The real landscape of technology-enabled opportunity
New technology can change the world, but so can old technology. Wise investment decisions draw on a more complete view of how technology disrupts markets
Lost in the technological forest
We live in a technological age, and a great deal of our competitive advantage comes from how adept we are at using technology. But in a society obsessed by the new, it’s easy to forget that most of the technology we’re working with, that we rely on, is quite old. The assumption is that new technology is the major force shaping marketplace disruption—a form of technological determinism.1
It’s true that new technology has disrupted some firms—Blockbuster and the shift from DVDs to streaming, and Kodak and the shift from chemical to digital photography, are two famous examples. But that’s not the whole story. We often fail to realize that the astute use of old technology can often be a larger source of competitive advantage than new technology.2 Our fixation on the new means that we’re missing many opportunities, possibly significant opportunities, to change the marketplace by new and different uses of the old.
What we need is a map, a tool, to help us think about where we might find these hidden opportunities. We can draw such a map by considering two dimensions to the problem: how novel a technology is, and the impact that a solution based on that technology will have.
Let’s handle novelty first. Some technologies, such as electric power distribution and nuclear fission, have few direct precursors.
They don’t emerge out of nowhere, but they do represent dramatic changes in technique. Other technologies, such as James Watt’s celebrated steam engine, are the result of small tweaks to previous designs; they have obvious precursors upon which the latest version is built. We’ll use the terms novel and established to distinguish between these two categories.3
Technologies, whether novel or established, are the building blocks for solutions: ways of using technology to yield a particular outcome. (For instance, nuclear fission is a technology, while nuclear power stations and nuclear-powered trains and [atomic] aircraft, are solutions.)4 Different solutions have different impacts on society. Some, such as electric telegraph networks,5 the networked home,6 and the internal combustion engine (ICE) powered motor car, change the world in fundamental ways. We can refer to these high-impact solutions as macroinventions.7 Other solutions, such as Francis Whishaw’s 1838 invention of the hydraulic telegraph,8 have smaller impacts. We can call these low-impact solutions microinventions.9
Combining the novelty and impact dimensions yields the four possibilities depicted in figure 1.
The fundamental lesson this map teaches us is that the novelty of a technology is unrelated to the impact of the solution. Microinventions based on novel technology are possible, as are macroinventions based on established technology. The atomic (nuclear powered) aircraft was novel,10 with few direct predecessors, but it is a mere footnote in history. On the other hand, Watt’s incremental improvements to the steam engine turned it from a clever but an impractical idea11 into one of the Industrial Revolution’s most important drivers.
The fallacy that novelty implies impact—our tendency to focus near-exclusively on novel technologies as a driver of disruption—leads us to concentrate on the bottom-right quadrant of the map while ignoring the others.12 This results in the common mistake of assuming that just because a technology is novel, it will result in a macroinvention when it is more likely to be a microinvention. One consequence is that we risk overinvesting in new technologies that have little chance of disrupting the marketplace, and so become disappointed when the solution doesn’t meet our expectations.
This risk, of course, is well known. Advice abounds on how to distinguish “disruptive” new technologies from merely “emerging” ones.13 The real shame—the potentially even more costly blind spot—is that our singular focus on the bottom-right quadrant causes us to miss opportunities outside it, when there may well be more opportunities outside it than inside.
How can these opportunities be brought to light?
Navigating our way to new opportunities
We can use our map of technology-enabled opportunity as a tool to improve our approach to innovation. Rather than looking only under the media streetlight of “disruptive innovation” (macroinvention via novel technologies), we can look elsewhere on the map to find innovations that would otherwise pass us by.
The flip side of our tendency to conflate novel technologies with high-impact solutions is the frequent assumption, when we see a high-impact solution, that it’s based on novel technology. But just because a solution appears novel or high-impact doesn’t mean that a novel technology was responsible. History is rife with examples of macroinventions based on established technologies. The development of modern public sanitation in the 1800s, for instance, relied on established technologies such as bridges, canals, and tunnels to execute an old idea (channeling waste away from populated areas), only on a much larger scale than in the past.14
In terms of our map, these types of opportunities are to be found in the upper-right quadrant. Organizations can do this in several ways.
Sometimes, a series of small developments can add up to a high-impact solution worth far more than the sum of its parts. One way to pursue macroinventions arising from established technologies is to identify (and invest in) incremental advances that can complete a high-impact solution. Mechanized weaving, for example, was the outgrowth of many separate advances, none of which were game-changing in themselves, that mechanized individual weaving tasks (the last was the flying shuttle, which simplified the task of passing thread across a loom through the weave). After all the tasks were mechanized, however, it became possible to automate the loom, replacing human power with mechanical power. This meant that weavers only needed to attend a loom when something went wrong or when it needed materials—providing an instant 2.5x productivity increase.15
It’s also important to always be alert for opportunities to use established technologies in new ways. An example is the emergence of “mass bespoke building” in the construction industry.16 Mass bespoke building combines established building information management (BIM) technology, digital modeling and collaboration tools, virtual reality and drones, and the Design for Manufacture and Assembly (DfMA) modular construction process to the creation of bespoke, architect-designed buildings via digitally enhanced manufacturing techniques. Few, if any, of the technologies are new; what is new is the way they’re being used.
Looking for indirect benefits is another powerful perspective that can reveal previously unseen opportunities. When we encounter a novel technology, we typically try to identify the type of problem it solves and then look for problems of that type—a focus on direct benefits. Given a hammer we go looking for nails. But we need to also consider how the new technology relates to our existing technologies, and how together they might enable us to approach old problems in new ways—indirect benefits. The question we should ask is not just what the technology can do, but also what it can enable us to do.
Indirect benefits can dwarf direct benefits. The electrification of factories is an excellent example. When electric power distribution was first developed, factory owners saw it as a cheaper and cleaner alternative to coal and steam. A factory that swapped its coal-powered steam engine for an electric engine, one connected to a local electricity utility, could realize a 20% saving in fuel costs.17 This was a microinvention based on novel technology. Roughly 30 years later, however, manufacturing engineers realized that distributing electric power within a factory was much more flexible than distributing mechanical power.18 Machines no longer needed to be organized according to how much power they consumed (how close to the central steam engine they needed to be). Floor space, workers, and machines were rearranged to optimize workflow rather than power distribution, yielding a 30% increase on total productivity. Though electric power distribution was hardly novel by that time, its use to pursue an indirect benefit created a new, high-impact solution—a macroinvention based on established technology.
Finally, when we encounter macroinventions based on established technologies, we should ask a crucial question: What did change, if not the technology? Understanding this can lead us to new opportunities by identifying what other solutions might benefit from these changes or, more proactively, investing in bringing about changes that could create the conditions needed for a macroinvention.
Many macroinventions using established technologies become so due to changes in the business and operational environment. Statistical machine translation is a case in point.19 First conceived in 1949,20 the technology behind machine translation was formalized in the 1980s and early 1990s by researchers at IBM’s Thomas J. Watson Research Center before exploding into the public consciousness in 2006 with the release of Google Translate. The major development between the 1990s and 2006 was not in the core technology (though there had been ongoing technical improvements), but a significant increase in the number of digitized parallel texts available to use to train the translation algorithms and readily available cheap compute.21 If we’re to attribute the rapid rise of statistical translation to something, then it should be access to these parallel texts, coupled with an organization willing to sponsor its development, and not the development of new technology per se.
Toward a broader view of technology-enabled opportunity
New technologies can create new opportunities, but new technology is only one driver for marketplace and societal change. Our focus on novel technologies leads us to ignore the broader landscape of opportunity. Thinking in terms of micro- and macroinvention, and in terms of novel and established technologies, can help us explore more of this landscape.
Disruptive technologies—macroinventions driven by novel technologies—do exist. They are, however, the great white whale: valuable but rare. Other, less shiny opportunities should not be ignored in the hope that we’re about to land the next whale.
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