don’t get paid for it, they’re not going to be able to produce” it.

People. Several participants noted the scarcity of science, technology, engineering, and mathematics (STEM) talent as one major potential inhibitor of progress. They cited the need for U.S. immigration policy to recognize the demand for STEM graduates. Notwithstanding the demand for talent, it’s striking how lean and scalable so many big Internet players are. Facebook serves 1.11 billion users with about 5,000 employees; LinkedIn has a few more than 1,000 employees and quarterly revenues of more than $300 million. Instagram’s 13 employees were acquired for more than $1 billion, and Google is paying $1.3 billion for Waze and its 100 or so staff. Twitter has 2,000 employees and hosts more than 200 million monthly active users who send hundreds of millions of tweets every day.

The digital revolution has already led to the demise, consolidation, and disappearance of many household-name companies. They were slow to grasp the changes taking place, and they failed to adhere to the first fundamental of the market economy: give customers what they want. Consumers love technology and the products and services that technology enables and makes better and less expensive. New Delivering Digital Satisfaction: U.S. Consumers Raise the Ante released at the D11 conference shows widening gaps between companies in sectors that do a good job of delivering consumer satisfaction (online and media retailers and banks, for example) and those that do not (including health care providers, supermarkets, and telcos and cable companies).

Smart companies—whether established or new entrants—will figure out how to deliver online, mobile, and possibly wearable satisfaction and value. They will create a competitive advantage for themselves, just as companies in many already disrupted industries have done. Others will fall by the wayside or be marginalized as niche players in an increasingly digital world.

John Chambers is right in his prediction, except that he dropped one word. In the future, every successful company will use technology as its differentiator.