Breakthrough inquiry by INSEAD eLab scholars reveals how mobile computing, cloud services and online collaboration tools are improving productivity, but not for everyone

INSEAD, the international business school, released a research report in collaboration with AT&T, which shows that emerging technologies, such as cloud services, mobility and online collaboration, are dramatically improving corporate competitiveness. These findings, for the first time, offer concrete evidence of the connection between such innovation and enterprise-wide benefits.

The research team found that significant investments in new information technologies can double their likelihood of being highly competitive – from 35% to 74% – and outperform their peers.

However, the researchers found that merely investing in new technologies is not enough to guarantee improved competitiveness. In fact, some heavy investors in technology are seeing no improvement in their competitiveness at all, and are performing the same as companies with low or no investment. The most critical factor in making technology investments succeed is for organisations to have other strong and complementary business resources in place.

The research effort was conducted by INSEAD’s eLab, a centre of academic excellence dedicated to studying the impact of digital technology and global innovation on leadership and the strategic development of organisations and countries.

‘Our findings show clearly the direct link between specific technology investments and improved organisational performance when these investments are made carefully,’ said Theodoros Evgeniou, Associate Professor of Decision Sciences and Technology management at INSEAD and academic director of eLab. ‘We have long known that some technology investments succeed and some fail, but we have never been able to pinpoint why. We are excited by this research because it provides new data that can help business leaders decide how to invest in technology.’

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Global data leads to robust research insights

The INSEAD and AT&T research analysis is drawn from detailed responses from senior executives at 225 multinational companies across Europe, Asia Pacific and North America.

The data shows that in Asia-Pacific, firms are investing a much greater percentage of their information and communications technology (ICT) budgets in new technology, and expect to grow those investments more quickly, compared to all other regions. These companies report that:

• Investment in mobility will grow from 17% three years ago to 31% two years from now (82% growth);
• Cloud will more than double from 12% to 30% (150% growth); and
• Collaboration tools will increase from 18% to 26% (44% growth).

In Europe by contrast, investment in new technologies will accelerate over the next two years also, though not as significant as in Asia. Survey data shows that as a percentage of the total European ICT budget:

• Investment in mobility will increase from 12% three years ago to 20% two years from now (66% growth)
• Investment in cloud based services will almost double from 12% to 23% (96% growth); and
• Investment in collaboration tools will rise slightly from 16% to 17%

Andrew Edison, Regional Vice President for EMEA, AT&T said: ‘Increasing productivity is one of the primary challenges facing European companies today. New technologies like cloud offer great opportunities to do this, which some high performers are demonstrating. However, simply adopting the newest technologies is not the answer, and is in fact a great risk. They must sit on top of mature, standardised platforms. Being agile and competitive doesn’t mean being the quickest, it means always being able to be quick. The secret is a mature platform and avoiding the creation of ‘infrastructure spaghetti’ in the rush to adopt the latest tools.”

Technology alone is not the answer

Indeed, the research team’s most important finding shows that when firms have strong business enablers and invest more in new technology, the probability of becoming highly competitive can double – from 35% to 74%. Conversely, when firms with weak business resources make significant investments in new technology, their likelihood of better performance does not increase at all; their investment in new technology is at great risk of being completely wasted. Professor Evgeniou said that these facts present critical insight for organisational leaders and that CEOs must ask a very simple question before adopting any new technology – Is our organisation and our digitised platform ready?

INSEAD eLab Associate Director Nils Fonstad, concurred : “Any firm that is investing in technology to enhance agility would do well to first assess the strength of their key business enablers. In the process of identifying what distinguishes high performing firms from others in terms of their investments in ICT and key business enablers, we have identified both the benefits of having strong business enablers and the risks of having weak ones.”

As a central part of the research, INSEAD eLab scholars identified the following key business enablers vital to success.

1. Business involvement in technology investment and management decisions
2. Access to technology-focused talent
3. Access to management-focused talent, and
4. Benefit of a mature digitised platform – the extent to which the technology, business process and data components of a company are standardized, shared and integrated. This is sometimes referred to as a firm’s “digital maturity”.

The research clearly shows that the most important resource by far is digital maturity. Firms that have mature digitised platforms and then invest in new technology significantly increase the organisation’s likelihood of being highly competitively agile, compared to firms with immature digitized platforms that make similar investments.

Establishing this mature platform is critical for global competition, particularly in Europe. European companies are spending less on new technology, but have the opportunity to leverage their past investments to make every new investment create optimal impact. In Asia, companies must be careful not to rush too quickly to adopt new technologies, and make sure their platforms are ready to make best use of these tools.

The research provides valuable real-world insights and comparative metrics with implication for ongoing policy innovation. In response to the findings, John Higgins, Director General of Digital Europe, a leading technology industry advocate, said: “Europe is letting its advantage in technology driven productivity erode. It is investing less, and growing that investment slower than places like Asia. European businesses must leverage their years of investment in technology to ensure their digital platforms are sufficiently mature, so they make every investment count and stay competitive in this tough environment. The technology industry is proving that it can make a serious difference to productivity, but technology must work with the rest of the business if it is to be successful.”

The INSEAD-AT&T research collaboration also provides clear messages for governments and policy makers. European policy-makers can help businesses mature their digitised platforms more rapidly by creating the right regulatory environment that facilitates the storage and flow of data in a stable, seamless and secure way. They can also help businesses define, access and foster talent to make the most of their investments in technology by coordinating industry and universities to ensure demand for key skills is clearly matched with supply.

Neelie Kroes, Vice President of the European Commission said: “To emerge from economic crisis, companies and governments need to identify how technology can be most productive; and how it can best help Europe compete in a global race. The fact is, we need to fully understand what emerging technologies mean for performance; and how to ensure that they bring most return for your euro. At the moment, it is more important than ever to get the most out of investment: whether public or private. So we need not just to make judicious decisions about new technologies, but also to build the environment where investment has the best chance of success.”

 

The full report and supporting information is available at: www.corp.att.com/bemoreproductive