New technologies emerge by the day. Investing in everything, even all the ones which become popular is foolhardy for any business seeking profitability. Enterprises able to zero in on emerging technologies that deliver real value get first-mover advantage. Such new technology could lower cost, improve efficiency, deepen insights, or unlock new opportunities. 

This IT blog gives you five tips to vet the business value of emerging technologies.

1. Undertake Cost-Benefit Analysis

There is no point in embracing a new technology if it costs more than the savings it delivers or does not deliver benefits to recoup the investment.

Undertaking the cost-benefit analysis of new technology is tricky. New technology does not have a track record. As such, it is beyond conventional financial metrics such as internal rate of return and net present value.

Pinpoint the business problem. Understand how new technology will solve the problem differently. Quantify the difference, and compare it with the cost of the new technology.

The trick is to capture the hidden costs. Account for the unquantifiable benefits of the new technology. Consider licensing costs, the total cost of ownership, cost of support, and every other conceivable cost.

Evaluate the cost of change. Many enterprises disregard or underestimate the cost of changing over to the new technology. They do not estimate the disruption caused by the learning curve of the new technology, cost of training, and other invisible factors. Likewise, the cost-benefit analysis may not consider agility or accelerated time-to-market.

2. Identify the Business Value

Most new technology comes with hype. The promoters position it at a panacea for many problems. This may be true in theory. But the technology may not have matured enough to address the subtle workflow issues associated with the problem.

Evaluate the technology from the business perspective rather than the technological perspective.

Revisit the SWOT analysis of the enterprise. Consider the challenges faced by the enterprise, and the opportunities it expects. Identify the strengths and weaknesses. See how the new technology adds to the strength, helps seize opportunities, overcomes challenges, or removes weakness. Those who make informed decisions and reduce uncertainty get it right.

Several enterprises have migrated off the cloud after discovering the cloud provided neither the flexibility nor the scalability they needed. In 2008, Netflix’s migration to the cloud went wrong, as it was not attuned to the demands of its new streaming service. The company has to redo the architecture and migrate to AWS.

3. Seek Advice and Support

Any technology adoption is only as successful as the customers and other stakeholders allow it to be. Instances abound where the end-users have sabotaged new systems thrust upon them by the management.

Refer to industry experts. Experts unlock valuable insights on opportunities and tips on avoidable pitfalls. Browse through research and literature on similar attempts.

Seek support and advice from all sources, to understand the mind of the customer and other affected stakeholders. Involve business managers, line staff, and end-users in the evaluation. Conduct customer surveys and take feedback on what they expect better.

Understand the disruption the emerging technologies will bring on customers, employees, and others. Check if support will mitigate the disruption, and if so, the cost of such support. If the technology will force a permanent change, understand the true level of such costs.

In 2015, Myntra, one of India’s e-tailer closed its website and became an app-only platform. The move failed spectacularly. The parent company, Flipkart abandoned its move to become app-only and even Myntra reopened its e-commerce website. Flipkart lost out to Amazon as India’s leading e-commerce player. The cause for the failure was the inability to understand what customers want.

4. Assess Compatibility and Interoperability

Many enterprises underestimate compatibility issues related to emerging technologies.

Unless the enterprise is going for a total overhaul of its systems, interoperability with existing technologies is a must. The cost to run disparate systems may be higher than the benefits brought about by the new technology. For instance, integrating machine learning to a legacy system requires considerable work, and is costly.

The lack of backward compatibility in the new technology may make it a non-starter. For instance, the investment in a state-of-art social media analytics technology will be a write-off if it cannot access an existing database.

Most enterprises underestimate the work it takes to get new technology up and running.

5. Go for a Pilot Test

Emerging technologies will always have some level of uncertainty. Implement a pilot test or proof-of-concept in a near-production or actual-production environment. This offers a first-hand understanding of how it works, and how it lives up to its claims in solving the stated business problem.

Put in place the proof-of-concept iteratively. Plot the most valuable use case and add functions to it. Launch a full-scale rollout only when the pilot test or proof-of-concept ticks all the boxes. Even if these tests do not work as expected, it will adjust expectations, allowing for a rollout with realistic ambitions.

In 2018, TSB, the UK based bank suffered a disaster when migrating from legacy apps to the cloud. The move locked customers out of their accounts and compromised data. The new bank had sped up the roll-out of the new system, without adequate testing, a prototype or proof of concept. The fiasco incurred TSB £150 as increased costs, fines, compensation to customers, and lost business. The cost for making the technical fixes and cleaning up the data mess was much more.

In the past, when the competition was limited, and VC’s poured in easy money, many companies could afford costly gambles. In today’s challenging and cash-strapped business environment, fewer enterprises can take such a route. Investors, regulators and other stakeholders now demand a sound analysis of risk and value. The route to competitive advantage lies in following the steps mentioned in this blog.