Photo credit: Ben Mack
The technology industry is performing well, with major players reporting strong financial performances. The major US companies are thriving, some of the large Chinese firms are growing internationally, and startups are receiving funding. The future looks bright thanks to the prospects for growth in such technologies as the Internet of Things (IoT, the networking of connected devices), cloud computing, advanced data analytics, artificial intelligence, machine learning, autonomous vehicles, advanced supply chains, e-commerce, and robotic manufacturing.
Yet the industry is confronting serious problems, seemingly unable to control the risk that its own technology creates. Across the world, customers, the media, politicians, and regulators are asking questions about the consequences of technology and platforms. There are also ongoing moves to introduce more privacy regulation, such as the EU’s recent General Data Protection Regulation. In some cases, US institutional investors are asking technology companies to become involved with broader economic, environmental, and social issues, or to conduct themselves more responsibly. Some firms are responding to concerns about addiction to the use of smart phones and other devices.
If the technology industry is to reach its full market potential, then it must take the initiative in six areas to demonstrate its grasp of risk and that it can offer ways to manage and mitigate that risk. Companies need comprehensive strategies that handle immediate business risks and longer term social problems arising from their technology. The industry must act even as it continues to offer all of the benefits that digital technology provides - and that customers crave.
First, companies must deal with problems before they emerge publicly. In the past, companies were often reactive about issues with their products and services. Today they must be proactive. This requires an internal culture change so that risky practices based on sometimes harsh and arrogant attitudes give way to openness and transparency. If staff raise concerns early, and the company deals with them fairly and publicly, then a proactive approach can permeate the organisation. Companies must better understand the effects of their technology while it is still in development, and should build trust among likely customers and stakeholders by incorporating considerable security and privacy features. That means also rooting integrity into business models and practices, whether it relates to how they sell, handle intellectual property, hiring, and treatment of staff.
Second, companies must spread the rapid, agile culture of their R&D to the rest of the organisation, so they make risk-related considerations and improve at the break-neck speed of product development. Slowing down is not an option. Leaders want to win in a competitive market and meet the needs of demanding consumers. That’s why culture change matters, so that discussions about ethical or operational problems occur with the same intensity and collaboration that leads companies to develop successful products. Companies also need a broader view of their role so that they can weigh whether their responses to problems will lead to improvements and to which aspects of external criticism they respond.
Third, companies must rework their incentive structures to foster a culture of responsibility. The industry has thrived on risk, willing to take chances and see many startups fail as the price of innovation. Companies compensate employees who discard the rulebook and learn from failure. Unfortunately, that can lead firms to offer products and services that are not ready for the market and to toxic workplace cultures. The value of the industry does not come from these risks and behaviors. It derives from the promise of mass adoption of their products and services. Speed remains of the essence, but it must come with responsibility.
Fourth, companies should partner with regulators. Some firms have kept their distance from regulators. They created customer-focused products and services with little regard to economic, legal, or social factors. Some companies exploited the failure of regulation to keep pace with technology. No longer. Regulators are catching up and the public wants more protection, with the danger of a regulatory overreaction. Companies should therefore understand regulators’ genuine concerns and their origins. They need answers to the regulatory and reputational problems from new technology, including solutions that enforce regulations, while educating regulators from the beginning about innovations. Companies should work with regulators preferably in concert with other firms, to create rules that incorporate the disruptive nature of technology but that do not prevent innovation.
Fifth, companies should build common standards transparently and cooperatively. These standards are vital because technology has penetrated every corner of people’s lives. Agreed standards should exceed legal and technical requirements. Such standards must protect privacy and security. They are also good for business as companies in autonomous vehicle development are finding. Without a common standard for informatics, different autonomous vehicles could fail to communicate with each other, misread maps and roads signs, with serious consequences.
Sixth, companies must use integrity to attain competitive advantage. Risk is spreading as technology becomes inherent to daily life and business. Many people do not understand this risk. At the same time, there is growing disquiet about the effect of technology. Companies that proactively grasp the importance of transparency and trust can use this as a form of differentiation, becoming a brand associated with technological and social responsibility.
As the technology industry matures, it will discover that good intentions and a fanatical commitment to quality are compatible with trust and transparency. Companies that integrate these attributes into their products and services can manage their risk and those of their customers, gaining the approval of the market, regulators, and society.