The True Cost of Technology

Analysts have theorized as to why larger companies seem to have a much harder time extracting gains from new technologies than smaller companies do. At first glance, they should be much better at it: they have the money to hire experts and staff to run the systems, and they have the largest gains to be made from digitizing portions of their businesses. Despite these apparent advantages, large firms struggle to make incremental gains, while small business seem to have no problem leaping ahead.

The solution to this problem might have something to do with the initial investment. Small firms and startups seldom have to do much to fully integrate their firms with new technology. From the ground up, these firms are quick to adapt and integrate the latest software.

Large firms don’t have this luxury. For example, Ford is about to launch its latest flagship truck, the F-150, with an aluminium body. This should not be a challenging endeavour for one of the world’s largest car firms. Car companies have been manufacturing aluminium bodied vehicles since the early automobiles, and in recent years their popularity has grown massively. However, until now, aluminium cars have been made in small production runs using craftsmen and serviced by specialists. Ford, in contrast, will need to sell over half a million F-150’s each year, and will be required to service a comparatively large number that are crashed or otherwise broken.

In an excellent lesson for firms looking to invest in new technology, Ford put its money where its mouth was, and bet an enormous $3 billion on this new technology. Additionally, Ford demanded the support of everyone from upper management to shop floor workers in the adoption of the new technology. Even with this huge budget, and complete support, problems weren’t scarce. Manufacturing issues included figuring out how to efficiently weld aluminium at high speeds with a robot, redesigning many of the components to take advantage of the aluminium’s strength, preventing aluminium from cracking while being pressed into shape, and figuring out repair costs so that aftermarket factors didn’t scare consumers away. Even marketing a truck made of aluminium presented unique challenges.

Ford’s approach to new technology is what all large business need to consider when considering new technology. For large firms, complete management support from all departments, huge budgets, and extensive retraining and investment in employees are required to achieve the same gains found by small businesses.

This isn’t to scare large companies away from technology. Ford invested huge amounts of money into new technology to stay ahead of emissions regulations while making their vehicles more practical than the competition’s. Companies, under the guidance of the chief technology officer, must innovate in the same way to stay ahead of their competitors and better serve their clients. These brave managers must take a page out of Ford’s book: Go big, or go home.