• Cloudway Partners

We Are A Technology Company

No, you’re not. Many companies today like to refer to themselves as “technology companies.” I find this both quaint and puzzling.

Just because you produce lots of revenue and pay lots of bills and have a lot of accountants on staff, does that make you a finance company?

Your company hires and fires lots of people. Does that make you an HR company?

Being perceived as a technology company is sexy. Technology is hot. There is also the fact that technology is valued higher than other disciplines.

GE tried to fashion itself as a technology company a while back and even had commercials encouraging people to apply for jobs. https://www.youtube.com/watch?v=GcZHGonRF28

However, don’t kid yourself. GE is not a technology company. It is an old-school mainline industrial company. Sure, it is dependent on technology, as are most companies today. But technology is not its core product. In fact, technology is not one of its products at all.

Many people think Facebook (and Instagram, Snapchat, LinkedIn, etc.) are technology companies. They are not. Can you go buy some Facebook and install it in your house or company? Can you use it for something? No. These are social media platforms. Their product is social media and they generate revenue by advertising on their platforms and getting people to look at those advertisements. Granted, they are 100% technology-dependent, could not have existed as recently as 20 years ago, and hire engineers and developers to build out the technology that is their lifeblood. But they are not actually technology companies. They are, in a very real way, glorified advertising platforms. Social media is their product, and advertising is how they generate revenue.

Uber, Peloton, Netflix have all been called technology companies. They are not. They are, respectively, a ridesharing service (taxi company?), fitness equipment company, and streaming service (and only a few years ago, a DVD-by-mail company). Technology enables their business to function and reach customers, and can enhance the product and experience, but the technology is not independent of the core business, nor is it an independently marketable asset.

JP Morgan’s CFO, Marianne Lake, we so far as to claim that Chase is a technology company. It is a BANK! Yes, technology has helped it grow an provide more services, products, and a better customer experience. And as society moves away from cash to digital currency, technology becomes more important. But the bank existed long before today’s technology.

Tesla is a very forward-thinking, technologically advanced car company. The tech is built right into their cars. Is a Tesla a car with a sophisticated computer or a computer with 4 wheels?

Most companies today are very heavily dependent on technology. There isn’t a single industry that does not rely on it. In order to support the business, companies hire or outsource large IT teams to support the technology upon which they are reliant. This sometimes creates a bloating of the IT function. Some companies go so far as to believe that because they may have built a very cool and useful piece of software, they can now generate revenue from it by marketing it to other companies. This is a terrible mistake. Creating something for your own use, regardless of how good it is, does not mean the company has the infrastructure, knowledge or skill sets to support it in a competitive sales environment.

At my former employer, I would walk around the floor and randomly ask my people, “What is your job?” The answers were usually along the lines of, “I manage the databases,” or something similar. My response was always, “No! Your job is to sell insurance. We are an insurance company, and that is what we do. In your own way, that is what you do, too.” People need to stay close to the company’s core competency (Business 101). When they stray too far, the company loses its mission cohesion. As an example, I once had a conversation with the CIO of an online education provider (this was in pre-Covid days), and he was asking my advice. He said that they saw themselves as a technology company, but they were now struggling with the actual mission of delivering quality education to their students. Revenue was slipping, and competitors were rapidly catching up. This was all in the context of a Salesforce conference, so my advice to him was to get back to fundamentals. Put as much of their systems into the Salesforce platform as possible, integrate it to their educational software, and quit building their own systems.

Will there come a day when a traditional company evolves into a true tech company? Yes, most definitely, Amazon being a prime example. What started off as an online seller of books now derives 65% of its revenue from its hosting services. However, don't be surprised if, at some point in the future, AWS and Amazon split into two.

Bottom line: Unless you are Salesforce, Microsoft, Apple, AWS, etc., buy, don’t build.

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