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Companies Must Jump On 'Tech Treadmill' To Succeed In Today's World

Includes: T
by: John M. Mason
John M. Mason
Banks, long-term horizon

Just adopting modern technology does not make a legacy corporation a "new" Modern Corporation.

In today's world, adopting modern technology means that a company must constantly innovate and bring new features and constant upgrades to the technology, a never-ending process.

This is a reality of today's technological environment and to be competitive, corporations must accept and incorporate this process into their basic operating principles.

I was a part of an “Innovation and Entrepreneurship” conference this past weekend. After what I went through over the weekend it was very interesting to me to see the Wall Street Journal article by Andy Kessler on Monday morning titled “Tech Treadmill Wears Firms Out.”

Mr. Kessler writes, “The problem is that adopting a useful technology doesn’t mean your advantage will last.”

In fact, the battle to maintain supremacy is just beginning when you adopt a useful technology.

And, that is what Mr. Kessler’s article is all about: How corporations keeps up with new technology.

“When a company adopts a new technology, it can’t set it and forget it.”

“Staying ahead requires new features and constant upgrades.”

So, Mr. Kessler examines which companies are spending to keep up - Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB).

And, which companies are not spending to keep up - Disney (NYSE:DIS) and AT&T (NYSE:T).

So, what is being taught to the newbies? Those interested in starting up a company and building it into something.

Well, the people learning about entrepreneurship are being informed that nothing is constant.

New entrepreneurs are being told that nothing is “final,” nothing is “set” and nothing is “it.”

Everything must be flexible and adaptable to change.

These individuals are learning that you do not have to have a “finished” and “complete” concept before you bring a product to market.

Oh, yes, what is brought to market must solve the market problem you are attempting to correct, but it does not have to be “complete” in the sense of incorporating every solution, resolving the problem right now or “finished” in the sense that nothing else ever needs to be done to the product.

What the entrepreneur is being coached to do is to create something workable that will help the consumer deal with something that, right now, is not fully satisfying to the customer or creates something that fills the hole created by a “missing market.”

Then, the entrepreneur is told, be prepared to bring on the next improvement, the next version, within a given amount of time.

And, then be ready to bring on the next improvement, the next version, by a given future date.

Innovation is never ceasing.

And, learning is the foundation of all this movement.

The entrepreneur is being taught that life is a process of learning and that learning never stops.

You cannot rest on your laurels.

If you do, you are dust!

I have always responded to questions about how quickly will a new technology be integrated into society and my answer has always been this: What are the young teenagers doing? That’s your future market in technology, not what the current twenty-something crew is doing.

Here, corporations must face the reality that the “crowd” coming up is being trained to never stand still when it comes to technology.

This is a growing part of the “new” Modern Corporation.

The legacy group?

Well, Mr. Kessler mentions AT&T as a member of the “legacy” group. He states in his article that AT&T does not have the R&D budget to lead. AT&T does not have “the margin structure to afford yearly costs.” AT&T may have a “gross margin” that is “not bad” but “most will be eaten up by its 5G rollout.”

Here, again, is a mis-connection between what it means to be a “new” Modern Corporation versus the “legacy” companies that are trying to remain competitive against this new form of competition.

As Mr. Kessler says, “Today every company wants to reinvent itself as a tech firm….”

However, “Tech investing used to be about chips and software….”

Now, to be competitive on the tech side, companies must “remaster or die.”

What is the upcoming generation learning? Change takes place regularly and it takes place universally.

Let me just add that there are hundreds of classes and conferences and conventions that are talking about these things. And, consequently, there are hundreds of young people and young entrepreneurs that are learning these lessons.

Mr. Kessler is “spot on” in discussing this corporate dilemma.

But it is the reality of the world today.

Corporate executives need to absorb this lesson.

Investors also need to absorb this lesson, for the companies they invest in must adapt to this reality, or their performance will deteriorate over time.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.