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The Tech-Centric Revolution Is Here

Oracle

There comes a time when the dissonant buzz around every important technology trend settles into a steady whir. Consider how seemingly ephemeral trends such as e-commerce, data warehousing, mobile computing, and virtualization traveled the Gartner hype arc from inflated expectations to disillusionment to enlightenment and finally to broad acceptance and productivity.

Among today’s top megatrends is the conventional wisdom that every modern company is now a technology company, a “digital business.” We pay a lot of lip service to this phenomenon, but have we all really bought in?

In today's world, the media still think of the “tech-savvy” CEO as someone special and still only trot out digital natives such as Amazon and Uber as the poster children for tech-based business disruption. The notion that every company is indeed a tech company can feel like it’s stuck in the buzzy, not-quite-there-yet enlightenment stage.

Nevertheless, the reality is that tech companies are now the rule, not the exception, in almost every major industry: financial, transportation, manufacturing, consumer goods, agriculture, healthcare, energy. If you still think the likes of Amazon and Uber are leading the digital charge, think again.

The following examples show that long-established industry players aren’t just innovating at the edges, waiting to be outmaneuvered by some “pure” digital hotshot. They’re embracing technology as fundamental to their competitive advantage and survival, regardless of the strength of their brand or the perceived depth of their customers' loyalty.

Technology Squeezes More Out of Fixed Resources

Union Pacific, which operates freight trains west of the Mississippi, is investing hundreds of millions of dollars a year in IT to do fundamentally one thing: Push more freight volumes over its relatively finite network of tracks. That’s the only financially viable way for the company to move the needle on revenue and profit, given the fact that adding new track costs as much as $2.5 million a mile and a new locomotive costs about $2 million.

"We can't spend enough money on capital to fulfill our growth," Union Pacific CIO Lynden Tennison said in 2012, even though the company’s capital spending at the time was $3.26 billion. (It was $4.1 billion in 2014, as the company reported 18% higher net income of $5.18 billion on 9% higher revenue of $23.99 billion.) "We have to get there with IT," Tennison said.

An Internet of Things pioneer, Union Pacific is analyzing data collected by sensors on its railroad cars and alongside its tracks with the goal of moving trains through its 32,000-route-mile rail network at faster (though safe) speeds with fewer breakdowns and other disruptions, improving what the company calls “network fluidity.”

At agricultural products maker Monsanto, technologies such as biotech, cloud services, and data analytics—requiring massive computing power—are at the core of the company’s three ambitious goals: Double yields of core crops by 2030; use one-third fewer resources per unit of output; and improve the lives of farmers worldwide.

Companies Create Their Own Tech Profit Centers

Union Pacific, for instance, generates tens of millions of dollars in annual revenue selling or licensing some of its IT, such as excess capacity on its fiber optic network and its virtual reality training software.

Another example is the University of Pittsburgh Medical Center’s for-profit Technology Development Center. Having compared the near-50% profit margins of some of its most successful software suppliers (including Oracle) to its own 2% margins, the Pittsburgh-based healthcare and insurance provider decided it wanted a piece of the more profitable action.

So UPMC set up TDC, now with about 200 employees, to bring IT products to market on its own or in partnership with tech vendors. Ventures include a partnership with Health Fidelity, a Silicon Valley startup whose natural language processing software for medical records TDC is helping bring to market, and Fluence, a Windows-based healthcare data analytics application.

Faced with shrinking margins in its core stock trading business, NYSE Euronext, formed in 2007 from the merger of the New York Stock Exchange and Euronext, moved aggressively into the tech business, selling hosting, advanced networking, managed data services, and stock trading platforms to other financial institutions. “We think of ourselves as an applied technology company,” CEO Duncan Niederauer said in a roundtable discussion two years ago.

'Establishment' Companies Snap Up Digital Pioneers

Companies across industries are realizing they can’t always develop the technical expertise they need. Sometimes they need to buy it.

Capital One's December 2012 acquisition of ING Direct, for example, gave it instant credibility in digital banking. It went on to acquire Bundle, an online tool that lets customers compare their spending habits with others; design and user experience consultancy Adaptive Path; and BankOns, a mobile startup that gives customers discounts based on their spending behavior.

Over the past couple of years, Walmart has acquired OneOps for managing cloud workloads, Tasty Labs for software to connect with social networks, Inkiru for data analytics, Torbit for website optimization, and Luvocracy, a social product recommendation app.

The most recent tech acquisition at FedEx, a company that was extolling the power of technology as far back as the 1970s (“the information about the package is as important as the package itself”), was Bongo International, which gave the company a comprehensive cross-border e-commerce capability.

Software Is 'Eating the World'

Manufacturers such as John Deere and Ford don't just make farm equipment and cars; they're already software companies, reinforcing Marc Andreessen’s famous prediction of four years ago.

Software on some Deere vehicles lets dealers remotely wirelessly monitor and upload fixes and upgrades.

Ford has built an Android app ecosystem for its vehicles and is continually upgrading its MyFord Touch in-dash driver interface. Just like a software company, Ford lets customers download those updates without having to visit a dealer. (The downside of being a software company: Early problems with Ford’s in-vehicle communications and entertainment system, co-developed with Microsoft, caused Ford’s customer ratings to plunge.)

Next Industrial Revolution Is Here, and It’s a Tech-Centric One

GE, the $149 billion industrial conglomerate, is getting out of the financial services business and focusing on “inventing the next industrial era,” bringing together “the physical and digital worlds in ways no other company can,” says CEO Jeffrey Immelt in the company’s latest annual report.

Immelt describes the three huge technology-driven bets GE is making.

One is on what he calls the "energy transition," as GE produces a range of technologies to help oil, gas, and power companies find and distribute new sources of energy. Its second bet is on advanced manufacturing via improved automation tools, 3D printing, and data analytics. The third big bet is on what GE calls the “industrial internet,” the company’s term for applying the Internet of Things to its industrial equipment, medical systems, and appliances.

Which Industry Are You in Exactly?

Is Tesla Motors a car company or a technology company? Is Netflix an entertainment company or a tech company? What about German elevator company Thyssen Krupp, which reinvented the category with magnetic levitation technology? Or Amgen, whose DeCode Genetics database has sequenced the genomes of more than 1 in every 100 people in Iceland (for starters), helping the company decide which drugs to develop?

When UPS CIO Dave Barnes started at the company 37 years ago, he thought of it as “a shipping company that applied technology to its business challenges,” writes InformationWeek about the #1 pick in its 2015 Elite 100 ranking. Now the thinking at UPS is that “it's a technology company that happens to have trucks, trailers, planes, distribution centers, and collection points.”

Does your company, whatever it produces or sells, think in these tech-centric terms?

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