Memo to boards: the internet is staying
Let’s be clear on one point: the internet changes everything. It’s changed how we experience entertainment, news and culture; it’s changed our social and family lives, how we work and even how we engage in war and politics.
So why have so many of the Fortune 500 and FTSE 100 failed to adjust fully? Why are there so few technology leaders on their boards and executive teams? Why are there only four chief technology officers on the boards of the FTSE 100?
You would think big business would be first out of the gate. Boston Consulting Group has predicted that by 2016 the internet economy will be worth $4.2tn in the G20 alone and in the UK already accounts for more than 10 per cent of GDP, making it more material to the economy than health, education and construction.
Meanwhile, in less than five years the world’s networked population will have doubled. Regulation allowing, there will be 5.6bn with smartphones able to talk, learn, buy and sell from anywhere.
This is not 2000. This is no longer a rehearsal, the internet is now the main event. For businesses in media, retail, travel and telecoms, the changes have already been profound. But it is starting to have an impact on every sector and new leaders are emerging who have exploited new technologies and distribution platforms to save money and deliver more value to customers.
We all know the tales of icons such as Blockbuster, Kodak and even Nokia who were crushed by major shifts in technology. But the problem is not isolated any more and research shows the average company lifespan on the S&P 500 has gone from 61 years in 1958 to less than 18.
We seem to be at a point of profound transition, where we need to stop thinking of the internet or technology as discrete sectors or areas of operational expertise.
Thriving “technology” companies such as Apple, Amazon and Google have not remained in their sectors: they have crossed borders and used advanced technologies, and the law of the network, to invade and often dominate unwitting incumbents.
Every single employee at these companies embraces technology, seeing it as fundamental to growth and sustainability – and if there is any fear, it is the paranoia that someone in a garage is cooking up a breakthrough to threaten their lead.
So why have so few big businesses and governments been able to embrace technology in a similar way? There is certainly no shortage of fear and anxiety. So successful are large IT suppliers and consulting firms at scaring governments, boards and CEOs that in the UK alone the public sector was spending £16bn a year on IT and the FTSE 100 more than £40bn.
But these fears are not something that can be outsourced any more. Marketing, sales, finance, operations and design are also now fundamental customers of technology. It is no longer acceptable to close your eyes and hand over to IBM or Oracle.
Of course you should get help and support, but the challenges and opportunities presented by the internet are too fundamental for organisations not to take ownership and create cultures where any fear of technology is constructive not paralysing and is tempered by the opportunity to reinvent the status quo.
This does not have to be scary. Across the world, governments and companies are using their mastery of technology and the internet to reimagine their scope of operations and the role they can play in the networked economy.
Just think: if you have a local or national news business, such as the Guardian or the Mail, you can now think of building an international one. If you have ambition, like Asos, you can build a world-leading fashion business from a central distribution centre and a 24-hour customer care office. If you have a peerless digital infrastructure like Estonia, you can start thinking of expanding your digital borders well beyond your territorial footprint.
Joi Ito, director of the MIT Media Lab, said it best: “The internet is not a technology, it’s a belief system.”
What if big companies and governments could fully internalise this notion? Just in the UK, where the FTSE 100 employs more than 6m people and accounts for £1.8tn in market value, the potential is both frightening and exciting. Just how it should be.
This article was originally published in the Financial Times on Aug 5, 2014.