Crossing the Technology Line: Strategic vs. Utility - Page 1

Dec 12, 2006

Mike Scheuerman

Technologies change constantly. When a technology becomes ubiquitous (i.e., it’s only noticed when it’s not there) it becomes a utility.

A strategic technology is measured on how well it accomplishes the goals set by the vision you have of what your company is becoming. A utility is measured on how efficiently and reliably it delivers its product.

Constant Change

A few years ago, Company X wanted to provide its customers with a way to order products online. It would expand the customer’s access to product information, differentiate the company from their competitors, and reduce the cost of sales. That was a strategic decision.

When they implemented the online ordering system, there were very few companies providing that kind of service. Their customers gained a service they couldn’t easily get elsewhere and the company got enhanced loyalty from the customers. Reduced transaction costs soon followed.

After a couple of years, online ordering became a standard service for many companies. Customers now expected or even demanded online shopping. That technology had crossed the line from strategic to utility.

When you cross the line from strategic to utility, it’s time to think about either establishing a “maintenance” group or outsourcing the operation to someone else. In either case, the amount of unit resource devoted to the utility should begin to decline. If it doesn’t, you either have an operational problem or insufficient mass to force the costs down.

In the first case, you need to take steps to gain control of the costs. Look at the resources you’re using to maintain the application. Do you really need a full-time programmer or will a part-time contractor work? Consider deploying a packaged solution instead of a highly customized and costly one.

Examining the way the product or service is delivered and removing the non‑value added steps in the delivery process could also help solve an operational problem.

The critical mass problem in the second case is somewhat more difficult to solve. Outsourcing may be a solution. That can be done a couple of different ways. You could develop partnerships with other like-minded organizations to collectively deliver the service or product. Alternatively, you could look for a company to partner with that will deliver the product efficiently and use that organization as your product delivery surrogate.

In either case, an outsourcing arrangement can aggregate a number of clients together to gain cost advantages that, alone, a company can never attain.

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