Harvard Book Store: Competitive Advantage Speakers: Larry Downes

Larry Downes is a widely-recognized consultant and speaker on the impact of emerging technologies on business strategy. He has worked with Andersen Consulting, McKinsey & Co., and CSC Index. Now an independent consultant, Mr. Downes works with companies in a variety of industries to develop their own digital strategies. In 1997, Mr. Downes was appointed Adjunct Professor of Law at Northwestern University, where he teaches Law and Technology. His new book (with co-author Chunka Mui), Unleashing the Killer App: Digital Strategies for Market Dominance, studies the need for digital strategies and how "killer apps" can change the face of a market.

Larry Downes spoke at our Competitive Advantage Breakfast on May 13, 1998.
Mr. Downes began his talk by discussing the need of all companies (even those that aren't high-tech) to develop digital strategies. He compared the digital strategy to the more traditional strategy by saying that traditional corporate strategies are developed by senior executives and take two to five years to implement, whereas digital strategies are developed by a wide variety of people, don't cover more than twelve to eighteen months, and are "highly opportunistic." Technology, he said, has become a constant disrupting force in society and particularly in the business world. In order to keep up with technology and use it effectively, all companies should develop a digital strategy. Some may not even need a traditional, long-range strategy, especially if their fields (such as the high-tech industry) change rapidly.
Mr. Downes continued by identifying three new forces that are contributing to the fast growth of technology, particularly in developing nations: digitization, deregulation, and globalization. These forces, he said, are not independent of one another. Digitization feeds the push for deregulation, which opens the market and leads to globalization, which in turn leads to further digitization. He used the example of ATM machines to illustrate this cycle: by introducing a new technology into the banking market (digitization), ATM machines led to a change in laws prohibiting interstate withdrawals (deregulation), which led to wider market opportunities (globalization), which led to further technological developments, such as online banking.
Afterwards, Mr. Downes answered questions from the audience (questions and answers may be paraphrased):
Q: Do you distinguish between technology and non-technology companies in your book?
A: No -- we don't think there are any non-technology companies ... or at least no non-information companies. Even "smokestack" companies use technology.
Q: Where do you see use of the Web going?
A: The Web is not so much a technology as a "test bed" for new technologies and business models. It's a good place for experimenting.
Q: How do we (as a country) stand regarding technology driving strategy?
A: The U.S. is better equipped to experiment with technology and the Internet because local calls are free. Thus, the U.S. is ahead in its use of technology in general. The Wall Street Journal is a leading technology newspaper, and it enables executives to rapidly get information about technology, possibly even before their IS people do. This access to information advances the importance of technology in business.
Q: What behaviors do executives need to adopt?
A: "Stop behaving like managers." Experiment wildly, don't be afraid to fail, and really listen to your customers.
Q: How do a company's resources limit this experimentation?
A: You can play with a lot of technologies without incurring great cost, and you can also use partnerships to manage your risk.
Q: What companies have done well implementing digital strategies?
A: Companies where you can't tell if they're technology- or non-technology-based, because the technology is so well integrated. For example, Federal Express or MasterCard -- their companies are their technologies. Even at British Petroleum, a smokestack company, their CEO sees it as an information company.
Q: Do you think companies should only have a digital strategy?
A: Yes -- drop the traditional strategy. It's no longer practical.
Q: How do companies implement digital strategies?
A: Some industries are better positioned to do this. At British Petroleum (BP), they identified their priorities (collaborating, communicating, etc.), replaced their communications system with Internet technology, and in a few months had repositioned themselves in the market and merged with Mobil. BP became the operator of the merged companies because of their communications advantage.

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