Saturday, July 14, 2018

Disruptive Technologies - Friend or Foe of the CTO - Part 1

Disruptive Technologies - Friend or Foe of the CTO 

Part 1 - The CTO's Challenges

Disruptive technologies have the potential to transform life, business and the global economy . The exponential growth of new technologies makes it critical for the chief technology officer, CTO to stay ahead of the technology trends and be responsive to disruptions. The disruptive potential of these new technologies pose a threat to the CTO who is deeply immersed in current technologies and have a high organizational inertia to respond to changes. However, the very same disruptive technologies offer business growth opportunities for the CTO who systematically scouts for new technologies, assesses their potential, tracks their evolution and have a responsive organization. The CTO has a critical role to play in converting the disruption into a threat or an opportunity. He cannot go overboard with disruptive technologies – he has to strike the right balance in investing in sustaining vs disruptive technologies. During our interaction with CTOs across the industry, we observed that very few are able to stay calm in this VUCA world and make the right technology decisions. The CTOs opined that a framework, that helps that to systematically analyze and invest in disruptive technologies, will be very valuable. Though we have refined our framework over the last five years by applying it for various industries, we use the automotive domain as an example here to illustrate how the CTO can build a portfolio of disruptive technologies to create sustainable mobility. Let us first analyze the challenges faced by the CTO when he has to manage disruptive technologies.

The challenges posed by disruptive technologies

The CTOs of automotive OEMs have a very important role to play, in taking their companies safely past the turbulent phase, when their industry is being disrupted by new technologies and radically new business models. The portfolio, of internal combustion engine (ICE) technologies, that they built and deployed to differentiate their products will become less relevant with the emergence of the electric vehicles (EVs). Their portfolio of technologies on drive comfort and drive experience is fundamentally getting redefined with the emergence of autonomous vehicles (AVs). The emergence of connected vehicles (CVs) makes him work with technology partners (internet, communication, cloud) well outside the traditional automotive industry. The convergence of electric, autonomous and connected vehicle technologies necessitates the CTO to build a new technology portfolio from scratch. The new business model of shared mobility compounds the power of the ongoing disruption . The emergence of new customer value propositions necessitates the CTO to think fresh on where to innovate and how to differentiate his new products. The CTO has to master the science of assessing the potential of these new technologies and quickly re-skill his entire technology organization so that he can take them along when he rides the waves of disruption. The CTO has to make big decisions on technology portfolio, innovation strategy and technical capability building to secure the future growth prospects of his company.

Imagine you are the CTO of an automotive OEM and the year is 2000. You would hold discussion with your R&D head and fund exploratory projects on electric vehicles. You will look at these technologies as lab curiosities with potential to grow incrementally over the years and would not expect EV to disrupt ICE vehicles by 2020. It would not have been possible for you to predict that the price of lithium ion battery storage would reduce by 80% over the next 10 years and bring down the price of EV. You would have looked at autonomous vehicle as real long-term technology development initiatives and wait for the ecosystem to develop before taking it to the market. It would have been impossible for you to predict that the LIDAR, the heart of the autonomous vehicle, would fall from 70K USD (in 2012) to less than 1K USD (in 2016). You would have hardly thought about the legal and insurance aspects of autonomous vehicles. You would have only looked at other Automotive OEMS as competitors - you would not have expected a smartphone maker or a search engine company to compete with you. You would have tracked the price of Steel but not the price of Lithium, Cobalt or the Rare Earth minerals. You were so deep into the ICE Technology and that prevented you from visualizing that 2020 would be so different from 2000. The exponential growth of a few disruptive Technologies and innovative new Business models have entirely transformed the automotive Industries landscape in these 20 years. The future of automotive OEMs depends on the CTO’s ability to build a sustainable mobility solution.

There are four areas that are critical for a CTO to leverage disruptive Technologies and build a strong portfolio of technologies to create sustainable mobility for the future. Through a series of blog posts, I intend to describe a systematic approach and provide a structured framework that would help the CTO to:

(i)               Scout for mega trends across multiple domains (beyond the traditional automotive domain) like IOT, Analytics, Machine Learning, Robotics, Additive Manufacturing etc

(ii)              Gauge the true disruptive potential of a new technology e.g. a new manufacturing method like additive manufacturing or a new material like graphene - and make early investment in new technologies.

(iii)            Create a strategy to build a strong portfolio of technologies, innovations and intellectual property in new technologies that would accelerate the development of differentiated new products

(iv)             Drive the disruptive transformation in a systematic way and take the company smoothly from the current state to the future state.

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