I’ll admit that when it comes to technolgy, I’m somewhat biased. I’m hoping that in this post that while I am coming at it from that perspective, that my thoughts result in a balanced result.
I don’t think that there is a means of making a living today that doesn’t take advantage of technology in one way or another. While it’s fairly obviously true in the US, I actually think that it’s universally true. Even when you consider subsistence farming and hunting and gathering, we end up using technology in one form or another to give ourselves the advantage we need to survive.
Take gathering as the most basic. You walk to where your source of food is, and pick berries or pull up roots. It becomes fairly obvious after a very short period of time that the trip back and forth from where you are living, to where your food happens to be growing is introducing you to the risk of a preditor of some sort. Be it a bear, wildcat, wolverine, wolf, or something else, you are not set up with the same level of strength, or hunting implements (teeth, claws, eyesight, etc.) that are going to give you a particular advantage against one of these guys. So you’re going to want to do something to reduce that risk. There are two ways to solve this issue, carry something to defend yourself with, and make more trips because one hand is occupied with carrying that weapon or shield, or find some way of carrying more of what you are gathering, and cut down on the number of trips, and therefore the overall risk. Besides if you only make one trip out for food, rather than 4 or 10, there’s all that time you were spending gathering food that you can spend developing critical social skills, or better yet procreating. (And demonstrating that you’ll be around to help raise those kids you are busy procreating as well.)
Either carrying a weapon, or finding a way of carrying more food is going to result in a technological solution. You created a tool that makes you more productive in one way or another. And while having to make more trips because you are only able to use one hand may seem like a loss, the fact that you have a way to defend yourself also means that it is more likely that you will be comming home at the end of those extra trips.
Your first first solution to carrying more at one time may be to use a large leaf as a simple basket. Or after carrying a weapon for a while you might discover that the skin of one of those creatures you were defending yourself from makes for a good basket as well, or even a sling. Who knows.
Fast forward to today. the technology we wor with today includes far more than just a better hammer or a basket to carry things in, but they all are an effort on the user’s side to get more done with less work done from the user’s point of view to improve the working situation. It even gets into the world’s oldest profession, where a hooker can advertise her services online, and make arrangements for where and when to meet. She can check out the John ahead of time, as well as the location, and know far more about what’s going to happen. She doesn’t have to stand on the corner trying to make eye contact with prospective John’s on the street. (This is not to be taken as an advocacy for prostitution, just an example of how pervasive technology ends up being.)
All technology is information handling. From the latest computers and high speed network infrastructure, down to the basket of berries and point of the knife or spear. They are all means of demonstrating that you have some idea for getting ahead, and can make use of that idea to solve the problem at hand.
In the 1960s the LASER was developed. LASER stands for Light Amplification through Stimulated Emission of Radiation. For a long time it was described by naysayers as a solution in search of a problem. And while there are some ‘problems’ that lasers have solved that might be considered a real stretch of credibility, the reality is that they handle more information in one day today than all the computers built before 1999 handled between the development of the jakard loom and the latest computer of 1999 combined.
Technology and information handling today are the foundation of all business. “Products!” I hear you shout. Ok, without products to sell, you won’t make any money. But what are ‘Products’? They are transformed raw materials. A Car is a large chunk of a variety of metals, oils, plant and animal byproducts, all processed by technology and the know-how to use that technology, (added information) to produce a car. We sure as hell don’t fart them, or find them growing on trees. (Money does grow on trees by the way. As any orchard owner can attest. But if he’s going to be profitable, he’s going to have to employ some hard won knowledge either of his own or of a hire.)
There seems to be a strange view showing up in business these days. The view is that technology is a cost for the business. I can understand a part of this view. If your business is moving packages from one location to another, or better a lot of locations to a lot of locations, you use tools to perform that movement. For small packages, it might be an individual acting as a courier. For larger packages, it might be a truck driver and truck of some sort.
In theory that isn’t very complicated. How difficult can it be to take a package across the street? Follow a FedEx package across the street some day, and you might be surprised. Perhaps you’re wondering why you should pay FedEx to take the package from your receptionist, put it on a truck down town, another out to the airport, a flight to Memphis, another flight back, onto another truck back to the local city office, and then out to your neighbor across the street? Especially when you could hire your next door 8 year old kid to take the package across the street, and all it will cost is a piece of candy from the candy dish. The thing is, the FedEx solution will cost the same, and take the same amount of time (within reason) regardless of whether the destination is across the street, or across the continent. The 8 year old is going to run into problems getting the next package across the continent. FedEx has a technological solution that scales well for their defined problem set. Deliver the package anywhere in the US, overnight.
That’s the thing with technology. A solution that looks expensive for one set of problems may turn out to be the lowest cost general solution. And trying to undercut that cost may result in you having a surprise in follow-on costs that you did not prepare for.
Another way of looking at that is to note that there is nothing particularly difficult about owning an orchard. Let’s assume that the cost of labor is fixed. As is the cost of shipping the fruits of your orchard to market. The question comes up then, how do we maximize our profit, or maximize sales. Better yet, is there a way to maximize both profit and sales? While the cost of shipping is ‘fixed,’ the qustion comes up ‘how’ is it fixed? It could be on a per mile basis, no matter how much we ship, whether it is 1 lb, or 1,000 tons. Or it could be the same amount per lb, whether the product is shiped across the street, or across the continent. Worst case it’s a combination of both. Weight (or volume) and distance. In that case is the market down the street going to be more profitable than the one 2 states over? Well, if you and your 20 neighbors are the only people in the continent who have orchards producing Makintosh Apples, perhaps sending a bunch of small loads to markets a couple of states away you might be able to sell the apples at $10 a lb. rather than the $5 a lb. that you can sell them for at the roadside stand you set up next to the orchard.
Perhaps you can maximize the price per sale by developing a history of selling consistently good Apples. You personally go through the pecks of pick, and get the bad apples out of the barrel. This takes time, but in the end it means that where you might have been selling at $5 a lb, perhaps you can sell for $7 a lb instead. At that point you have to ask is the amount of extra effort and information added to the sold product costing more or less than $2 a lb. If it costs more than $2 a lb, then that should tell you not to perform that service. Right?
Back when I was going through school, a common case was posited that at some poing the effort and costs associated with identifying and repairing bugs needed to be compared to the added value for the end product. In other words if the cost of reparing the bug was low, and the value for resolving the bug was high, then you work on fixing the security issue. If not, then ignore that bug.
A lot of that changed as companies realized not fixing those bugs ended up exposing the company to some very high risks. If you failed to work towards a fix for that bug, and someone found an exploit, you personally or as a company may be held liable for the damage that some script kiddy does on your systems. Not because you are at fault for doing whatever it is that the script kiddy initiated, but because you are responsible for not properly securing your computer.
This gets into a whole slew of issues with technology that I won’t delve into too much here, but what I hope is simple to understand is that providing a technologically advanced and competitive means of doing businesses is not without it’s costs, both up front, and over the long term.
Schools have learned this the hard way. Someone suggests spending $1000 per child on computers for the students this year, and that will give them a significant advantage in learning. And yes that part is true. Actually it’s more true that if you spend money on technology with a plan for how to implement it in a educational system to make it possible for children to learn more, and you follow through, then they will. The long term problem has always been that this is not a one time expense.
When it comes to text books, you buy 60 copies of the $50 text book for your two 30 student classes, or perhaps three 20 student classes if you are really fortunate, and those text books can be expected to survive through between 5 and 7 years of classes. Likewise for film projectors, Televisions, and so on. That’s not the case with computers. If you spend $1000 on a computer today, next year you couldn’t get $100 in return for it, even if you never opened the box. That might be an exageration, but I can assure you that in 3 years the computer will cost more to get rid of than you can sell it for. Additionally most classrooms are dusty environments that will end up filling your computers with enough dust to cause significant problems for that computer, both in heating related issues, as well as with potential for electrical shorting across power elements of the computer.
This carries over into the business world as well. computers are machines that require regular maintenance. We have not yet gotten to the point where computers will clean themselves. A significant portion of a business budget needs to be spent to regularly go through the computers in it’s inventory and make sure that supported hardware, software, drivers and so on are all in good condition. Patches being provided by manufacturers and operating system vendors need to be reviewed for problems, distributed, and validated, That takes money. And it will cost a business a fairly significant amount to ignore. There will be down time, and that needs to be kept track of as a part of the cost of doing business. Some of the down time can be managed around. Tracking recurrent issues and woring with vendors to identify the cause and providing effective prevention needs to happen, but to do that requires people who are familiar enough with the situations involved to be able to perform those reviews, and also the resources of time and money for them to complete those preventative actions.
Remember that the goal is to be competitive. Whether that means having more customers, or more cash flow, or some other element of measurement, it fundamentally means getting customers to want to do business with you, and to get them to tell their friends how great it is to work with you. You can’t do that if your goal for technology is to reduce it’s cost 10% overall, year to year, without providing a plan for reaching that goal. Additionally if you are increasing your profitability 5% a year, and technology is fundamental to that growth, then while you can easily get rid of 10% of the people and technology costs associated with your business over the next year, you have to consider whether removing that 10% of a fundamental element of your company is going to leave you with a 15% growth this next year, or are you going to still see a 5% growth in profit next year with a 10% loss in revenue.
Stockholder value is based most often on the combination of profit and revenue. If you earn $500 in profit this year and your costs were $5000, then your revenue has to be $5500. A 5% growth in profit would mean $525 in profit next year. However if you cut $500, (10% od $5000) then your total revenue would be $5025. A loss in revenue of $475. You met both goals of increasing profits, and decreasing costs, but the total value dropped by almost 10% as well. If there are 500 shares of stock in the company, then you have actually cost the stock holders more than your increase in profits would predict.
Now that might be where you want to go. I’m just not convinced that it is the best business model.
The reality is that we all want our technology to cost less, and produce more. Whether that means the ability to sell more potato chips from the same amount of raw material and number of people on the production line, or that means that the technology results in a product that tastes better and lasts longer, and is therefore of more interest to customers, there will be different types of costs involved. Technology does not provide a free ride. And at times the costs associated with one technology will not result in better value in the end product. But those are the real business decisions. ‘Cutting Costs’ is almost always going to result in reduced revenue. There are times when that will be desired. But it should not be the primary goal of any department head.
Then again, what do I know. I’m a fan of technology, and I work with it every day at work doing what I can to provide improved stockholder value. Sometimes I succeed, other times, not so much.
