IT strategy - How to spot that hi-tech flop.

Introducing new technology to customers is always risky. It may go disastrously wrong, damaging relationships all the way down the demand chain, as in the case of genetically-modified (GM) food. Or it may fail to deliver the promised benefits, leaving customers disappointed, as in the case of WAP phones. Or, most common of all, it may simply take far longer than expected for the anticipated benefits to materialise.

While information technology is unlikely to produce anything like the GM food scare, consumers do already have some worries, for example about the privacy of the data held on them and the safety of mobile phones.

Since both these worries have been around for some time it is tempting to discount them. But such vague fears are precisely the sort that, given a few news reports, can suddenly intensify into a major panic.

What’s clear from the GM food case is that it is important to stay in touch with the right customers. Monsanto focused on the needs of the customers it dealt with directly, mainly large-scale North American farmers. For such customers the new weed-killer resistant GM crop strains held out the prospect of cost savings. But these benefits to farmers were outweighed by the price collapse when the farmers’ customers, particularly European supermarkets, decided they didn’t want GM products – because their customers in turn didn’t want GM, on their plates or in their environment.

Whether these distant customers were right or wrong is beside the point. They were the ultimate customers for GM food and they had the power to take their custom elsewhere. It was them that ended up mattering most – not the customers Monsanto was talking to.

What’s the lesson in WAP phones? WAP – wireless application protocol – is a way of delivering information from web sites to mobile phones. The promise of WAP is that it will deliver information and entertainment to people as they move around. Consumers ought therefore to see it as a great convenience. However, in reality, people are finding it is taking them a couple of minutes just to get connected, so no matter how good the information the chances are it isn’t worth the wait. WAP is now perceived by consumers as a waste of time.

The lesson in WAP is that it’s all to easy to think about what the technology ought to do, rather than checking on how it appears to consumers.

Of course, with any new technology, it is hard to tell whether consumers are irredeemably not interested and never likely to be, or just not interested yet. This is why so many failed technology initiatives never really die.

There are still companies working on push technology, micro payment schemes and internet sites selling clothes. They live in the hope that once the mousetrap is perfected the world will beat a path to their doors.

There are sometimes grounds for this hope, for example in business-to-business markets. Clayton M Christensen has argued brilliantly in his classic book The Innovator’s Dilemma* that disruptive new technologies typically first get established in niche markets – often neglected low-end ones. Over time they improve and take over more niches, more parts of the value chain fall into place, and they can eventually conquer the world.

For example, the first steam ships under-performed sailing ships in nearly every dimension. They cost more to operate, they were slower and they were prone to break down. But they were good on rivers (where there wasn’t any wind) and this is where they found their niche. As the technology improved and coaling stations were established for them to refuel at they were able to challenge sail on more and more routes.

Today there is a widespread feeling that business-to-business electronic marketplaces or “B2B hubs” are a failed idea, despite being flavour of the month just a year ago. Indeed, there have been several high-profile collapses. Yet in some specific niches they are working fine – for example they are exchanging highly perishable products such as telephone bandwidth or natural gas (which is burnt off if it isn’t sold).

So customers aren’t always reluctant to embrace new technology – even if it isn’t perfect. Impressive evidence is provided not just by the legally beleaguered music-swapping service Napster with its peak of 65 million users, but by the whole PC revolution.

* The Innovator’s Dilemma – when new technologies cause firms to fail, by Clayton M. Christensen, Harvard Business School Press 1997.