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How Technology Is Adding and Subtracting Organizational Friction

Technology is infused into every organization’s DNA. In many cases, technology has transformed organizations. In the healthcare sector, for example, robotic technologies have improved diagnostic capabilities, as well as our ability to explore and identify new drug candidates.

 

Yet in many cases, technology adds complexity and organizational friction. In collaborating with Bob Sutton and Huggy Rao at Stanford University as part of the Friction Project, we’ve developed key insights about productive and destructive friction in organizations. Our aim is to understand the causes and cures for destructive organizational friction. In the case of technology, we’ve learned that too many organizations find themselves overwhelmed due to a (largely self-inflicted) deluge of hardware and software tools. Case in point: according to Mary Meeker’s 2017 Internet Trends report, the average enterprise uses 91 different marketing cloud services. Oftentimes, technologies are redundant, obsolete, poorly integrated or, worse yet, rejected by employees.

 

An organization’s technology mix offers a powerful window into the inner workings of an organization. It can reveal an organization’s culture, bias with respect to risk, and receptivity to innovation. Leveraging iDatalabs’ database and our AI-generated technographic attributes, we’ve been able to draw back the curtain and gain a deep understanding of organizations. This omniscience, of sorts, is powerful.

 

The Distinct Technology Stacks of Innovators

Consider the current cohort of Fortune 500 organizations. The most innovative Fortune 500 organizations (as measured by BCG’s annual ranking) have a very distinct technology mix. They are much more dependent upon cloud technologies, as compared to on-premise technologies. Innovators exhibit, on average, a 51% higher cloud adoption score (our in-house attribute that assesses an organization’s propensity to adopt cloud technologies), as compared to the other companies. In terms of specific products, innovators are more likely than other organizations in the cohort to use ServiceNow (95% vs. 55%), Windows Azure (95% vs. 66%), and Amazon EC2 (91% vs. 50%).

 

It’s clear how technology has impacted innovators’ efforts. Thanks to the transition from clunky, legacy, on-premise systems to nimble cloud solutions, these companies have reduced operating costs, improved network performance, and decreased data latency. They’ve become more agile and have been able to scale their businesses. Their innovative potential and output have increased by leaps and bounds.

 

Technology in the Airline Sector

In analyzing Fortune 500 companies according to their industry or sector cohorts, technology is especially illustrative. Consider, for example, the airline industry. One need not be a frequent flyer to recognize that airline experiences differ markedly. I, for one, have experienced more than my fair share of delayed United Airlines flights. In examining the airlines included in the list of Fortune 500 companies–the likes of United, JetBlue, Delta, American, and Southwest Airlines–it becomes clear that each company’s technology footprint is related to its corporate reputation and performance.

 

On one hand, many airlines have invested heavily in similar technologies. The aforementioned five airlines are all, for example, using Amazon AWS, Amazon EC2, Windows Azure, and Salesforce Force.com. What sets these airlines apart, however, is the cohesiveness of the technologies they use and how much reliance is placed on them. Some airlines–typically those with more impressive growth rates–have well-integrated technology stacks (as evidenced by a lack of overlap among similar technologies). Others–typically the ones we read about in the context of airline fiascos–are relying on a hodgepodge of overlapping technologies, an organizational faux pas that fuels friction.

 

Technology as a Truth Serum

One airline that is notorious for poor customer service and has been a victim of poor recent market performance is currently being touted by IBM as a reference customer. This airline has adopted a specific IBM technology. A top executive at the airline has publicly declared that the investment was part of a competitive evaluation process, and was expected to be key to the airline’s growth strategy moving forward.

 

iDatalabs’ technology data reveals the truth. Not only has this airline shelved the IBM technology, it has extensively been using an alternative technology that directly competes with IBM’s technology. The leader’s apparent reality distortion field is troubling and cause for concern. It’s this type of disconnect that fuels organizational friction. How can this airline hope to implement an effective technology strategy when its key leaders have an abstracted reality of, don’t care about, or are falsifying which technologies its employees are using as part of their daily workflows?

 

Technology As a Predictor of Innovation and Performance

When we look at airlines that are renowned for customer service and that demonstrate an ability to consistently innovate to align with customers’ needs and expectations, we inevitably see technology stacks that are well integrated and organizations that are more cohesive. Companies such as JetBlue, which recently launched a venture capital arm, JetBlue Ventures, that aims to invest in technology startups in the travel and hospitality industry, have well-aligned stacks. JetBlue Ventures’ website explains its mission: “While we think about today’s business, we’re also looking beyond the horizon. How can we make the entire travel experience enjoyable, effortless and efficient, now and in 10 years?”

 

This mission is readily evident in JetBlue’s technology stack. The airline has adopted technologies that are empowering it to be more nimble and innovative. For example, it is relying heavily on Salesforce’s Heroku. Heroku is key to Salesforce’s mission to empower innovation inside of companies. Salesforce’s website explains, “From day one, our focus has been on delivering innovative tools so developers can put their energy into building great apps.” A former Google App Engine software developer confirms, “Heroku is the new Google App Engine. You can quickly build a new project. It’s up to date on the new hot technologies. It’s used by startups today as well as big companies that want to be innovative.”

 

Our data reveal that high-performing, innovative airlines are much more likely than their lower-performing counterparts to invest in specific providers of hardware and software. They are, for example, more likely to purchase cloud-monitoring technologies such as AWS CloudWatch to monitor and assess their cloud-technology usage. Comparatively speaking, they are also more in tune with their organizations’ technology usages. As well, they are more concerned about implementing robust technologies that align with customers’ needs. Extensive use of such technologies affords them a powerful edge in terms of ensuring their websites and apps are always online and in terms of prioritizing customer security. It’s not too surprising that two of the airlines with the lowest customer service rankings on the current Fortune 500 list have failed to implement a single cloud-monitoring technology. By doing so, they’ve in essence deprioritized the customer experience.

 

Technology can function as an immense source of cohesiveness and can cure organizational friction. It can also serve as a debilitating source of friction. One can gain tremendous insight into an organization’s health by analyzing its technology stack. By all accounts, organizations are increasingly wearing their technologies on their sleeves. We should watch out for the ones with highly dysfunctional, albeit expensive, hodgepodges of technologies.

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