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According to McKinsey, 84% of executives say that their future success is dependent on innovation. Although innovation may sound like a buzzword for some, there are many reasons why companies put a lot of emphasis on it.

In addition to the fact that innovation allows organizations to stay relevant in the competitive market, it also plays an important role in economic growth. The ability to resolve critical problems depends on new innovations and especially developing countries need it more than ever.

We've written quite a few posts about innovation management and this time, we've decided to take a closer look at the reasons that make innovation important for an individual organization and the society at large.

What is innovation and why do we need it?

Innovation, by definition , is the introduction of something new. Without innovation, there isn't anything new, and without anything new, there will be no progress. If an organization isn't making any progress, it simply cannot stay relevant in the competitive market.

Because organizations are often working with other individual organizations, it can sometimes be challenging to understand the impacts of innovation on our society at large. There is, however, a lot more to innovation than just firms looking to achieve competitive advantage.

Innovation really is the core reason for modern existence. Although innovation can have some undesirable consequences, change is inevitable and in most cases, innovation creates positive change.

We've decided to look at the outcomes of innovation on macro and micro level:

Macro perspective: The role of innovation in our society

Over the last decades, innovation has become a significant way to combat critical social risks and threats.

For example, since the Industrial Revolution, energy-driven consumption of fossil fuels has led to a rapid increase in CO ₂ emissions, disrupting the global carbon cycle and leading to a planetary warming impact.

Our society revolves around continuous economic growth, which mainly depends on population growth. The population is shrinking and ageing in the developed counties and is likely to do so in other parts of the world as well.

Innovation is important to the advancement of society as it solves these kinds of social problems and enhances society's capacity to act.

It's responsible for resolving collective problems in a sustainable and efficient way, usually with new technology. These new technologies, products and services simultaneously meet a social need and lead to improved capabilities and better use of assets and resources.

In order to be able to solve these kinds of societal problems, private, public and non-profit sectors are involved.

The fundamental outcomes of innovation

Because innovation has an impact on so many different parts of our society, it would be almost impossible to go through everything in one post. Therefore, we've decided to focus on the most significant aspects related to the importance of innovation.

In general, the result of innovation should always be improvement. From the society's perspective, the fundamental outcomes of innovation are economic growth, increased well-being and communication, educational accessibility and environmental sustainability.

Economic growth

Technological innovation is considered as a major source of economic growth. Economic growth refers to the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

There's generally two ways to increase the output of the economy:

Increase the number of inputs that go to the productive process

Come up with new ways to get more output from the same number of inputs

The latter describes the essence of innovation quite well. The purpose of innovation is to come up with new ideas and technologies that increase productivity and generate greater output with the same input.

If we look at the transformation of the US, once a largely agrarian economy that advanced from emerging nation status in the mid-19 th century to an industrial economy by the First Wold War, we can see that the agricultural innovations and inventions were actually one of the largest factors that helped bring about the Industrial Revolution.

Vast improvements in agricultural productivity had already previously transformed the way people work in Europe, releasing farmers for other activities and allowing them to move to the city for industrial work. The shift from hand-made to machine-made products increased productivity, directly affecting living standards and growth.

If previously one worker was able to feed only a fraction of their family, it was now possible for one person to produce more in less time to provide for the entire family.

Innovation and the future of jobs

Technological advancement and increased productivity means major changes for careers today as well. The world economy could more than double in size by 2050 due to continued technology-driven product improvements.

According to the new World Economic Forum report, nearly 133 million new jobs may be created by 2022 while 75 million jobs are displaced by AI, automation and robotics.

Source: World Economic Forum - The Future of Jobs Report 2018

Manual, low-skilled jobs and middle-income roles such as accountants, lawyers and insurance clerks are the ones that will be affected the most over the next decade.

The biggest issue here isn't necessarily that these jobs would disappear completely but the fact that polarization of the labor force becomes more significant. New skill sets are required in both old and new occupations.

How and where people work will also continue to change. There will be more demand for experts, whereas "regular workers" are at risk of having to settle for low-income positions.

Increased well-being

In general, innovation and economic growth increases well-being because living standards rise. According to the Brookings Institution, average life satisfaction is higher in countries with greater GDP per capita. Another research also shows that there's a link between innovation and subjective wellbeing.

However, not all of the benefits of innovation and growth are evenly distributed. Often, a rise in real GDP means greater income and wealth inequality. Although there isn't a threshold level for how much inequality is too much, greater socioeconomic gaps are most likely have some negative consequences.

In theory, income inequality isn't a problem itself except when the concrete purchasing power decreases. In practice, however, it does have a number of impacts on our society and collective well-being.

Reduced sickness, poverty and hunger

As already mentioned, developing countries depend on innovation as new digital technologies and innovative solutions create huge opportunities to fight sickness, poverty and hunger in the poorest regions of the world.

Developed countries also rely on innovation to be able to solve their own problems related to these themes.

What comes to reducing hunger, for example, agricultural productivity is critical in the developing countries where the next population boom is most likely to take place. Smallholder farms in developing counties play an important role as up to 80% of the food is produced in these communities.

Developing and sharing agricultural innovations such as connecting farmers to information about the weather, has proven to be an efficient way to help farmers stay in business. Although this is just an example of how innovation can help people continue producing food, innovation provides endless other opportunities that can eventually help reduce poverty and hunger around the world.

Communication and educational accessibility

You probably already knew that The World Wide Web celebrates its 30 th birthday this year. We've already seen a huge technological revolution during the past decades and continue to do so in the future.

According to the World Bank Annual Report 2016, even among the poorest 20 percent of the population, 7 out of 10 households have a mobile phone. This means that more people now have mobile phones than sanitation or clean water.

Also, the mobile worker population is expected to grow from around 96 million to more than 105 million by 2020. Innovations in mobile technology such as voice control and augmented reality are enabling workers in completely new ways.

Technology innovation can also help rural areas thrive and become more sustainable. Although there are some barriers to technology adoption, such as low income or user capability, more people can access information an improve their knowledge despite their socio-economic position or demographic area.

Environmental sustainability

Sustainability and environmental issues, such as climate change, are challenges that require a lot of work and innovative solutions now and in the future.

Earth suffers as consumerism spreads and puts consumption at the heart of modern economy. Although consumerism has a positive impact on innovation as a source of economic growth, the rising consumption of innovative products is often considered as one of the reasons for environmental deterioration.

Often, politics or other methods aren't enough to make a change - at least not quick enough. Policy changes take time to take effect, which is why the long-term survival of our society and nature depends on new, responsible innovative technologies.

Although new greener technology solutions, such as eco vehicles aren't necessarily more competitive alternatives to petrol-powered vehicles just yet, they will definitely offer many advantages for the future.

Micro perspective: The importance of innovation for an organization

Now that we've looked at the role of innovation from the society's perspective, we can take a closer look at the importance of innovation for an organization.

In general, it's difficult to identify industries where innovation wouldn't be important. Although certain industries depend on innovation more than others, innovation and the ability to improve considers everyone.

Even highly regulated industries, such as taxis and banks aren't immune to change. Look what Uber has done to the traditional taxi industry, or how innovation affects financial services.

In general, innovation can deliver significant benefits and is one of the critical skills for achieving success in any business.

Competitive advantage

Competitive advantage means the necessary advancements in capabilities that provide an edge in comparison to competitors of the industry. What these are exactly, depends on your business model and the industry you operate in.

As already mentioned, for organizations the ability to get ahead of the competition is one of the most significant reasons to innovate. Successful, innovative businesses are able to keep their operations, services and products relevant to their customers' needs and changing market conditions.

In fact, according to Deloitte, only 12% of the Fortune 500 companies from 1955 are still in business and half of the S&P 500 companies will be replaced in the next ten years, which is why it's important to be able to quickly respond to external challenges.

Innovation increases your chances to react to changes and discover new opportunities. It can also help foster competitive advantage as it allows you to build better products and services for your customers.

Maximize ROI

Increased competitive advantage and continuous innovation often has a direct impact on performance and profitability.

According to Global Innovation 1000, there's a clear difference in both revenue (11%) and EBITDA (22%) growth in favor of the more innovative organizations. These numbers show that innovative companies not only grow faster but are more profitable than the rest.

Although measuring the ROI of innovation might be challenging especially in the beginning or when talking about disruptive innovations, investing in innovation is often a surer way to improve your numbers than not innovating at all.

Increased productivity

Economic growth is driven by innovation and technological improvements, which reduce the costs of production and enable higher output. If we look at this from the perspective of an organization, different automation solutions decrease manual, repetitive work and release time for more important, value-creating tasks.

Improved productivity and efficiency makes work more meaningful as less time needs to be spent on low impact tasks. The more time you're able to spend on tasks that have a direct impact on your business, such as improving processes, solving problems or having conversations with your customers, the more likely you're able to actually reduce costs, increase turnover and provide your customers with solutions that truly benefit them.

Positive impact on company culture

Last but not least, innovation also has a positive impact on company culture as it increases the ability to acquire, create and make the best use of competencies, skills and knowledge.

Innovation practices can help build a culture of continuous learning, growth and personal development. This type of innovative environment can again motivate people to constantly improve the way they and their team work.

If you look at history, innovation doesn't come just from giving people incentives; it comes from creating environments where their ideas can connect. - Steven Johnson

When the entire organization is supportive and provides the right tools for the employees to succeed in their jobs, it eventually has a positive effect on how people perceive their jobs.

Conclusion

Generally speaking, the main purpose of innovation is to improve people's lives. When it comes to managing a business, innovation is the key for making any kind of progress.

Although your innovation activities aren't necessarily powerful enough to save the world, you should focus on improving the things you can affect.

Small improvements eventually lead to bigger and better ideas that may one day become revolutionary. In the meantime, however, you're responsible for finding ways to make improvements in your own sphere of influence.

Often, getting started is the hardest part as there are many ways to approach innovation. Our suggestion is to simultaneously work on developing your personal skills and business related aspects. You should, however, start small and pick your focus as it's impossible to achieve everything at once.

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This post is a part of our Innovation Management blog-series. In this series, we dive deep into the different areas of innovation management and cover the aspects we think are the most important to understand about innovation management.

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The Importance of Innovation - What Does it Mean for Businesses and our Society?

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According to McKinsey, 84% of executives say that their future success is dependent on innovation. Although innovation may sound like a buzzword for some, there are many reasons why companies put a lot of emphasis on it. In addition to the fact that innovation allows organizations to stay relevant in the competitive market, it also plays an important role in economic growth.

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Business & Information Systems Engineering

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1 Introduction: information and communication technology as a driver of innovation

In recent years the pace of innovation has risen dramatically, not least due to trailblazing developments in information and communication technology (ICT)1. Fifteen years ago, electronic communication was still virtually unknown in business; today, business would be unimaginable without it. Every cellular phone, every MP3 player, and even some washing machines now have more computing capacity than the navigation computer that is still used to fly the Space Shuttle2. The availability of inexpensive mobile data storage has radically changed entire industries such as photography, media or telecommunications, as has the ubiquity of the Internet. Innovations - seen as novelties with a competitive effect3 - have the potential to revolutionize established markets practically overnight.

Even companies with a seemingly unassailable market position are under threat from the pace of innovation in the market. How fundamentally these often ICT-driven changes affect even large and dominant corporations is shown by the U.S. Standard & Poor's 500 (S&P 500) Index, which has been in existence since 1957. In 2007, 50 years after it was launched, only 86 of the original 500 companies are still listed in the index. In other words, fewer than 20 percent of the largest U.S. corporations have survived the past 50 years with their original relevance ( Standard & Poor's 2007). A large number of companies have disappeared, either taken over by more successful competitors or reduced to economic insignificance by failure to innovate in a core market. Many companies held on to established strategies and business models for too long - due either to inadequate strategic foresight or fear of cannibalization of their established business, to problems in implementing a new strategy, or to underestimating the speed at which innovations in, inter alia, ICT revolutionize entire market segments ( Picot et al. 2008, p. 7). To hesitate in reacting to these changes, however, is to run a risk of being rolled over by market developments.

In the early 1990s, even IBM, one of the "survivors" of the initial S&P 500 ( Standard & Poor's 2007) nearly fell victim to swift change in an ICT market that is relevant for the company in a twofold respect - as an innovation driver and as a core business area. Only by fundamentally changing its business model, organization and corporate culture was IBM able to surmount this crisis, and flexibility and the ability to change fast have since been the basis of its economic prosperity4.

In the following, first the influence of ICT on globalization and service-orientation is outlined (Chapter 2), followed by a consideration of the general relationship between business model, organization and corporate culture (Chapter 3). Then, the transformation at IBM in particular is analyzed. For three important phases during the past 50 years the market-driving innovations are identified and linked to the respective changes in business model, organization and corporate culture (Chapter 4). Finally, the results are summarized and an outlook is presented on the growing significance of transformation and change management (Chapter 5).

2 The influence of ICT on globalization and service-orientation

The influence of the swift pace of ICT developments is particularly evident in the increase in globalization and service-orientation, also known as "servicization" ( IfM, IBM 2008), that is particularly important for the transformation of many companies, including IBM.

2.1 ICT and globalization

Let us take a deliberately broad view of the term "information and communication technology" for a brief look back at the history of mankind, understanding it to mean all of the methods and techniques that relate to dealing with information. The last 5,000 years have witnessed four innovations that have led to such drastic changes in cost and speed in dealing with information that their effect not only on the markets but also on humankind as a whole can clearly be described as revolutionary ( Tab. 1).

Tab. 1 ICT innovations in the wider sense of the term that were trailblazers for long-distance trade (pre-1990 innovations based on Graff 1982, pp. 17-19)

By the end of the nineteenth century, ICT had already been instrumental in initiating and implementing long-distance trade. In around 1990 the development of the World Wide Web marked a further milestone in stepping up the pace of globalization. Practically free worldwide transportation of data or information dramatically boosts the opportunities for international exchange of services. In contrast to trade in products, the globalization of which has reached new dimensions - a new quantity - in recent decades, trade in services has taken on an entirely new quality. The fast development of ICT has loosened the previous attachment of services to the place where they were provided. It took ICT and the Internet to make globalization of services, especially knowledge-intensive services, and corresponding global markets, conceivable and feasible5. The globalization options for digital services are especially significant and are steadily gaining economic significance. New digital services (eServices), in particular Internet-based Web Services ( Buhl et al. 2008, p. 63), account for a growing proportion of value added. Gartner ( 2008), for example, anticipates that by 2012 at least one third of application software in companies will be provided as "Software as a Service (SaaS)". These digital services can not only be traded over a network, but also provided digitally in their totality, in other words delivered via private or public networks (typically the Internet) and thereby globally and independently of the place of provision. For many of the established industrialized nations this will present a major opportunity to countervail the future shifting of markets. While the gross domestic product of the so-called E7 states (the Emerging 7, consisting of Brazil, Russia, India, China, Indonesia, Mexico, and Turkey) at present amounts to a mere 20 percent of that of the G7 states, by 2050 the E7's gross domestic product is expected to have risen to around 125 percent of the corresponding G7 value ( PwC 2006, p. 18-23). The above-mentioned ICT enablement of international activities must be leveraged - also for developed countries like Germany - to participate in the growth of these markets.

2.2 ICT and service-orientation

In many developed economies services already account for over 70 percent of gross value added ( Satzger 2008). The ongoing development of ICT will lead to a further increase in the share of services, due for one to a shift in scope of economic output from products to services and for another to the rising number of opportunities for de- and recomposition of added value networks and their coordination.

Shift in scope of economic output: A widespread definition of services that goes back to Engelhardt et al. ( 1993, pp. 404 ff) and Meffert ( 1994, pp. 524 ff) describes them as a diffuse part of a performance continuum along the dimensions of intangibility and the inclusion of an external factor that again subdivides into the dimensions of the degrees of interaction and individualization. An economic output must be deemed increasingly as a service the more it consists of intangible components, the more interaction takes place with the customer in the provision of the output and the more individually the solutions are designed for the customer - so that the terminology established in practice, namely that of a "hard" distinction between products and services, can well be called into question ( Satzger 1999, pp. 10‑14; Vargo and Lusch 2004, pp. 5-12). Along all three dimensions ICT drives the significance of services. New, intangible services, such as Web Services, take shape or replace previous tangible ones. Opportunities for interaction and cooperation with the customer are intensified (via cooperation platforms, for instance). Opportunities for individualized production are increased by flexible production processes.

De- and recomposition of added value networks: The focus on joint value creation also taken forward by the international initiatives promoting Service Science, Management and Engineering (SSME)6, will increasingly lead to intensified endeavors to see services not only as the product of supply and demand but as added value cooperatively created by several partners ( Spohrer u. Kwan 2009). This can lead to long-term strategic partnerships, such as in IT outsourcing, or to short-term project-related organizational forms. In any case an increasing progression from established value chains to more complex, more dynamic, adaptive service value networks can be expected. A recent study by Deutsche Bank Research ( 2007, p. 8) names the change in business culture and value creation patterns as core dynamic processes for Germany's future development - in addition to the design of the political and legal framework and to the exploitation of societal potential. ICT plays the role of an enabling coordination technology; uniform and/or open protocols and standards make a cross-company creation of added value networks feasible. Service-oriented architecture concepts, not only applied on the ICT-infrastructural layer but also to business processes between companies permit a greater specialization on the core competences of one's own company along with dynamic utilization of external added value components. The classic business question of whether to "make or buy" is to be reconsidered in many cases.

It should be noted that this ICT-driven service-orientation is further enhanced by two other observable trends:

Societal developments promote the emergence of new services. The aging of society, for example, triggers additional demand for services in the healthcare or leisure area. The flexibility of individuals (in respect of forms of work, working times or length of service with one employer) lends further support to this trend.

Promotion of political framework conditions (such as deregulation of markets and implementation of the EU Services Directive by the end of 2009) or systematic research funding in the services sector (such as promotion as a strategic area in the context of the German High-Tech Initiative ( BMBF 2008)) eliminate barriers to growth.

In the next section, the connection between innovations and the transformation of companies is first outlined in general terms before we proceed to specifically analyze the effect of ICT innovations on the transformation of IBM.

3 The relationship between business model, organization and corporate culture

Disruptive technological innovations regularly force companies and entire industries to adapt their business models and their organization ( Christensen 1997, pp. 125-131; Picot et al. 2008, p. 7). Moreover, a dependency between business model, organizational structure and corporate culture has been postulated on a conceptual basis since the 1980s and investigated in greater detail in different models (such as by Wilkins and Ouchi ( 1983); Waterman et al. ( 1980)). Empirical analyses of the relation between corporate culture and success undertaken in subsequent studies produced partially inconsistent results. In later research it became clear that there is no such thing as a generally valid "best" corporate culture and that successful corporate cultures are evidently industry-specific and context-dependent ( Christensen and Gordon 1999, p. 400; Baumöl 2006, pp. 315-316). Based on this hypothesis, significant changes in business models, such as the transformation from a product-oriented to a service-oriented model, ought to be accompanied by no less radical changes in terms of a new corporate culture that supports the new model to the best possible degree. Adjusting a company's culture is a fundamental tasks of so-called change management ( Kotter 1995, p. 64; Siegal et al. 1996, p. 57) and is considered to be an especially tough challenge: this was shown by the findings of a recent study by Jørgensen and Neus ( 2007, p. 87) in which 65 percent of project managers interviewed named "changing mindsets and attitudes" as the most serious obstacle to implementing change. It came well ahead of "scarcity of resources" (41 percent) and "lack of senior management commitment" (35 percent). Changing processes or IT systems, in contrast, cited by 20 and 8 percent of respondents respectively, are rated nowhere near as problematic ( Fig. 1).

Obstacles to the introduction of change based on interviews with 220 project and change managers in different industries in Germany, Austria and Switzerland ( Jørgensen and Neus 2007, p. 87)

Successful companies typically develop strong corporate cultures that encourage and reinforce those attitudes to which the company owes its market success. The corporate culture thereby reflects the market situation (and the appropriate attitudes) in which the organization achieved success. If, however, the environment changes, due in this case to market changes, a strong corporate culture that has supported and strengthened previously valid success factors can turn into a problem because it hinders the adaptation of the organization and the development of new and different attitudes that are required for success in the new environment. A further factor that complicates matters is that often times parallel cultures coexist in companies, one being the official, documented and indeed believed culture stated in values and guidelines opposed to the actual culture that is lived in day-to-day business. Argyris and Schön ( 1978, pp. 12 ff) call this the difference between "espoused theory" and "theory in use."

In the following an analysis is undertaken of how the ICT-driven trends of globalization and service-orientation described in Sections 2.1 and 2.2 have made their mark on the development of IBM. We go into individual phases of the company's development and investigate on the basis of the ideas outlined in Section 3 not only the effects on business model and organization but, especially, also on corporate culture. Fig. 2 provides an overview of the approach adopted.

Approach used to analyze IBM in chapter 4

4 IBM: the past 50 years of transformation of business model, organization and corporate culture

IBM is one of the few companies existing today with origins that date back to before 1900. Back in 1888, Herman Hollerith, a son of German immigrants, founded the Tabulating Machine Company (TMC) in New York to manufacture machines that automatically recorded and counted punchcards7. After mergers with other firms that produced, inter alia, scales and time recording devices, the Computing Tabulating Recording Company (CTR) was founded in 1911 and renamed International Business Machines in 1924. From 1914 until a year before he died in 1956, Thomas J. Watson, Sr., headed the company and established an extraordinary culture that was characterized in particular by strong sales orientation and a sense of community among the company's employees. IBM has exercised a decisive influence on the development of ICT and at the same time undergone fundamental changes as a result of this development. The transformation of the past 50 years will be outlined in the following. For simplification, a distinction will be made between three major phase in which the development of ICT gave rise to different forms of business model, organization and corporate culture. Tab. 2 provides an overview of these phases, referred to in the following as the mainframe phase, the service-orientation phase, and the global integration phase.

Tab. 2 Phases in IBM's development from around 1956

4.1 The mainframe phase

In 1956, Thomas Watson, Jr., took over from his father as CEO. That was the period of the development and announcement of the System/360 mainframe family (in 1964) that marked a fundamental innovation in information technology and indirectly ushered in the development of disciplines such as informatics and, later, business and information systems engineering (BISE). What was so impressive about System/360 was the separation of architecture and product, leading to the emergence of a modular, scalable computer system that could be used for both scientific and commercial applications and combined the options of previously different and specialized computer architectures in a uniform architecture ( IBM 1964) based on a modular system of integrated circuits with the aid of solid logic technology ( Davis et al. 1964, pp. 102 ff). Basing System/360 on this new technology was a very risky strategic decision given the resources invested. At the time, Fortune magazine described the $5B development costs as "IBM's $5B gamble" ( Wise 1966, p. 118). The investment paid dividends, however. Instead of many voluminous special systems, customers were able for the first time to buy a generic computer that could grow with its task by means of modern add-on components without the software for a larger computer system needing to be rewritten each time. Subsequent technological innovations such as CMOS technology or RISC architecture further consolidated IBM's pioneering role.

IBM built its entire business model around the mainframes. The hardware, software, sales and services, the latter originally being merely system maintenance and not marketed separately, were all geared to System/360. Competitors had a tough time in view of IBM's research edge and its organization focused on this one system, and many providers vanished from the market. IBM long appeared to be unassailable until, on the one hand, the UNIX open operating environment in the early 1980s offered customers a realistic, high-performance non-proprietary alternative to IBM's mainframe products, while on the other the emergence of the personal computer, the market effect of which IBM initially underestimated, shifted the market towards decentralized concepts.

In the late 1980s, IBM's organization, which was originally focused entirely on System/360, was structured around different IBM product lines, each with its own head of sales. It soon transpired that an integrated view of the customers' problems was not available because the focus was on each unit's own solution. In later years, this would even lead to internal competition between mainframe, AIX, AS/400 und PC business units offering customers solutions that sometimes overlapped and were positioned not only against the competition but also against other IBM solutions. While clearly not optimal, this was still bearable in an almost monopolistic market with a limited number of offerings - as IBM held a market share of up to 70 percent ( Pugh 1995, pp. 57-58). In an increasingly competitive environment, though, with a large number of alternative products it was posing a serious risk.

In 1969, IBM's success even led to the U.S. Department of Justice filing a suit against it for establishing a monopoly position (and thereby breaching the 1890 Sherman Antitrust Act), ushering in years of litigation. The case was dropped in 1983, but it nevertheless had far-reaching effects on the company's business model and organization. In 1969, the previously uncustomary unbundling of software - marketing software separately from hardware - was introduced. This has widely been regarded as the trigger for the establishment of today's software market ( Grad 2002, p. 70; Pugh 2002, p. 58). By the same token, training services were offered for purchase to non-IBM customers for the first time. This marked IBM's initial step in the direction of a more comprehensive IT service offering. Organizationally, the antitrust suit led to IBM spending years preparing to split into two separate companies. This project was not further pursued, though, once the case was dropped.

The System/360 innovation also had consequences for IBM's corporate culture. Watson had deliberately and systematically institutionalized three "basic beliefs" that had made IBM successful under his leadership. They were "excellence in everything we do," "superior customer service" and "respect for the individual." These values were firmly incorporated in the remuneration and incentive systems, management training, other training programs, marketing, and customer service, and they enhanced each other. In around 1990, however, the importance and implications of these basic beliefs were entirely different from what they had been in 1960. Rules, values and traditions had not changed with the market and customer environment ( Tab. 3):

In the heyday of System/360, superior customer service mainly meant maintenance of machinery installed at the customer's premises. Over time, however, the service required became more complex and the customers' needs changed without IBM's offerings reflecting this change. Traditional customer service was more of a routine administrative task than a customized activity geared to each customer's requirements.

Over a period of 30 years in which these values - also driven by the commercial success of the mainframe architecture - were manifested even more strongly in the corporate culture and in IBM's formal structures, a feeling of unassailability was at times widespread among IBM employees. As IBM's later CEO, Lou Gerstner, wrote when looking back ( Gerstner 2003, p. 189), they seemed to be immune to external influences such as competition, price wars and the like. All of the important developments in IT seemed to originate in IBM research laboratories. Viewed in this light, changes in customer requirements were not a central factor. Excellence in everything we do put the ability to adapt and the speed of change on the back burner. In 1972, for example, former IBM employees founded SAP because they saw no way within IBM to satisfy the growing customer demand for standardized, real-time financial applications.

The interpretation of respect for the individual changed in much the same way. Given the extent of market success this belief was in some cases interpreted as meaning that every opinion within the company must be heard and "respected," leading to a lack of readiness to make decisions at IBM ( Gerstner 2003, p. 192).

Tab. 3 Values proclaimed and actually lived at IBM in the early 1990s (based on Gerstner (2003), pp. 181-193)

4.2 The service-orientation phase

Innovations in ICT such as the development of personal computers, the establishment of open standards and the concept of client-server architectures - for which IBM was not sufficiently prepared8 - led to a progressive decline in the importance of mainframes. Financially, this was intensified by a drastic fall in prices due to the introduction of efficient CMOS technology with which IBM itself was largely associated. The medium-term result was the most serious crisis in the company's history. After two years with losses of more than $1B, IBM reported losses totaling $4.97B for 1992, at the time the largest-ever corporate loss in U.S. history ( Burgess 1993, p. 3).

It was in this phase that Lou Gerstner took over as CEO in 1993. He realized that the key to restoring the company's profitability lay in the need to transform its business model. Anticipating that market growth would be mainly in the implementation of technologies, he transformed IBM's service business from an organization that dealt solely with IBM products (and mainly with their repair and maintenance) into a business unit focused on understanding and satisfying customers' needs. Whereas previously only IBM solutions were sold, competitors' services were now included - if they suited the customer's requirements - and the entire solution was integrated as a service and operated after the sale or developed further if required. At the end of 2002, the $3.5B acquisition of PriceWaterhouseCoopers Consulting (PwCC), one of the largest professional services organizations with around 30,000 employees worldwide, was further evidence for this transformation. Experts saw in it an unexpected change in the market situation: Gartner analyst Ben Pring wrote that "IBM caught everyone unaware with a deal that, although not the largest in revenue terms, is one of the most significant in some time in terms of market dynamics" ( Gartner 2002). At the same time IBM stepped up the expansion of its software business, realizing that it must seek to provide total solutions for the customer. This expansion began with the takeover of Lotus in 1995, and its focus was always on middleware as the key to designing integrated total solutions.

It had decisive consequences for the organization. The commitment to a compact IBM is considered one of Gerstner's most courageous decisions9. He did not pursue moves called for by the financial markets to break up the company into small, flexible units - in order to promote IBM's total solution competence and to make the change evident10. At the same time he bundled all of the company's services in a separate Global Services business unit alongside hardware and software units to make the contribution of services measurable and visible. The new services unit's organizational structure was no longer geared to products but, consistently, to solutions, such as outsourcing or customer relationship management, and to industries, such as financial services, in order to bundle and develop the corresponding industry skills. The transformation from a manufacturer of capital-intensive products to a company that in the future would be significantly characterized by labor-intensive ("labor-based") services posed a very special challenge - one of which IBM stayed abreast by means of a fundamental reconception of its business processes.

At the same time Gerstner had to usher in a change in corporate culture that for one would help to interpret the company's previously "lived" values correctly and for another would support his strategy. "Until I came to IBM," he later wrote, "I probably would have told you that culture was just one among several important elements in any organization's makeup and success - along with vision, strategy, marketing, financials, and the like. I came to see, in my time at IBM, that culture isn't just one aspect of the game; it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value" ( Gerstner 2003, p. 181). He accordingly set IBM three new and simple imperatives:

Win: Since economic activity takes place in competition, with winners and losers, the market should be the decisive criterion for all business activity. This made it clear that the previous values of excellence and superior service were to be measured by the yardstick of commercial success.

Execute: Speed and discipline were to overcome the obsessive perfectionism that had led to market opportunities being missed and had left IBM vulnerable to competitors capitalizing on IBM inventions.

Team: Every employee must act as a part of one IBM - in full accordance with the basic philosophy of the company's integrated solution competence.

During this phase IBM - while still operating at an undiminished level of high technological competence11 - developed into the world's largest IT services company: services' share of IBM sales rose continuously from 27 percent in 1993 via 45 percent in 2002 to 55 percent in 2007.

4.3 The global integration phase

Starting in the late 1990s, a number of ICT innovations led to the emergence of totally new opportunities and risks, first and foremost the commercial use of the Internet and the establishment of open standards. New forms of cooperation across corporate and national borders became possible and many customers' business models faced fundamental transformations.

Under Sam Palmisano, who took over as CEO in January 2003, IBM continued in principle the course set under Gerstner while integrating three main aspects into the business model:

Bearing in mind that the swift pace of technological change also poses a challenge for the company's customers, even greater emphasis was put on total solutions for customers that went beyond IT solutions. As an "innovator's innovator," IBM stepped up its commitment to providing customers with integrated assistance to gain a competitive edge in their respective industries12. The acquisition of PwCC, with the takeover of a large number of highly qualified consultants with industry-specific experience laid the groundwork for implementation. Global organizational structures were created to make industry-specific know-how available around the world and to provide worldwide support for international customers.

With the advent of global networks by means of modern ICT, a worldwide integration of processes and value chains within the company became possible, leading to significant economies of scale. Corporate functions were no longer replicated; they were established once only and with global responsibility. For this, Palmisano ( 2006, p. 131) coined the concept of the globally integrated enterprise.

As ICT undergoes progressive evolution, the value contributions of individual business segments change as well. IBM consistently focused on premium segments such as integrated management consulting and enlarged them further. Product areas that had become commodities as a result of ICT trends were sold off. After the sale of the hard drive division, IBM also sold its PC business to Lenovo in 2005. At the same time it acquired a number of small and midrange software companies, such as Rational in 2003 and Cognos in 2007, thereby making appropriate additions to the company's solutions portfolio.

This was also directly reflected in IBM's business organization. To make its consulting business both more visible and measurable, the services division was split into two business units, Global Business Services (GBS) and Global Technology Services (GTS). GBS was consistently structured along customer industries and solutions. Central corporate functions such as procurement, supply chain management, and financial management were assigned to a central, worldwide leadership that would be in charge of strategy, processes and systems. Global procurement responsibility, for example, was consolidated in Shenzhen, China, in 2006.

Gerstner had revised the original IBM values that were "lived" dysfunctionally in the early 1990s and changed the company's corporate culture by means of a focus on competitive orientation, speed of implementation, and cooperation towards a "Bias for Action" ( Peters and Waterman 1982, pp. 134-136). Palmisano also kick-started a renewal of corporate culture to match it to a now service-oriented enterprise and an adjusted business model. Rather than centrally revising corporate values, however, IBM invited all of its employees around the world to take part in a joint debate on the company's values. This in turn was only made possible by ICT: an online jam - analogous to informal jazz sessions - gave IBMers an opportunity to share in an open discussion about the desired values ( Hemp and Stewart 2004, p. 61). IBM's new values, drawn up in cooperation with all of its employees via the so-called value jam, are now stated to be "dedication to every client's success," "innovation that matters - for our company and for the world," and "trust and personal responsibility in all relationships". They once more take the change of business model and organization into account, incorporating especially IBM's commitment to corporate social responsibility as reflected in the campaign for environment-friendly and low-energy ICT (Green IBM) launched in 2008.

5 Summary and outlook

This article has claimed that innovations in ICT call for complementary - in some cases fundamental - adaptations to business model, organization and corporate culture to ensure that a company remains successful even when market conditions have changed. A case in point is IBM's transformation over the past 50 years into a globally integrated, service-oriented enterprise.

Starting with the swifter pace of ICT-driven change and the resulting shorter innovation cycles, we see one of the most urgent tasks for companies in improving their ability to recognize essential changes and to adapt to them in a timely and consistent manner. As business model and organizational transformations and, above all, cultural adjustments, always take their time, it is not surprising that coping with swift change currently appears to be the most serious problem that chief executive officers face. This was impressively demonstrated by the Global CEO Study published at the beginning of 2008 after interviews of over 1,100 CEOs around the world ( Fig. 3): "Organizations are bombarded by change, and many are struggling to keep up. Eight out of ten CEOs see significant change ahead, and yet the gap between expected change and the ability to manage it has almost tripled since our last Global CEO Study in 2006" ( IBM 2008b, p. 7).

Comparison of the 2006 and 2008 IBM CEO studies - 83 percent of respondents now expect to have to handle fundamental transformations in the near future ( IBM 2008b, p. 7)

Some of the challenges ahead will be to deal with a fundamental dissolution of the traditional roles and structures of information production and consumption (Web 2.0) that is brought about by ICT. Data and information produced by previous information recipients can be used for innovative business models or for cooperative innovation. At the same time, it will constitute a complex challenge to cope with the flood of user- and increasingly sensor-generated data - at times called a "data tsunami" - in order to extract competitively relevant information. Recent acquisitions of leading business intelligence firms such as Business Objects (by SAP) or Cognos (by IBM) testify to this subject's relevance. Companies must utilize the resulting opportunities. Scientific disciplines such as BISE that integrate technical, economic and human resource aspects in an interdisciplinary manner are called upon to support corresponding transformations and to do so by means of both an appropriate research and education orientation13 ( Satzger 2008; Maerki and König 2006, pp. 229 ff; Spohrer u. Maglio 2008, pp. 241 ff).

Further acceleration of the pace of change must thereby lead at IBM and at many other companies to further, faster adjustments for which the course must be set here and now. To survive and be successful in a highly dynamic world of which ICT is the hallmark will require a focus on the following points:

Trends and technical developments must be anticipated better to take an active part in shaping the company's business model. IBM, for example, engages in strategic foresight for itself and its customers by means of the Global Innovation Outlook and the CEO Study ( IBM 2008a, IBM 2008b).

Corporate organization and processes must be kept flexible along the lines of adaptive systems. Service-oriented architectures in the context of business processes, such as IBM has realized in recent years in its IT service factories, may be considered a promising concept in that respect.

Involving employees early and making them aware of the need for change are critically important for further development of corporate culture in a highly dynamic world. In Germany, for example, IBM launched a number of transformation initiatives in 2007 ( n. a. 2008, p. 9), underscoring the personal responsibility of employees for shaping their role in a globalized world economy.

An integrated transformation of business model, organization and corporate culture has always been a critical success factor, as IBM's history has illustrated. With more and even faster ICT innovations to be expected in the future, this ability has become absolutely essential for survival.

Notes

1. 1.

The convergence of nanotechnology, biotechnology, information technology and cognitive science (NBIC) is seen as the main driver in the years ahead ( Bainbridge and Roco 2006, p 5).

2. 2.

The Space Shuttle's avionics computers use IBM AP-101 family processors (originally ca. 400 KB, and since 1991 ca.1 MB) that were originally developed at the end of the 1960s ( Tomayko 1988, p 93). Due to the complexity of the safety-relevant system, NASA has hitherto chosen not to change the architecture. Embedded processors now used in the consumer goods sector are often more powerful in terms of sheer performance than these specialized chips ( Schlett 1998, p 49).

3. 3.

4. 4.

Rugman and Verbeke ( 2004) analyze "true global players" with a somewhat even distribution of business in America, Europe and Asia. They identify a company's ability to radically change as one of the characteristic properties that this requires.

5. 5.

These internationalization opportunities are enhanced by the fact that in future markets such as India or China services account for only around 30 percent of gross value added, and can still be expected to catch up in terms of service-orientation ( Satzger 2008).

6. 9.

In the early 1990s, turnaround research had produced only few substantive results ( Pearce and Robbins 1993, p 614).

7. 10.

This decision of Gerstner's led to the book "Who Says Elephants Can't Dance?" in which he looked back on his time as IBM CEO ( Gerstner 2003).

Author information

Affiliations

1. IBM Deutschland GmbH, Pascalstr. 100, 70569, Stuttgart, Deutschland

2. Karlsruhe Service Research Institute, Universität Karlsruhe (TU), Englerstr. 11, 76131, Karlsruhe, Deutschland

Prof. Dr. Gerhard Satzger

& Andreas Neus

Authors

1. Search for Martin Jetter in:

2. Search for Prof. Dr. Gerhard Satzger in:

3. Search for Andreas Neus in:

Corresponding author

Correspondence to Prof. Dr. Gerhard Satzger.

Additional information

Accepted after 2 revisions by Prof. Dr. Buhl.

This article is also available in German in print and via http://www.wirtschaftsinformatik.de: Martin Jetter, Gerhard Satzger, Andreas Neus (2008) Technologische Innovation und die Auswirkung auf Geschäftsmodell, Organisation und Unternehmenskultur - Die Transformation der IBM zum global integrierten, dienstleistungsorientierten Unternehmen. WIRTSCHAFTSINFORMATIK. doi: http://dx.doi.org/10.1007/s11576-008-0105-2.

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# data[].attributes.attachment_link.title
Technological Innovation and Its Impact on Business Model, Organization and Corporate Culture - IBM's Transformation into a Globally Integrated, Service-Oriented Enterprise

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This article investigates the influence of information and communication technology (ICT) on business transformation. First, the general, ICT-driven development lines of globalization and service-orientation are described. Then, an analysis of the IBM Corporation's transformation over the past 50 years into a globally integrated, service-oriented company illustrates that ICT innovations must be dealt with by simultaneous adaptation of business model, organization and corporate culture.

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Evolving strategic business imperatives, trends, and disrupters are driving a seismic shift in the way IT organizations operate. This report-part of a series exploring the merger of business and technology strategies and the reimagination of technology's role in the business-aims to address fundamental questions about the future of work in technology:

How can organizations leverage technology to redesign current work outcomes to focus on exponential increases in productivity and cost efficiencies and redefine new work outcomes that extend beyond productivity and cost to value, meaning, and impact?

How will tomorrow's technology workforce be different than today's? How will jobs and roles change? What skills and capabilities will be needed?

Does the current workplace support the evolving work of technology and the workforce required to complete it? How will it need to be redesigned to sustain the evolution of technology work?

Based on formal surveys and interviews with dozens of business and technology leaders, this report discusses the future of work in technology-the work itself, who does the work (workforce), and where the work is done (workplace). It sheds light on changes in these three dimensions-work, workforce, and workplace-that have already begun, will continue to unfold during the next three years, and likely will continue to progress over time. Finally, it will provide pragmatic advice and recommendations on how technology and business leaders can strategize, design, and collaborate on this bold journey.

Reimagining the role of technology

Savvy business and technology executives are working together to reimagine how technology delivers business value and competitive advantage. "Because of technological advances, technology's role within the organization is itself shifting," says Satish Alapati, CIO of Media & Entertainment Customer Experience at AT&T. "The role of technology has evolved from automating the business to actually being the business."

Business innovation and disruption are rapidly changing the scope, pace, and scale of technology work. "Disruptions come in different forms-from competitors using technology at scale to the industrial Internet of Things," says another technology leader. "As a result, it's becoming more important than ever to enable everything we do with cutting-edge technology."

Yet despite the convergence of technology and business strategies, data from Deloitte's 2018 Global CIO Survey suggests that CIOs and other technology leaders still struggle with a lingering perception of IT as order-taker rather than business-driver. Only 29 percent of business leaders participating in the survey agree that the technology organization and its leaders should be deeply involved in developing enterprise business strategy.

Four major shifts in the role of technology

Deloitte's ongoing research on reimagining the role of technology has identified four significant shifts that are changing the role of technology in organizations.

From trusted operator to business cocreator. Technology teams should continue to maintain operational excellence-in the past, their primary function-but because business and technology strategies are now entwined, technology work should evolve to focus on hand-in-hand collaboration with business functions to cocreate value.

In addition, because of the growing demand for rapid and efficient delivery of low-friction experiences and capabilities-on par with best-in-class consumer-grade online experiences-many technology teams are shifting from traditional project- and process-focused operating models to those that are more product- and outcome-centric, which prioritize cross-functional collaboration, acceleration of time-to-customer value and other user/customer needs, and business outcomes.

From service delivery to value delivery. Automation, cloud, and as-a-service technology models are taking root, streamlining and speeding IT delivery, and changing the way technology teams and business functions work, collaborate, and create value. And they're helping eliminate some tactical and operational work and move the rest to machines and service providers.

As technology teams shift from trusted operators to business cocreators, their worth likely will lie in the value they deliver to the business rather than in the services they deliver.

From cost center to revenue engine. In the service delivery world, IT is typically viewed as a cost center, with CIOs charged to deliver services at the lowest possible cost. The average IT department invests more than half (56 percent) of its technology budget on maintaining business operations and spends only 18 percent on building new business capabilities.

Data suggests that if technology teams are to drive innovation and be change agents, reducing costs should take a back seat to strategically investing to increase revenue, growth, stock price, or other measurements of business and shareholder value. CIOs in "digital vanguard" organizations-those with well-defined digital strategies and highly regarded IT departments-already allocate less than half of their budgets (47 percent) to business operations and 26 percent to innovation. In the next three to five years, they plan to further reduce the operations allocation to a third of their annual budget while increasing innovation funding to 38 percent. For CIOs, being savvy about financial returns and articulating the value of technology investments can help drive forward their new agenda.

When technology and business strategies merge, the technology function is a codriver of innovation and cocreator of revenue driven by technology investments. "IT needs to demonstrate an innovation agenda," says Jo-ann Olsovsky, Salesforce CIO. "A company has to feel that IT is a change agent that's positioning the business for the future."

From cybersecurity to risk and resilience. When it comes to risk, technology leaders' primary focus has been cybersecurity. While cybersecurity will always be critical, leaders also should focus on business resilience and risks and disruptions inherent to having a combined business-technology strategy-risks whose reach extends beyond traditional IT environments into factories and other workspaces, products, and even customer locations. Because digitally connected customers will now have access to data through a voluminous set of channels that all need to be secure and resilient, this should include integrating security into product design and development.

Forces shaping the future of work in technology

Technology's transition to a new role in the organization requires the work of technology to change. Three forces are converging to reshape the future of work in technology:

1. The proliferation of disruptive technologies is continually reshaping businesses, industries, and markets.

2. Technology's role is shifting to that of a catalyst for business strategy and transformation, changing the expectations and delivery of technology and blurring the lines between business and technology functions.

3. Global demographic and workforce trends such as gig and contingent workers, a multigenerational workforce, more diverse talent, and global talent markets are transforming the labor market in general-and the technology workforce in particular.

In the face of these drastic shifts, many savvy CIOs and other technology leaders are aiming to shape the future of work in technology. To do so, they can harness these forces and balance their competing demands while continuing to maintain operational excellence, meet business and customer expectations, and drive innovation, disruption, and digital transformation.

Traditional IT disciplines evolve to new technology disciplines

Many technology leaders recognize these shifts are happening but may fail to understand their fundamental implications on technology work and the workforce and workplaces required to deliver it. As a result, some leaders have approached the evolution to the future of work with disjointed, ad hoc efforts.

These changes have rendered the traditional scope of IT work unsustainable. Business leaders should redefine technology work beyond IT and refresh traditional IT disciplines to create technology disciplines focusing on value creation (figure 1). In this report, we deliberately replaced the acronym "IT" with "technology" because the scope of responsibility is very different for each. IT refers to the historic technology organization and its inward-focused IT disciplines. In the future, technology work will spread throughout the enterprise and may not be directly controlled by the CIO. Business and technology leaders alike can benefit from becoming comfortable with the idea of looking at technology holistically across the organization.

This evolution goes beyond semantics. New technology disciplines represent more than simply a different way of operating. Collectively, they define a fundamentally new type of work that extends beyond the boundaries of the technology organization to business and functional areas (see sidebar, "New IT disciplines"). Ultimately, these new disciplines can help transform the technology work, workforce, and workplace.

New IT disciplines

1. Business cocreation. Business cocreation is a shift in the role of the technology function from supporting character to costar. Hand-in-hand with business functions, technology teams can drive innovation and cocreate products, services, and experiences that drive growth, revenue, and competitive advantage. This likely will require unprecedented levels of collaboration among business and technology functions during the design, development, and deployment of products and services.

2. Value realization and measurement. The future of work in technology likely requires traditional IT governance and performance metrics to evolve to focus on realizing and measuring value. Clearly articulated business goals can provide clarity on objectives and metrics. KPIs such as revenue, market growth, and customer satisfaction can help monitor overall progress, maintain business-technology alignment, and keep teams jointly accountable.

3. Product management. When a product mindset is applied to the traditional IT disciplines of application and program management, technology work can be viewed as a product that solves business problems, rather than a project that implements an application and delivers functionality. This can ensure development of a coherent product strategy, a coordinated plan for spreading technology work across business and functional areas and external partners, and engagement with external stakeholders-including customers, prospects, and ecosystem partners-throughout the product development process.

4. Experience and design. This new technology discipline focuses on tasks such as embedding technology into the end-to-end customer life cycle to provide products and solutions throughout the customer journey and help ensure that critical bottlenecks are quickly identified and resolved. Analytics and AI can help predict user behavior and provide a differentiated experience, thereby enabling revenue growth: Revenues for companies whose customer experience is highly ranked outgrew other companies by more than five to one, suggesting that technology leaders should actively engage in customer experience and design to provide this edge.

5. Technology architecture. Architectural discipline is often a casualty of rapid growth. Mergers and acquisitions, aging legacy systems and processes, and the proliferation of data and applications also can complicate and strain architecture, platform, and infrastructure management. Decisions about cloud adoption or off-the-shelf software purchases can be evaluated not only on cost, features, and functionality but also on their ability to offer future options, flexibility, agility, scalability, and speed to market.

6. Data and insights. Customer data can increase engagement and helps team create products and experiences to support individual customer journeys. Business data can improve decision-making, while product data can be monetized or used to help improve reliability and experience. Yet data on its own does not drive value-it first should be normalized, aggregated from across the organization and external sources, and analyzed to deliver insights that can be monetized. Few organizations have cracked the code for monetizing data, an even more challenging task because of the velocity at which data is being generated.

7. Product delivery and operations. Continuous delivery can enable faster, more iterative delivery of technology work, with continuous attention on improving quality. This likely includes migrating to approaches such as Agile development and DevOps to deliver greater, faster business value. Because legacy environments often use a mix of delivery methods, many organizations that shift to these methods may employ a hybrid approach.

8. Talent continuum. Talent of the future likely will be valued not only for technical skills but also for agility, flexibility, ability to collaborate, and other soft skills. To access needed skills, leaders may need to leverage talent from across the open talent continuum, which includes full-time and contract workers, crowdsourcing, and the external partner ecosystem. In addition, the talent continuum will include human-machine collaborations and partnerships. Businesses will rely on machines to carry out and augment work across a wide spectrum, where machines could serve as tools, assistants, peers, or even managers.

9. Partner and ecosystem orchestration. Via engagement with the broader business ecosystem, leaders can tap new revenue sources such as business and industry platforms and digital marketplaces. Ecosystem partners can help organizations identify and understand emerging technologies that may be relevant to business strategy and objectives. Finally, engaging the ecosystem accelerates opportunities for learning, a largely social activity, and innovation, which is often the result of collaboration across fields of expertise and domains of knowledge.

10. Security, risk, and resilience. The historic IT risk, security, and compliance discipline typically is not designed to help companies evaluate, manage, and harness risks related to growth. Many savvy organizations are already managing such risks by using AI to protect against a rapidly changing threat landscape, managing risks to customer and company data and intellectual property used for value creation, bolstering organizational resilience to meet the requirements of a hyper-connected era, and owning digital responsibility and ethics.

* Product marketing is an important component of this discipline: It includes market positioning, creation of customer personas, product launches, sales strategy development (for internal products, development of consumption strategy, among others).

These external forces and internal pressures fundamentally redefine the three dimensions of the future of work in technology: the what (work), who (workforce), and where (workplace) of technology work, as shown in figure 2.

Every company's journey to the future of work will have a different starting point depending on business strategy, industry drivers, and market dynamics. However, regardless of entry point, businesses should first define new work and work outcomes before considering workforce or workplace transformations.

Work (what): It's likely that technology work increasingly will be performed by humans, machines, or human-machine collaboration; leaders should determine how to deploy people, bots, and algorithmsseparately and in partnership.Technology teams' focus should turn from IT capabilities to work outcomes as they move from project- and process-centric operating models to those that prioritize products and outcomes. Cocreating value with business functions and focusing on customer outcomes rather than processes are part of a more fundamentally human and meaningful work experience. As teams shift their emphasis to combined business-technology strategies and objectives and are enabled by automation to trade manual and repetitive tasks for those requiring higher-order skills, it's likely that they'll find more meaning in their work.

Workforce (who): Jobs and roles, talent and skills, and organizational structure will evolve. Employment models are already changing; businesses can access talent via a range of on- and off-balance sheet solutions. And finally, instead of being specialized technologists, technology workers can become collaborative cocreators of business value.

Workplace (where): Technology workplaces are evolving from location-centric to relationship-oriented. The geographic location of the work will vary, and workspaces should be redesigned to maximize collaboration, productivity, and cocreation. When extended to a network of geographic locations, including virtual offices, coworking spaces, and traditional office spaces, seamlessly integrated technologies such as collaboration and digital reality tools can help facilitate and support connections among humans and machines.

Let's take a more detailed look at the shifts in the work, workforce, and workplace.

Work: From IT capabilities to technology work outcomes

Historically, technology teams took pride in developing and delivering IT capabilities to serve business needs. Technology leaders assessed and developed people, processes, and technologies to address organizational demands through the use of complex capability models and frameworks-all within a centralized IT organization.

As organizations develop joint business-technology strategies and collaborate to cocreate business value, processes and roles may change, causing skills and tasks to overlap across traditional business and technology borders. Integrating business and technology skills and teams likely will require CIOs and other functional leaders to rethink how they and their teams work. The focus is no longer on the delivery of a project but on the value delivered from the outcome. "Redefining work means identifying and addressing unseen problems and opportunities in the work, for everyone at all levels and at all times," says John Hagel, cochairman for Deloitte LLP's Center for the Edge.

The transition from IT capabilities to technology work outcomes requires a fundamental shift in thinking: Technology is not solely the purview of the IT function. Business leaders are equally accountable for the successful design and delivery of technology work.

The two-step process of reimagining what technology work will look like in the future includes first deconstructing the work and identifying work outcomes, and then defining the roles that support new disciplines.
Step 1. Deconstruct the work and identify work outcomes
To gain clarity on the new work and provide guidance to those in new roles, technology leaders can deconstruct the work into work outcomes for each discipline. These outcomes will define not only the new work, but also the expected outcomes and accountabilities (figure 3).

Further analysis of work outcomes can help determine which activities an organization should continue, discontinue, or deliver in a different way based on the changing role of technology. It can also help executives identify the work that will be performed by humans, machines, or a combination of the two-and help ensure that work is meaningful to all stakeholders.

This level of detail can help provide a deeper understanding of how work is changing and show how the roles and the organization could evolve to deliver the work. For example, a more in-depth examination reveals how the work outcomes for the technology disciplines of product management (figure 4) and product delivery and operations (figure 5) could be defined.
Step 2. Identify roles that support new disciplines
Once work outcomes have been designed, leaders can establish the organization and roles needed to support the new disciplines and outcomes. New roles will emerge but others, such as project manager and business analyst, may evolve, decline in demand, or even disappear (figure 6). Some roles, such as product owner, may be filled by workers in business functions rather than those in the technology function.

Leaders can identify roles that do not transfer to the new model and determine how resources can be reskilled, trained, and supported to make the shift. The vast majority (89 percent) of surveyed technology executives plan to somewhat or very extensively retrain current staff, but not all employees will want or be able to transition roles-for example, some project managers may not be able to become scrum masters. Defining clear work outcomes and accountabilities can allow leaders to have candid conversations with technology and business staff about future expectations.

Clarity of roles and organization structure to support the new disciplines can help leaders make a smooth transition. For example, the average technology organization might have hundreds of project managers and application developers. Executives can understand, assess, and communicate the new skills and tools these roles will need, and identify individual road maps based on current competencies, future potential, and passion.

Workforce: From specialized technologist to collaborative cocreator

The workforce required to deliver these new work outcomes could be a gating factor in this transition. As technology work evolves, talent with the required skills and capabilities are increasingly in high demand. The size, scope, and competencies of the workforce required to deliver the new technology work likely will be very different than in the past.

Some leaders begin considering workforce transformation without first determining the work and work outcomes that should be delivered. However, the lack of clearly identified and articulated work outcomes can lead to piecemeal, inefficient, and unproductive efforts. It bears repeating that business and technology leaders should first define new work outcomes-only then can they make determinations about transforming the workforce. The following considerations may help.
Technology athletes replace specialized technologists
As technology work changes, so do the skills and proficiencies required to complete the work. Fifty-one percent of CIOs surveyed in Deloitte's 2019 report on Industry 4.0 readiness cite a significant mismatch between current skill sets and future needs.

In the past, many IT workers have been task-focused, often with highly specific skill sets. A worker with sought-after application development skills could spend his or her entire career within a single specialization. Technical expertise remains critical and in short supply-65 percent of global CIO survey participants say analytics and data science will be the hardest-to-find technical skills in the next five years while 54 percent named cyber and 49 percent named emerging technologies.

However, some specialized skill sets are falling by the wayside as IT becomes more automated. "Twenty years ago, people branded themselves as SAP experts and even focused on a specific module, and that was going to be the focus of their entire IT career," says Wayne Shurts, former EVP and CTO, Sysco Corporation. "Those days are gone. Today it's about technology athletes-people who are curious and are always looking to solve business problems through technology."

Ditto, says Rachel Parent, MassMutual CIO. "It's no longer imperative that the IT leader be deeply skilled in a specific technology discipline. Technology is changing too rapidly for that depth of expertise to remain relevant," she says. "There's incredible value in having skills that allow you to keep current with technology trends. Understand which of those can help drive your organization's strategy relative to serving customers, enabling collaboration, and increasing operational and financial efficiencies."
Machines augment tech workers
With clearly articulated work outcomes, technology leaders should be able to align roles and work. They can ascertain the outcomes that can best be achieved by machines, humans (permanent employees, contractors, or otherwise sourced), or a combination of both.

"It's important to think about how people and machines should work together," says Dell CHRO Steve Price. "This will have implications for how and where work gets done, the kind of skills people need to possess, and the broader expectations of the future workforce."

While cognitive technologies are indeed transformational, evidence suggests they will augment rather than replace workers. Most tactical, algorithmic, and structured work will be automated by machines over time, leaving much creative and strategic work for human talent. "We have spent way too much time thinking about people versus computers, and not nearly enough time thinking about people and computers," says Thomas Malone, director of the MIT Center for Collective Intelligence. "We've spent too much time thinking about what jobs computers are going to take away from people, and not nearly enough time thinking about what people and computers can do together that could never be done before."
Enduring human skills complement technical expertise
In the past, soft skills that support collaboration and communication typically took a back seat to specialized technical skills. Today, soft skills are having a breakout moment. These enduring, essentially human skillsare increasing in value in part because they cannot be replicated by machines.

Even though future technology jobs may be more machine-powered and data-driven, talent likely will need to have more breadth across both business and technology areas. This could include critical traits for driving innovation and disruption, such as:

Business and financial acumen to understand complex business challenges and decisions

Ability to understand the engagement, interaction, and collaboration of humans and machines

Enduring and essential human skills such as empathy, creativity, and enthusiasm for learning

Ability to embrace change and uncertainty

And as we've suggested, rather than working in centralized silos of IT expertise, technology talent likely will need to collaborate with business functions to cocreate value. The CIOs who participated in the global CIO survey point to a growing need to augment technical expertise with collaboration skills (figure 7).

This is not a subtle shift-it likely requires new job families, roles, and talent capabilities. Talent shortages are hardly new to IT-60 percent of participants in the global CIO survey report difficulty finding employees with the appropriate balance of skills. Yet there likely will continue to be a dearth of talent with the right mix of specialized skills, adjacent proficiencies, and enduring human skills to support business mandates for innovation, growth, and business transformation.
Open talent continuum provides more workforce options
CIOs have more options than ever before to access the technology talent they need. The pool of potential tech workers-an open talent continuum-is expanding to include both on- and off-balance-sheet talent, from traditional full-time employees and managed services to alternative workers, including independent contractors, gig workers, and crowdsourcing (figure 8 ).

According to the global CIO survey, CIOs are already leaning heavily on the open talent continuum. Fifty-eight percent of survey respondents say they are retraining and retooling current talent. The same percentage report leveraging talent from external partners and service providers, and in another survey, 73 percent of technology executives said they plan to access needed talent by somewhat or very extensively using gig economy workers. Yet, a third of leaders surveyed for this report feel unprepared to leverage gig workers, freelancers, and crowdsourcing-a barrier that likely will need to be overcome.

While technology organizations are adept at managing technology vendors, the 2019 Deloitte Global Human Capital Trends Survey found nearly half (49 percent) of IT organizations are not consistent or integrated in their methods for sourcing and managing talent across the open talent continuum, which can prevent organizations from accessing the needed talent from the best source in a timely manner. Nearly every survey respondent indicated HR is responsible for hiring and developing full-time employees while procurement handles contracts with the external ecosystem, and users across the organization access open talent sources such as contractors, gig workers, and crowdsourcing.
Job descriptions become job canvases
Job descriptions rarely match actual jobs, especially in technology-and the future of work in technology could be the nail in the coffin of the traditional job description. Future technology jobs will be ever-evolving and dynamic. The half-life of a skill is currently five years and likely will continue to decrease, which means the tools, skills, competencies, and requirements needed to perform a role will constantly change. People are likely to have multiple roles within an organization during their careers.

As a result, we propose evolving job descriptions into "job canvases" that outline expanded responsibilities, new skills, redesigned work, and redefined work outcomes that are the result of automation and machine augmentation. A job canvas could include:

Skills increasing and decreasing in importance for that particular family of jobs

Broad sets of responsibilities across a family of jobs

Persona of an individual worker in the job

Description of "a day in the life" of a person in the role

Building on the work outcomes examples, we identified potential changes to product management and product delivery and operations, examined how this could affect the roles of product manager and Agile portfolio manager, and developed sample job canvases for these roles.

For product managers, skills that likely will diminish in importance include project management, technical writing and editing, and user interface design. On the other hand, scrum, DevOps, design thinking, Agile product life cycle management, and continuous integration and delivery will become more important skills (figure 9). Similarly, as product delivery and operations evolve, Agile portfolio managers will need to hone their capabilities in product testing, scrum and DevOps, data analysis, product management, customer contact, product improvement, and prototyping. They will likely have less need for skills such as project management, process engineering, systems integration, and component design (figure 10).

Workplace: From location-centric to relationship-oriented

The evolution of the work and workforce should be supported by targeted location strategies, as well as flexible physical and virtual workplaces. Fixed, uncompromising workplaces may need to evolve to virtual workplaces that leverage advanced mobility and connectivity, collaboration tools, and emerging technologies such as virtual and augmented reality that help improve collaboration and integrate workers from all segments of the open talent continuum.

"When it comes to the workplace of the future, physical proximity is going to matter less and less," says Stella Ward, chief digital officer of Canterbury and West Coast District Health Boards, New Zealand. "There are so many collaboration tools out there to help teams get work done remotely. The challenge is identifying the right tools and making sure our employees know how to use them to maximize efficiency."

However, that doesn't always mean face-to-face connections or the offices that host them are unneeded, although they may be designed differently. In fact, technology and business teams may require closer physical proximity than in the past. "Working in the office is about building relationships and trust between team members. When team members feel connected and trust each other, productivity increases," says MassMutual's Parent. "Good collaboration tools will help sustain this productive collaboration for longer periods of time when people cannot be regularly colocated but teams will still need to physically come together periodically."

Such workplaces likely will need to be flexibly designed to encourage collaboration and innovation to drive joint creation of business value. When considering a workplace strategy, leaders can ask questions about workspaces, collaboration, and culture (figure 11). Each is discussed below in greater detail.
Creating workspaces for cocreation
The mandate to cocreate technology solutions likely would require collaboration among business and technology functions. Collaboration could be virtual or in-person depending on the role, scope of work, and activity. Leaders can strive to create physical and virtual workspaces that encourage teamwork and connections but acknowledge the need for deep individual work.

While a healthy portion of the workforce already has flexible work arrangements, leaders may need to carefully balance the strategies for leveraging flexible, remote, and virtual workers and providing physical proximity and colocation to spark innovation, diversity of thought, and unplanned connections.

Mechanisms that can enable customer participation in the cocreation process are important. This can help technology and business teams gather customer feedback, incorporate it into each release of product design, and engage the customer to communicate new features and availability of updates as a result of their feedback and consumption.
Collaboration tools and practices enhance productivity, creativity, value, and meaning
Video conferencing, online collaboration platforms, and other tools have revolutionized organizations' ability to seamlessly collaborate on a global basis. As the work of technology evolves, collaboration tools likely will become critical; entire organizations may rely on them. Leaders should stay ahead of workers' communication and collaboration needs and constantly evaluate tools that could enhance productivity, increase transparency and collaboration, inspire more creative results, and enable more meaningful connections-ultimately enabling teams to drive new sources of value.

Plan and execute cautiously so that these tools don't become a productivity drain. One survey of 2,000 workers found that most use an average of four collaboration apps; 20 percent use six or more. Sixty-eight percent of employees say they toggle between apps up to 10 times per hour; about the same percentage (69 percent) say they waste up to an hour every day switching among apps. The American Psychological Association has found that employees experience a 40 percent drop in productivity each time they switch tasks.

Adoption of collaboration-enhancing processes and practices can also be valuable. Agile methods such as daily stand-ups/scrum meetings, ongoing feedback loops, transparency, and joint accountability can help foster effective collaboration. And activity-based training, pairing, and rotation programs, and training for conflict resolution and growth mindset are other practices leaders can consider as they aim to integrate collaboration into the workplace and work activities.
Creating a culture of performance, purpose, and meaning
Steve Jobs famously said that A players attract other A players. Occasionally, B players may convince a high performer to join the organization, but to consistently acquire and retain top talent, businesses need a supportive, engaging culture. The global CIO survey demonstrated that culture-the organization's deeply rooted beliefs and behaviors-is a key distinguishing factor for digital vanguard organizations, yet many participants in the 2019 Deloitte Global Human Capital Trends Survey rated their organizations only somewhat or not effective on attributes related to culture and experience, including providing meaningful work (37 percent) and maintaining positive work environment (41 percent).

Leaders can nurture and curate a culture to align with desired behaviors and outcomes. For the technology work of the future, cultural attributes such as collaboration, empathy, creativity, and agility likely will be significantly more important than they are today. Increasingly, social purpose and meaning are playing a significant role in organizational culture, due in part to pressure from workers, especially millennials and Generation Z: Forty-two percent of CIOs who participated in one survey say pressure from employees is a major motivator.

As they seek to develop organizational cultures that support their business strategies, leaders should consider whether the current culture, incentives, behaviors, and leadership align with the new model. They can also determine whether certain policies, mandates, or corporate constraints hinder productivity, agility, and growth. For technology, iterative work processes often require integrated and ongoing performance and development conversations to be embedded into the flow of work. Rewards are based on teamwork, the attainment of shared goals, and customer intimacy rather than operational excellence.

3 key implications for the future of work transformation

Financial planning. Changes in technology-and corresponding changes in the work, workforce, and workplace-may have significant financial implications that should be understood early in the process. Engage necessary stakeholders to gain consensus on issues such as capitalization versus the expense model, as well as internal versus external spending.

Ecosystem orchestration. The current procurement mindset often benefits the lowest cost provider, leads to transactional relationships, and binds the organization to multiyear commitments. And as the shelf life of skills moves from a lifetime to a few years, organizations cannot always rely on captive talent to do their work. Leaders are quickly realizing they should reimagine their ecosystems as sources of value cocreation, revenue, and augmentation of internal talent and skills. Businesses are evolving from members of a linear value chain that adds incremental value to participants in a much broader ecosystem of technology disrupters, incubators, startups, business partners, suppliers, and customers that cocreates business solutions, uncovers new opportunities, and delivers competitive advantage. One large distribution company built a platform that allowed real-time information to its suppliers and an integrated portal for its global distribution network that created efficiencies, reduced inventories, and increased profits across the entire ecosystem.

Technology work in the business. Pervasiveness of technology is impacting work outside of traditional boundaries of IT. What might once have been viewed as a traditional business role is now becoming very tech-centric. The impact of the changes in technology work, workforce, and workplace on business roles should also be considered.

Imagine, compose, and activate the future of work

Given the complexity of the converging disciplines, new talent models, spectrum of human-machine collaboration, and other variables in this shift, developing and executing the organization's future of work strategy may seem paralyzing. To help leaders get started, we suggest using a method we've called "Imagine-Compose-Activate."

Instead of getting bogged down in solving an immediate problem, start by imagining the organization's future in the three- to five-year time frame. Imagine the future of work without constraints; restrictions typically evolve over time. If there were no budget, staffing, or other constraints, what would the business look like? How will it drive value and provide meaningful work?

Composing the work and work outcomes can help businesses lay the foundation for work, workforce, and workplace components. Analyze and redesign work, workforce, and workplace options that take advantage of automation, alternative talent sources, and collaborative workplaces.

Finally, activate the future of work by initiating changes to the workforce and workplace and determining how to measure and report outcomes. This includes realigning operating model, culture, talent development, and leadership.

Lessons from leaders

The executives we interviewed provided three overarching lessons to help enable the Imagine-Compose-Activate process.

Zoom out first. Technology leaders are problem-solvers who tend to "zoom in" on problems with the intent of quickly solving them. Instead of narrowing in on and trying to resolve specific pain points related to the future of work, consider first looking at the big picture, holistically taking into account changes in work, workforce, and workplace. "Zooming out" three to five years and envisioning a future without bounds can help leaders imagine and define the art of the possible without the current constraints. This could help leaders get "unstuck" from the present and drive a transformative mindset that could clarify the unrealized potential of work, workforce, and workplace.

Access, curate, and engage talent. The traditional talent management mindset focused on attracting, developing, and retaining needed talent. The evolution of work, workforce, and workplace suggests the Attract-Develop-Retain model may have run its course. Consider instead the Access-Curate-Engage approach, in which organizations access talent on the open continuum, curate consumer-grade learning experiences that can enable technology athletes to build skills in real time, and engage talent by realigning rewards, incentives, and leadership to support and enable idea generation, cocreation, collaboration, accountability, and transparency.

Iterate, deliver, and repeat. We can't emphasize this enough: The future of worktransformation is a journey, not a destination. Continually iterate the work, workforce, and workplace models to account for changing business and technology landscapes. As new technologies and business models emerge, the work of technology will continually change and leaders in technology organizations likely will need to adapt quickly.

Additional key recommendations

Shifts matter: Move from IT capabilities to work outcomes. Technology work has often been traditionally performed by a centralized IT function and "thrown over the wall" to the business to confirm whether promised results were achieved. To kick-start a business mindset change, we purposefully have moved away from the traditional notion of IT capabilities in this report and embraced the term "work outcomes." The concept of work outcomes holds both technology and business resources accountable for product outcomes as well as adjustments and iterations that allow for continuous business value.

Bias toward speed and progress, not perfection. Recognize that speed and time to market are often key to competitiveness and cocreation. Releasing and iterating a minimally viable product based on customer feedback is fast becoming the norm. Technology work of the future is more akin to building speed boats than large naval vessels. Reliability, security, and resilience are still required, but flexibility, agility, and speed typically are more important.

Embrace cocreation at the team, enterprise, and ecosystem levels. The future of work is not a solo journey. Partner with other executive leaders and business and functional executives and equip them with the knowledge and ability to make informed technology decisions. The global CIO survey found that technology leaders who elevate the tech fluency of business counterparts are likely to have deeper and more influential relationships with their peers. The three most important allies for technology leaders on this journey likely will be the finance, HR, and procurement leaders-help them become equally invested and accountable for the outcomes.

Iterate with end-the outcomes-in mind. This journey may be triggered by business reorganization, skills shortage, business realignment, office space redesign, or many other potential causes. Irrespective of its entry point, a business should define work outcomes before trying to transform the workforce or workplace. Jumping ahead to reskilling the workforce or redesigning the workplace without understanding the shift in technology work could create chaos and confusion. After establishing work outcomes, leaders can determine the tools, automation, workforce needs, and how to augment humans with machines. Work outcomes and workforce decisions together can help determine the type of physical workspace, collaboration tools, and culture needed to support the change.

Enable real-time learning. Gone are the days when professionals crafted and perfected their skills over decades, even lifetimes. An average employee may have multiple careers in an organization. To engage and retain high performers, leaders should develop continuous learning programs that provide real-time skills acquisition, on-the-job training, and experience-based rapid knowledge transfer.

Stay informed through tech sensing. The increasing speed of technology change can make it difficult to stay abreast of advances. Technology leaders can keep informed of emerging technology trends and their business implications. Many leverage partner ecosystems to tap into new technologies, while others collaborate with universities and incubation hubs or invest in startups. Knowledge acquired as the result of such "tech sensing" approaches should be disseminated throughout the organization to help increase technology fluency.

Align with purpose. External corporate brand, internal culture, and the technology organization's mission should align to a higher purpose. Top talent often wants to work for companies whose ambition, passion, and purpose rise above economic considerations. They're seeking organizations that believe in and significantly contribute to meaningful causes. Authentically aligning the organization to environmental issues, human development, public health, or other relevant cause that can help bring meaning to work can directly impact talent recruitment.

Tolerate calculated risk. Typically,technology leaders avoid or minimize risk while business leaders seek to maximize value while taking calculated risks-two perspectives that are often at odds. Leaders shaping the future of work in technology can devise ways to consistently understand and agree on risk appetite with key stakeholders and make decisions and course corrections accordingly. Embrace ambiguity, uncertainty, and experimentation and avoid making risk decisions on behalf of the business. Instead, collaborate to make more informed, data-driven decisions.

Think big to create an audacious future. Focusing on the big picture, rather than a single tool or solution, can help leaders take the first steps toward creating the future of work. Foundational change takes time and persistent work across multiple dimensions. Simply reskilling staff, bringing on a new leadership team, or automating existing work likely will not alleviate current challenges. Instead, a holistic plan that employs multiple work, workforce, and workplace strategies has a higher likelihood of success.

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Evolving strategic business imperatives, trends, and disrupters are driving a seismic shift in the way IT organizations operate.

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Technological advances can help or hinder small businesses.

Comstock Images/Comstock/Getty Images

Technological advances happen every day, and business owners such as yourself feel pressured to keep up with the latest technology or risk losing your competitive edge. In business, technological innovation can take many forms, including computerization and automation of necessary systems and processes. Although new technologies can be exciting and alluring, a business owner should be familiar with both the pros and cons of innovation.

Growing Your Markets

One of the main benefits of technology is its ability to help even smaller businesses compete on a global stage. Innovations such as the internet, for example, allow a sole proprietor to offer her products or services to prospects around the world through the use of a website. She can provide detailed product descriptions and photos of her products to provide prospects with all the information they need to make an informed buying decision. Social media vehicles like Facebook and Twitter also allow her to connect with others who may have an interest in her business, without the need for face-to-face interaction.

Reducing Your Costs

Innovation can also help business owners keep costs to a minimum. With the use of automation, a small manufacturer can reduce his dependence on human beings to perform some of the necessary production processes. As a result, the business can reduce employee expenses such as salary, benefits and turnover. Technology can also help to streamline the production process, eliminating costly waste. Implementing a "lean" manufacturing process like Six Sigma, for instance, offers the opportunity to meet customer demand more quickly and efficiently.

Getting Timely Information

A key benefit of automated accounting is the wealth of timely information that's available to the business owner. Using data processed and extracted from your daily transactions, computer software can let you quickly measure the effectiveness of an ad campaign, check if your taxes are current, and know if you're low on critical stock items. Although many small businesses have relatively few transactions and can do their bookkeeping by hand, you can realize substantial gains by investing in a computer and accounting software.

Lowered Worker Morale

While innovative technology may reduce the dependence on a workforce, the flip side is that employees might lose jobs in the process. In the case of a small business owner, this may mean she needs to make a difficult choice between increasing profits or letting go of long-time employees. Even if the implementation does not result in job loss, some employees may have difficulty adapting to the change. There may also be a learning curve when instituting the change, resulting in reduced productivity in the short term. The workforce team as a whole may suffer lowered morale even if the technology affects only a few people.

Set-up Costs

While new technology can result in savings in the long run, you might see a significant upfront expense. A small business owner may not have the resources to purchase a state-of-the art computer system or new machinery, or may need to borrow money to do so. If the new purchase doesn't increase production or reduce expenses over the long haul, it could have a crippling effect on the long-term viability of the operation.

Early Adopter Blues

There's an old saying, "The pioneers take the arrows," which fits well with the tricky relationship between business and tech. In many instances, new technology brings new headaches: software bugs, compatibility issues, and a lack of familiarity by the vendor's support staff. Because of reliability concerns, you find yourself in the situation where your business needs to run on your older technology while the new version is being sorted out.

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Advantages & Disadvantages of Innovative Technology

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Technological advances occur continuously, and businesses often feel the need to implement the latest changes to keep up with the competition. In business, technological innovation can take many forms, including computerization and mechanization of necessary systems and processes. For small business owners, ...

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iii.  Efficiency and Adaptability

To create a well structural, stable, routine in high quantities, quality and at low cost, this is the optimal use of services. But efficiency alone is not enough to meet the global market in this advance technology world. Innovation is the key to adaptability where it requires to look for new technologies, ideas and methods that will improve or change a process routine completely to be compatible with demands of the technological world. Adaptability helps to improve on existing model to meet request from clients.

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ii.  Growing Markets

The ability to help smaller businesses to compete on global stage. Innovations such as the Internet allows a sole proprietor to offer products or services to prospects around the world through the use of a website. Social media such as Facebook, Instagram, Twitter and Skype allowed people to interact with each other without the need of face-to-face meeting.

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What is Digital Inclusion?

"Digital inclusion is the ability of individuals and groups to access and use information and communication technologies." From "Building Digital Communities: A Framework for Action", 2011

To help explain digital inclusion, we've created a Digital Inclusion Infographic.

Why? Access and use of information and communication technologies impacts individuals and the community as a whole. The technology itself is the tool. A digitally inclusive community is important to economic and workforce development, civic participation, education, healthcare, and public safety. More on why digital inclusion is essential.

How? Building a digitally inclusive community requires participation and support from all sectors: libraries, community based organizations, business, government and policy makers. Digital inclusion strategies vary widely. Even projects that seem similar are implemented differently, often to accommodate local populations and utilize existing resources. More on how to increase information technology access and use.

Who? The populations least likely to be online include the less educated, individuals with lower incomes, seniors, and persons with disabilities. More on who is not using the internet and who does not have home broadband service.

Barriers? The most common reasons an individual would not be an internet user and/or have a home broadband service are cost (of the technology and/or the home broadband service), relevance and lack of digital skills. More on barriers to internet use and broadband adoption.

Why Is Digital Inclusion Essential?

"Communications services and technological innovations should be accessible and affordable to all because of the implications they have for sustained economic development. The three elements supporting the success of technology in cities are broadband (commonly understood as high-speed Internet) access, broadband adoption (understanding how it can be used) and the effective application of it." National League of Cities, May 2013

"After controlling for demographic and geographic factors, Internet use among
adults ages 25 and older was associated with a 6 percentage point increase in probability of employment, relative to individuals who were not online. Furthermore, living in a household where someone goes online from home - regardless of whether the individual personally does so or not - was associated with a 3 percentage point increase in the probability of having a job." Exploring the Digital Nation: America's Emerging Online Experience, a report of the National Telecommunications and Information Administration (June 2013, p.7.)

In 2009, PricewaterhouseCoopers created a report for the Champion for Digital Inclusion to assess the potential economic benefits of digital inclusion in the UK. From Champion for Digital Inclusion: The Economic Case for Digital Inclusion (October 2009):

"We have examined four main areas of potential economic benefit from enhanced digital inclusion:

Improved education and employment outcomes, for example as individuals enhance their qualifications and this improves their earnings and/or their probability of finding employment;

Improved health and well being outcomes, for example through access to improved health information and health services;

Efficiency savings for public service providers enabled by greater use of online information and

Potential benefits for consumers able to purchase a wider range of products at lower prices."

From National Broadband Plan: Connecting America, 2010:

"A high-performance America cannot stand by as other countries charge into the digital era. In the country where the Internet was born, we cannot watch passively while other nations lead the world in its utilization. We should be the leading exporter of broadband technology-high-value goods and services that drive enduring economic growth and job creation. And we should be the leading user of broadband-enabled technologies that help businesses increase their productivity, help government improve its openness and efficiency, and give consumers new ways to communicate, work and entertain themselves."

How Can We Increase Digital Inclusion?

Technology and internet access strategies for individuals include (but are not limited to!):

Public access computers.

Computers accessible to defined populations (such as residents of a housing complex).

Free wifi hotspots.

Low cost options for home computer purchasing.

Partnering with broadband providers to offer low cost broadband.

Extending broadband service into rural areas lacking reasonable cost high speed broadband.

Technology and internet use strategies for individuals include (but are not limited to!):

Digital literacy and other technology training in trusted and comfortable locations (libraries, community centers, churches, schools, recreation centers, senior centers, etc) supported by trained computer instructors, librarians and lab monitors.

Training that focuses on the outcome (such as job searching) rather than the technology. This approach is often referred to as project based learning.

Youth digital media projects guiding young people toward professional technology use and civic engagement.

Technology training and guidance for small businesses.

Accessibility technology and strategies for persons with disabilities.

Awareness campaigns highlighting the relevancy of broadband for target populations.

Technology fairs focused on community members sharing and teaching each other.

Civic engagement training that teaches community members how to engage online with government.

The following terms are often used to describe digital inclusion efforts:

Broadband Adoption - The national Broadband Plan defines the barriers of broadband adoption as cost, digital literacy and relevance. National Broadband Plan: Connecting America, 2010. The NTIA Broadband Adoption Toolkit, released May 2013, organizes broadband adoption strategies into Awareness & Outreach, Home Computer & Broadband Service, Training: Planning & Delivery, and Training: Curriculum & Relevant Content.

Digital Literacy - "Digital literacy is the ability to use information and communication technologies to find, evaluate, create, and communicate information; it requires both technical and cognitive skills." From Digital Literacy Task Force of ALA, 2011

Community Technology Centers (CTCs) or Public Computing Centers (PCCs) - computer labs providing free access to technology and technology training. Some locations also provide free wifi. Outside of the United States, they are referred to as telecentres.

Who is Not Online?

From Who's Not Online and Why, report of the Pew Internet & American Life Project (September 25, 2013):

15% of all Americans do not use the Internet.

41% of Americans who do not have a high school diploman do not use the Internet.

22% of Americans with only a high school diploma do not use the Internet.

44% of Americans over the age of 65 do not use the Internet.

24% of Americans with a household income of less than $30,000 do not use the Internet.

24% of Hispanic Americans (English and Spanish speaking) do not use the Internet.

From Exploring the Digital Nation: America's Emerging Online Experience, a report of the National Telecommunications and Information Administration (June 2013):

In 2011, less than a quarter (24 percent) of African American rural
households headed by someone without a high school diploma said that they owned a computer, compared to 67 percent of all rural households, and 76 percent of all U.S. households. Concerning broadband service, only 16 percent of African American rural households headed by someone without a high school diploma used high-speed Internet at home. (p.43)
From Digital Cities, Mossberger, K., Tolbert, C. and Franko, W. (2013), New York, NY: Oxford University Press:

"Barriers to technology access vary across neighborhood contexts and vary across different demographic groups." (p. 185)

Of Chicago adult residents, "Older individuals and those with more income are more likely to say they are not interested as reasons for not using the Internet at home." (p. 176)

Of Chicago adult residents, "the poor, Latinos, females, and those with less education are significantly more likely to cite affordability as the main reason for not having the Internet at home." (p. 176)

Barriers to Internet Use and Home Adoption

From Who's Not Online and Why, report of the Pew Internet & American Life Project (September 25, 2013):

34% of non-internet users think the internet is just not relevant to them, saying they are not interested, do not want to use it, or have no need for it.

32% of non-internet users cite reasons tied to their sense that the internet is not very easy to use. These non-users say it is difficult or frustrating to go online, they are physically unable, or they are worried about other issues such as spam, spyware, and hackers. This figure is considerably higher than in earlier surveys.

19% of non-internet users cite the expense of owning a computer or paying for an internet connection.

7% of non-users cited a physical lack of availability or access to the internet.

From Digital Cities, Mossberger, K., Tolbert, C. and Franko, W. (2013), New York, NY: Oxford University Press (p. 176):

Older individuals and those with more income are more likely to say they are not interested as reasons for not using the Internet at home, controlling for other factors.

However, the poor, Latinos, females, and those with less education are significantly more likely to cite affordability as the main reason for not having the Internet at home.

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"Digital inclusion is the ability of individuals and groups to access and use information and communication technologies." From "Building Digital Communities: A Framework for Action", 2011 To help explain digital inclusion, we've created a Digital Inclusion Infographic. Why? Access and use of information and communication technologies impacts individuals and the community as a whole.

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i.  Reducing Costs

Innovation is cost effective through the rapid growth of technologies with the use of ICT. A small manufacturer can reduce the independency on human beings to perform some necessary process of a product. Technology helps to reduce employee expenses such as salary, benefits, turnover and eliminate costly waste.

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ii.  Multiple Devices Support

ICT connection should be optimized to function across different devices. So, it is important to find solutions to work across different type of device for simplicity.

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The web is taking over the way we do things, from bank transactions, to shopping, to paying utility bills and council tax; it touches most people every single day (H. Stephenson, 2015). Technological advances happen and business owners feel pressured and stressful to keep up with the latest technology or risk in losing in the competitive edge.

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The methodology that used in this project paper is Qualitative method. This methodologyused to understand the concepts and thoughts of the project topic (Streefkerk., 2019). The related information is collected and gathered from internet sources and in-depth study about the source. The information is curated in Padlet which the link is shown in Appendix.

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i.  Seamless Onboarding Experience

Connection is taken into concern as devices need to speak to each other. It should be easy to find a new connected device by just tapping on the device that appear in the interface.

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iii. User friendly system

Although we're talking about complex systems here, effective ICT should probably be managed by just one user-friendly control center (J. Boitnitt, 2015). ICT plays a huge role to transform the way people experience urban living, from their homes, to the office and any other places to meet the demands of the population of growing urban for limited city resources.