Published on August 10th, 2020 📆 | 4617 Views ⚑0
What CEOs Better Know About Technology — Or Else
Since every company on the planet relies upon technology to some significant extent, the leaders of these companies should understand the digital technology that powers them. The counter-premise is that many companies don’t rely upon digital technology all that much and it’s therefore unnecessary for executives to understand the technology that enables their products and services. In 2020 — and forever — the counter-premise is absurd.
A CEO once suggested that email be turned off to save money. I once had a General Partner of a private equity venture capital fund (focused on investing in Internet companies) whisper to me, “Steve, what’s the Internet … what does it do … how does it work?” I knew a public company CFO who believed the Internet was “a fad that would be gone in a couple of years.” Another one told me, “no one likes shopping online … people love stores.” Fortunately, these Bizarro World experiences occurred some years ago. But what about today? If you asked CEOs to explain why multi-cloud management is a critical business process could they do it? What about automated supply chains and their impact on scalability? Or how machine learning enables robotic process automation?
25 years ago, Martin, Batchelder, Newcomb, Rockart and Yetter published an article in the Harvard Business Review entitled “The End of Delegation? Information Technology and the CEO.” 25 years ago, they wrote:
“Today IT plays a role in most aspects of a company’s business, from the development of new products to the support of sales and service, from providing market intelligence to supplying tools for decision analysis. Many observers believe that this fact, along with the increased opportunities for using IT to achieve strategic advantage, requires that CEOs reexamine what they need to know about this resource to manage it effectively … the CEO can no longer afford to delegate these decisions to information systems managers alone … technology has become integrated with almost every aspect of the business … today technology plays a role in almost everything we do …”
So here’s the premise: since every company on the planet relies upon technology to some significant extent, the leaders of these companies should understand the digital technology that powers them. The counter-premise is that many companies don’t rely upon digital technology and it’s therefore unnecessary for executives to understand the technology that enables their business processes and products.
In 2020 — and forever — the counter-premise is absurd.
So what do CEOs need to understand? Here’s a list of 7 areas we should consider the price of admission to the C-Suite:
1. CEOs need to understand the technology that enables their internal processes – their ERP systems and the basics of the infrastructure on which they ride. By “understand” I mean they should know what business functions ERPs provide, what they cost, the technical debt they create, their life cycles, how they’re hosted and the major vendors that sell and maintain them. They should also know who in their company is accountable and responsible for this technology. Why? Because many companies spend tens of millions of dollars on their ERP environments over really long periods of time. And since many of these environments fail, it’s in every CEO’s interest to know all about ERP success and failure.
2. CEOs should also understand data and the basics of analytics. They should understand how data powers their internal and external processes, as well as innovation and competitive analysis. They need to understand the strengths and weaknesses of structured and unstructured data. (Just explain the former as their revenue numbers and the latter as what people think about their products and services.) They also need to understand the premise of analytics – what it seeks to do and how it works. Is understanding multiple regression too much to ask? Not at all.
3. They should understand the technology that powers the products and services they sell. All CEOs should be able to speak coherently, enthusiastically and persuasively about the technology that makes them money – no exceptions. The worst case? When a CEO embarrasses himself or herself by botching an answer to a technology question that’s perceived as a softball, like “which technologies do you think will get you to the next level?” CEOs must be able to describe how their products and services actually work, the data they use, how they interact with their customers and the technologies that enable them. CEOs of technology companies are usually pretty good at this, though not all of them are. It should always be a core skill.
4. CEOs must understand the emerging technologies that enable innovation. CEOs must not only understand the emerging technologies that enable innovation but they must understand precisely how innovation occurs in their company, the success (or failure) of innovation to date, and how innovation processes can be improved. They should be able to tick off the emerging technologies in which they’re investing and the impact they expect the technologies to have on cost management and revenue growth. This is especially true for public technology company CEOs. Today, the short list of emerging technologies includes machine learning, natural language processing, the internet of things, advanced analytics, quantum computing, 5G, cybersecurity, (hardware and software) robotics, and augmented and virtual reality. While no one expects CEOs to talk code, architecture or APIs, CEOs must be able to articulate how, for example, augmented and virtual reality can improve their products and services and how they plan to vet emerging technologies.
5. They must understand the technology of their competitors. One of the best ways to understand technology leverage is to track the technology investments of competitors. CEOs need to be absolutely fluent about the technologies their competitors are using to defeat them in the market. “So what do you think of your competitor’s acquisition? Do you think they’re trying to corner the AR market?,” are the kinds of questions every CEO should be prepared – and eager – to answer.
6. CEOs must understand the real cost/benefit of technology. Technology is expensive. Large internal technology deals – like for ERP and CRM applications – cost a small fortune. They also lock companies into proprietary platforms. CEOs should understand the inflexibility of large technology investments and how to mitigate it. The same is true of sourcing. CEOs must understand the costs and benefits of each (internal/external/hybrid) sourcing option. Risk analyses should be part of all technology calculations. But most importantly CEOs should understand the ROI punch that technology investments can have — as well as the disasters the wrong investments can create.
7. CEOs must embrace technology cache. It’s 2020. It’s hard to find a company that’s not already a technology company. Some more than others, of course, but every company relies upon internal and external technology to make (and save) money. The companies that sell hardware and software products and services are total technology companies. These companies should embrace the cache that comes from declaring oneself a member of the technology company elite, even if they don’t have the sales to prove it. Why? First and foremost, “technology companies” command much higher valuations than non-technology ones. In 2020, “technology” owns image, brand, excitement – cache. (Skeptical? Think Tesla, Amazon, Walmart [yes, Walmart], Uber and Zoom for starters.) CEOs – all CEOs – must embrace the technology that enables their missions. They must be way beyond literate, they must be enthusiasts, always anxious to talk about the technology that enables and differentiates their products and services.
If the above 7 areas were turned into an exam, how many CEOs would pass? How many CEOs actually believe they need to understand technology? Don’t they have “people” who “do” technology? There’s no question that solid CIOs and CTOs can add enormous value, but CEOs must understand what they’re talking about when they want to prototype an idea that might lead to a new revenue stream – or a significantly lower cost of doing business. But how? A Technology School for C-Suiters would be perfect, right? Unlikely: most CEOs would be unwilling to go to any kind of “school.” Maybe discreet technology coaching? Self-education and regular private briefings from their technology professionals might work. Regardless of the mechanism, CEOs who cannot comfortably maneuver through the 7 areas discussed here should seek some help. As argued 25 years ago, technology is just too important to leave to others.