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Many of the most consequential investment decisions facing CEOs today are technology-related. That wasn’t the case a few years ago. But now every company is in effect a technology company, and every CEO a tech CEO. With every major technology choice representing a vital business decision, “good enough” decisions are anything but.
That’s what we are finding as we continue to analyze the technology decisions of more than 8,300 companies across 20 industries in 20 countries, in what we believe is the largest study to date of enterprise systems. This work also includes responses from nearly 900 CEOs across the globe.
Our initial comparisons found that the top 10% of these companies in terms of their levels of technology adoption, technology penetration, and organizational change are achieving levels of revenue growth that are double those of the bottom 25%, which constitute the technology laggards. These leaders also grow revenues more than 50% faster than the middle 20% of the companies we studied.
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Further in-depth analysis of the data, the full results of which we released at the 50th World Economic Forum annual meeting earlier this week, indicates why: At critical stages of systems evolution, the 10% of companies that lead the way boldly choose the most challenging, but most rewarding, of the technology options typically available. In contrast, laggards fail to achieve full value from their investments in new technology because they make defensible but suboptimal decisions that inhibit their ability to share and scale technology-driven innovation across business units and processes.
Tempting Solutions Yield Mediocre Returns
Innovating at scale is difficult. Consider a decades-old media giant that operates across three continents. Rapid changes in its competitive landscape, consumer demands, and regulation have forced the company to quickly adopt new technology throughout the enterprise. Often, these technology decisions have been relegated to business unit, product, or geography heads.
This approach seems reasonable. Allowing different parts of the organization to customize and develop their own systems speeds up decision-making. Individual decisions about technology are made carefully and appear defensible. But this results in highly customized systems that are deployed in isolated pockets of the organization.
In an era of platforms that connect people with technologies and systems, this sort of approach is no longer tenable. Over time, updating and modifying such systems becomes increasingly difficult, precisely because of how customized they have become.