By the end of 2012 it should be clear that technology is a fundamental tool for business – it’s not just infrastructure like electricity but a key competitive advantage that every chief executive needs to understand.
The co-founder of software company Atlassian, Mike Cannon-Brookes, says software is the only strategic advantage in business these days because everything else gets copied so quickly.
“What we’ve seen over the past 10 years is really software moving from a really operational thing with some guys in a basement who write some code to much more of a strategic thing for every big business now,” Cannon-Brookes said, speaking at the November launch of Brett Kelly’s book Business Owners’ Wisdom. “By strategic, I mean that the CEO, the C-level suite, the management, get heavily involved in the process.”
Nike is an Atlassian client and Cannon-Brookes says the company sees the digital product as just as important as the physical one – it won’t ship the shoe unless its accompanying app is ready. The auto industry is another example.
“At the Detroit Auto Show nobody pitches their car any more on anything mechanical – it’s safety systems, it’s navigation systems, it’s entertainment systems, it’s fuel efficiency,” Cannon-Brookes says. “The whole car is basically a giant computer with a few wheels stuck to it and if you want to win in that business you have to have the engineers, you have to have the people.”
Technology has disrupted just about every type of business in the past few years, from the entertainment industry to manufacturing. The Australian retail sector has been especially hard hit and in 2012 the big retailers finally started making much-needed digital upgrades to compete with international competition.
It wasn’t long ago that you could only buy Christmas hampers on the Myer website. Chief executive Bernie Brookes admits that retailers, including Myer, were “slovenly” about grappling with the challenge and opportunity online. Now, after big investments and a huge development effort, both Myer and arch-rival David Jones have a multi-channel sales strategy and believe that online sales will underpin the growth of their businesses for years to come.
This was also the year when CEOs started to get to grips with social media. In late 2011, Qantas became a textbook study on how not to do social media. It ran a couple of ill-advised social media competitions following a management decision to ground its fleet during a labour dispute and became the target of merciless parody as a result. This highlighted the need for social media to be considered as part of core business strategy, not just a silo in the marketing department.
The fact that social networking sites such as Facebook and Twitter have started charging for their services would also have bumped social media up the agenda. In the past year a number of companies – from retailers David Jones and Harvey Norman to fast-moving consumer goods brands such as Durex – have used Facebook’s new paid sponsored posts service, which lets you pay to reach your fans and their networks.
Technology such as mobile devices and cloud computing have allowed workforces to become more flexible and mobile. While this can deliver cost savings, greater productivity and flexibility for employees, it throws up challenges for bosses who need to find new ways of managing staff and measuring output, rather than face time.
Cloud computing has been a trend for some time but it came into its own in 2012, culminating in the announcement that Amazon Web Services and other big international players such as Rackspace would open local data centres to deal with burgeoning local demand.
The advantage with cloud computing is that it unshackles staff and users from the tyranny of the desk, makes software upgrades and server moves a far simpler process and allows businesses to ramp their requirements up and down and pay only for what they need.
In keeping with the increased strategic importance of technology, there’s a growing trend for chief information officers (CIOs) to come from the business rather than being promoted from the IT department. Allianz Global Assistance CIO Luc Derix is one of the new breed of CIOs – he was formerly the insurer’s business intelligence manager.
“I think we were seen as a cost centre that would keep the lights on and do development here and there,” Derix says. “Because I come from the business, I understand it well. From the beginning I put a lot of focus on the fact that we are a partner to the business and can drive revenue and profit.”