The role of information technology in developing economies

The role of information technology in developing economies

In most developed countries, companies at large accept that technology is a fundamental driver of business growth and success. They are looking for an edge, and frequently find it in the implementation of technology that allows them to streamline processes, improve the experience of users and customers, follow up complex interaction with effectiveness, and navigate through colossal volumes of data to extract meaningful conclusions about their markets.

Technology in this context is so vital that, in fact, some of the very companies that develop and sell it are among the biggest in the world.

There is a specific rationale that bolsters this attitude. Companies face problems that are so complex, and on such a grand scale, that they are intractable without the right tools. Technology becomes, first and foremost, a means of survival in a sophisticated market. But mere operational survival leads to stagnation. It doesn’t allow companies to differentiate or take the lead. For that, they need the wherewithal to create new offers, solve problems in novel ways, and bring about innovative change to leverage their business opportunities. The most important part is that they must do all this before and better than their competition. That’s were technology sets in, stretching the boundaries of what is possible.

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Now to developing economies, using Chile as our example. The relationship between business and technology is much fuzzier here. Technology has, more or less, the same allure already described. It can still support operational excellence and drive businesses. But its intrinsic value is not so easily recognized by decision makers. Indeed, technology adoption and implementation in companies is generally—not always—years behind their counterparts in developed countries. There is a basic sense of skepticism when approaching innovative tools.

There are several reasons for this, among others:

  1. The scale of business challenges

In a developing economy the complexity, and in particular the scale, of business challenges are somewhat smaller than in developed countries. This means that more advanced technology adoption can sometimes be postponed, toned down, or averted. When companies face a performance crucible, they are sometimes in a position to implement several improvements, which include their processes, human resources, and technology. With these elements in the menu, technology will tend to occupy the tail end position. They will frequently attempt to overhaul their processes (forgetting that they go hand in hand with technology) or rely more on their human resources, either by hiring more people, or—sadly—by putting greater strain and demands on their current personnel, who have to deal with processes that are spinning out of control.

  1. Technology as a cost, not an investment

Most companies in developing economies tend to regard technology and IT departments as operational costs that they wish to minimize. They are rarely seen as strategic investments. This relates to my previous point. If IT expenditure is a variable that you wish to minimize, you will only invest in new technology when you have no more choices. Most companies don’t recognize the value of technology as a driver for business success, but treat it instead as one more functional asset, one that sits far away from their core activity at that.

  1. Risk aversion in innovation

Most companies don’t want to innovate. Of course, innovation for its own sake is hard to defend in business (and better suited for other settings), but an innovative idea that creates value is a different story.  Few companies want to take those bold steps, even if they can potentially allow them to create better products and services, streamline their operation, respond better to customer demands, and be more flexible. They will only take such steps when their very survival is threatened, or when their industry is clearly pushing in that direction. The avoid being the first to try. The cognitive distortion identified by Daniel Kahneman that predicts risk-aversion for gains and risk-seeking for losses is at work here.

  1. Technology as a second class citizen

I think this point is, in a way, a summary of the first three. As an additional token, there are virtually no CEOs with a technical background in any industry, including (medium to large) IT companies. Most top executives come from Finance or Sales, the departments that either pull in the money or manage it.

So, what can a software vendor, custom application developer, or service provider do to counter this tide? Well, there are lots of things that have to happen to create the proverbial paradigm shift. Some of them are part of a normal progression (growing business challenge scale, chief among them). Some require a cultural evolution (risk aversion, general attitude on technology). But there is one thing that a technology vendor can do to contribute to this change, albeit in a somewhat modest way.

Build trust.

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Yes, trust. That ever elusive element that sometimes arises between customer and service provider. The spice of a collaboration relationship that results in a true transference of knowledge and value. A customer who trusts their provider will be more receptive to understanding the value of technological initiatives. The provider, on the other hand, will acquire an enhanced eloquence in illustrating the benefits and gains of technology.

The crux of the matter is this. Despite what you’ve been told millions of time, TCO (Total Cost of Ownership) and ROE (Return on Investment) of technology adoption cannot be determined. Not with any degree of “certainty”. You can model your TCO and your ROE, of course, and you can no doubt detect the variables that affect such calculations. You can gain intuitive insight about how these variables will change after you’ve implemented a new technology. But try to put numbers on a spreadsheet. Real numbers of reduced cost or increased revenue. It can’t be done. Imaginary numbers, yes. Wishful numbers; defeatist numbers, perhaps. But any calculation you perform is only in your mind. That’s were trust comes in.

Trust allows you to go beyond those imaginary numbers, and gives you some footing to make a decision when the exact monetary outcome is unknown. If your provider can build a compelling case and illustrate value in a convincing business assessment of your technology, and if your relationship with them is built on respect, and trust, and tried and tested professionalism and competence, you will be open to their message. And so will the rest of your company.

That is why technology providers must put trust-building at the top of their priority list.

Bear in mind, though, that you can have depth trust and breath trust. Depth trust is what you acquire after you’ve been successfully working with a customer for a long time, and you have established yourself in their minds as a bona fide problem solver. Breadth trust is when you become a respected name in the market, and your reputation precedes you, or when you can engage new customers based on your experience and competence. In my opinion, no company can survive without developing some of both. The exact combination you aim for is up to you and your business goals. There is no magic universal formula.

Hand drawing a game strategy with white chalk on a blackboard.

Hand drawing a game strategy with white chalk on a blackboard.

Business maturity, cultural changes, regulation requirements. There’s very little a service provider can do about those. Trust building, on the other hand, is at everyone’s grasp. This is a lesson that works for both developing and developed economies. Put it at the center of your radar and good things will happen.

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