6 Ways That Emerging Technology Is Disrupting Business Strategy

Even though the internet has been publicly available for almost three decades, executives at just about every company are wrestling with how to use digital technology to advance their business strategy.

We asked professors from Harvard Business School’s Strategy Unit how emerging technologies involving artificial intelligence (AI), data analytics, and the Internet of Things are changing the way business leaders think about strategy. Here’s what they said:

1. Talent and data are more critical than ever

 

“Traditionally, companies focused on technology they own and have exclusive rights to use as a critical driver of competitive advantage. However, increasingly cutting-edge technology is developed as a shared resource where the core technology is freely available to anyone who wants to use it and it is frequently released as open source software.

Therefore, instead of the technology itself, companies are considering their user data and their tech employees as the primary drivers of competitive advantage.”

Frank Nagle (@frank_nagle), an assistant professor who is also affiliated with the HBS Digital Initiative, the Managing the Future of Work Project, and the Laboratory for Innovation Science.

2. Technology is propelling business transformation

 

“While some firms think about technology merely as a different type of capital investment that does not impact their way of doing things, others are adopting new technologies as they make significant changes to the customers they serve, the skills they employ, and their organizational structures. The latter approach involves higher costs and time horizons, but most likely also much higher returns.”

Raffaella Sadun (@raffasadun), a professor of business administration and a faculty research fellow at the National Bureau of Economic Research.

3. Algorithms are changing the pricing game

 

“Firms are increasingly using pricing algorithms to set prices, especially in online markets. Pricing algorithms can enable better-targeted prices, but they also can fundamentally alter how a firm competes.

A firm that adopts a pricing algorithm can change the nature of price competition in its market and change the focal set of rivals. In addition, adopting a pricing algorithm may change the direction of a firm, requiring additional investments in IT, modified production decisions, and different personnel, among other changes.”

Alexander J. MacKay, an assistant professor of business administration who studies the economics of competition.

4. Platforms are upending traditional business models

 

“Emerging technologies of all types and forms are helping companies exploit new business models. Classic competitive strategy (as its name suggests) has focused more on value capture and competition within existing business models, and yet the most valuable companies in the US today simply did not exist 30 years ago. The technology they exploit creates enormous value for customers through the novelty of the ‘job to be done’ and by monetizing their offerings in very different ways.

The fact that many of these digital firms are based on a ‘platform’ business model—a term that only applied to railroads a few decades ago—only goes to show how far the new technologies have transformed the strategy landscape.”

David J. Collis, adjunct professor and author of International Strategy: Context, Concepts and Implications.

5. Companies can test everything

 

“Firms can now rapidly and cheaply experiment with crucial competitive decisions like pricing, product positioning, and which markets to serve. Historically, these decisions relied on master plans and involved time horizons measured in decades. Now, online platforms, algorithms, and ubiquitous data allow firms to test these decisions quickly, sometimes in a matter of months or weeks.

Recent work by myself and colleagues at Duke University's Fuqua School of Business suggests these ‘experimental strategies’ improve performance in new ventures, but questions, such as whether experiments bias firms toward easy-to-test and measure ideas and markets, remain.”

Rembrand M. Koning (@orgRem), an assistant professor of business administration who studies experimentation, A/B testing, and agile strategies.

6. Cloud computing is lowering barriers to entry

 

“Competition will intensify in many digitally enabled industries as the cloud makes it ever easier for competitors to enter a market, which we’ve seen with Disney and HBO streaming to compete with Netflix. The major cloud providers will themselves inevitably compete with and threaten their own customers and partners as they expand their offerings.

As companies incur increasingly massive cloud usage costs that threaten their own profitability, they should make sure they do not get locked in with one cloud provider. Using multiple cloud providers ensures that they can always switch to the lowest cost option.”

Andy Wu (@AndyWuAndyWu), an assistant professor who studies how technology entrepreneurs use resources to expand their businesses.