Innovation and technology are at the top of almost all business agendas. Technology is critical to innovation, and it is also an accelerator for many parts of a business’s growth plan, from manufacturing to distribution to marketing to finance. As the past decade has increasingly shown, companies that are unable to adopt new technologies quickly and efficiently or do not have the right mix of talent run the risk of being overtaken, outsmarted, or disrupted. In many cases, the willingness and ability to adopt technology can make or break a company.
In fact, our research shows that leading companies that have expanded their technology investments during the pandemic have significantly expanded their growth advantage over their competitors, growing revenue five times faster than laggards and well over twice the rate of a few years ago.
While technology is critical and necessary to businesses, effective implementation and application are often challenging. To make the right technology shift, companies need to have the right organization, people and skills. It’s a fine line; organizations sometimes move too fast, which can lead to unintended consequences such as operational failures, security and risk issues, or poor customer experiences, while companies that move too cautiously risk being outsmarted because They find it harder to satisfy customers, attract the talent they need, and ultimately lose market share.
Technology transformation is necessary, but successful transformation depends on addressing two key issues.
First, companies not only need to make the right investments in people, training, and technology infrastructure, but also the right amount. And, importantly, this needs to be done across the technology spectrum. For example, at one level, technology automates simple processes and reduces costs. At a higher level, it provides insights that lead to better business decisions and ways of working, enabling people to perform their duties more efficiently. Companies need to address both levels, integrating technology to reduce costs while supporting and encouraging innovation.
Second, companies need to figure out the right pace of adoption. This can be tricky because innovation often doesn’t move at a predictable pace. Instead, it will be intermittent, with setbacks and stagnation often preceded by periods of rapid progress.Bill Gates said in 1996 “We always overestimate what will change in the next two years and underestimate what will happen in the next ten. Don’t let yourself get caught up in inaction.” This is still sensible advice today.
We’ve seen this cycle play out multiple times, including the recent global COVID-19 vaccine project, which saw collaborations across competitors leading to the development of a vaccine in less time than previously thought possible. At the same time, every industry is witnessing the rapid adoption of cloud computing, analytics, artificial intelligence and machine learning – dramatically changing the way they work in terms of process and speed. Change will continue to bring new opportunities, from electric vehicles to the metaverse to quantum computing. Companies need to get used to the idea that linear plans won’t work as well as they used to; instead of linear growth every quarter, there will be periods of plateau followed by explosive growth.
A company’s risk management function needs to be able to help control the risks of innovation and technology adoption. Risk managers can act as unbiased advocates for the right balance of investments and the right pace of adoption. They can explore the benefits of new technologies while helping identify risks associated with those technologies. Quantum computing provides a good example of a promising technology that presents new security risks, in this case related to its ability to overwhelm current encryption protocols.
Risk management has a significant ongoing responsibility for addressing the risks involved in digital transformation, but it requires confidence and skill to do so effectively. For example, in our 2021 risk study, only 49% of respondents said they were “fully capable” of assessing cloud-related risks, and even fewer said they were ready to use AI, blockchain chain and other new technologies.
As organizations move faster and change more frequently, technology will become more critical and integrated to achieve strategic outcomes. To keep up with the pace of transformation and upgrading, risks must improve their technical skills, awareness and acumen, as well as be more proactive and more frequent in their business related to technology risks. Those who do can help their organizations advance their technology agenda with the right investments at the right speed and address transformational barriers along the way.