Capital vs. Consciousness: Reducing the Costs of Staying Current

Engine or anchor: holding onto legacy technology to maximize investment can cost you the future.

Let’s say you’re a leader who’s deeply committed to keeping up with the times. You’re far-sighted and know that seemingly inconsequential players at the edge of your market could be the seeds of disruption that some day will threaten your existence.

So you invest in equipping your facilities and people with cutting-edge tools — whether that’s robotic assembly lines or Blackberries. And everything’s going fine, until one day, far sooner than you imagined, there’s a new technology out there — those awesome Blackberries you bought by the hundreds in January 2007 look weak in July when the iPhone comes out; that awesome new CNC milling machine now looks ancient compared to a 3-D printer.

You know you have to upgrade, but the technology you just bought isn’t even fully depreciated. Or, worse, the old equipment has been written off, but it still works and you’re making a ton of money from it; buying new stuff will crush those cushy profit margins you’ve grown used to.

Willy C Shih calls this the “death grip of legacy technology.” In his latest Harvard Business Review article, Shih outlines the many reasons leaders are held hostage by their technology.

The basic problem: it’s expensive to upgrade technology. For the accountants – and, more importantly, the shareholders – there’s a fine line between investing in technology and wasting money. (Just look at the pounding Amazon regularly takes from the investment community for its continuous spending on the cutting edge.) Oh, and what if you get it wrong and invest in dead-end technology?

Islands of the Future

One of the problems here is that leaders get blinded by the scope of investment — modern organizations are all about scale, and bringing in new equipment on a large scale is a big and expensive bet.

So instead of considering physical plant investment in terms of waves washing through the entire enterprise, what about looking at islands of the future?

Pick units within larger pieces of the organization and use them as test pilots. This approach costs less and allows tinkering without endangering the whole enterprise.

Starting small also allows these islands of the future to go farther with their experimentation — the risk of failure is lower, so they can afford to take more risks and find the limits of and new applications for the technology.

The important thing, though, is to make sure these islands of the future are not marginalized. They must be built as useful parts of the main show. This insures everyone is committed to their success, and also makes for easier knowledge transfer from the test pilots to the main production floor.

Noodling on something interesting at the edges of the enterprise will never be more than a sideshow; forking a critical function to create an innovative alternative makes a compelling example for change.

Upgrade the Humans and the Technology

As expensive and important as technology is to business success, it’s really only game stakes in a disruptive economy.

In his HBR article, Shih talks about technological changes that are either “competency-enhancing or competency-destroying.” Shih writes:

“The latter are troublesome because the knowledge base and skills required to operate in the new realm are so fundamentally different. From the perspective of how the resources in an organization are deployed and how its processes are organized, this makes sense. The more fundamental the break from the previous technology, the greater the switching costs.”

But there’s more than just the cost of training workers to use the new technology. The fundamental issue is changing their consciousness to match the new technology, and the new reality. Putting in cutting-edge equipment and training people to use it won’t modernize the organization if the people don’t upgrade how they see themselves in the new environment.

Even after Microsoft invested billions in mobile, the company and its people still saw themselves in the PC-bound software business.

I once worked with a senior executive who just had to be one of the first to get an iPad. Our accountants were stingy, and so getting the company to issue her one was quite a feat of bureaucratic maneuvering.

Her real problem, though, was figuring out what it was for. Soon after she received the iPad, I found her at her desk poring over a thick notebook — she had ordered her assistant to find an instruction book for the thing and print it out for her; the idea of the iPad as a search and reading device had never occurred to her. Clearly this was someone who no amount of cutting-edge technology was going to transform.

What Defines You?

It’s in this realm, the place where humans meet technology, that questions of self-image, emotion and consciousness matter most. Questions like:

• Do your people feel threatened or empowered by the new technology?
• Do your production workers define themselves by the machines they operate or the things they produce? (an especially big question if you work with unions, which largely define themselves by tools instead of products)
• Does your company define itself by its products or by the way it affects its customers (do you make typewriters, or do you give people tools for expression?)
• Do front-line workers feel safe telling their bosses the truth (such as, the new tools don’t work as expected)
• Are the leaders willing to question their decisions (maybe these new tools aren’t as good as I thought)

So in addition to test piloting new technology, islands of the future are places where people can redefine themselves and their relationship with their tools and their products. This is the real work of staying ahead of the wave of change.

Tools for Transformation

For a great collection of tools to create a learning mindset for keeping up with change, check out the Conscious Leadership Group, one of the premier organizations addressing consciousness in the workplace (I’m a founding member).

Photo: Flickr