The Covid pandemic has accelerated the digital transformation of many organizations, as so much of our life has moved online. The speed with which the pandemic has struck has forced many leaders to focus purely on the practicalities of such transformations rather than the more abstract and strategic aspects, and new research from Olin Business School suggests that is a good thing indeed.
Such a shift in focus encourages leaders to examine the utility of new technology more than its novelty, which increases their propensity to invest. What’s more, this approach is especially useful for leaders who lack technological expertise.
“The further removed decision-makers are intellectually from an idea, the less likely they are to invest in it,” the researchers say. “Keeping up with the rapid pace of technology can be especially challenging. But missed opportunities and failing to keep up, technologically speaking, is a recipe for failure.”
Lack of understanding
The worse the level of understanding a leader has of new technologies, the more likely they are to regard it as radical and lacking in utility, both of which undermine the likelihood that they will invest in it.
While previous research has suggested this could be overcome by deliberately drawing on past experiences with similar ideas, this is often not possible if the idea is truly unique. So, the researchers set out to understand how leaders process information about novel ideas and the role this plays in their investment decisions.
The researchers conducted a couple of experiments, the first of which involved a few hundred senior executives from the R&D field. Each of the executives was working for organizations exploring Quantum Key Distribution, which is a novel technology used in cybersecurity. Each of the participants was given information about the technology before being asked to assess how useful it is and how much of their income they’d be willing to invest in bringing it to market.
The second experiment was an online survey of several hundred middle- and upper-level managers who were asked to assume the role of a senior executive in an app-based taxi firm. The firm was considering investing in a fleet of autonomous vehicles and the volunteers were placed into one of four conditions – expert/concrete thinking, expert/abstract thinking, non-expert/concrete thinking, or non-expert/abstract thinking.
Those in the expert groups were given considerable information about autonomous cars, whereas those in the non-expert group were given more basic background information about the taxi industry. Those in the abstract thinking groups were encouraged to think about the “why” of the technology, whereas those in the concrete thinking group were encouraged to think more about the “how” of shifting. As in the first experiment, the volunteers were asked to assess the technology and explain how much they would invest in it.
“Across our two studies, we show that decision-makers who are distant from a highly novel technological idea in terms of domain expertise are less likely to invest in it. However, our results also show that the effect of expertise distance is entirely dependent on how abstractly vs. concretely they approach the idea,” the researchers say.
Shifting perspectives
“Highly novel ideas, when evaluated by decision-makers who have no expertise in the relevant domain, are perceived as too uncertain and too risky,” the researchers continue. “Changing how they approach the idea can help managers mitigate the negative effect of expertise distance.”
This can be difficult, however, as many leaders fall into the trap of assuming that they need to focus on the big picture, with the minutiae of daily activities more of a managerial task than a leadership task. As such, key decision-makers can often think purely in abstract and broad ways. When it comes to assessing technology, however, this isn’t the best approach.
“Most decision-makers have a preference for rationality and predictive accuracy over the uncertainty inherent in novel technological ideas,” the researchers explain. “When leaders focus only on the high-level, abstract features of the technology, they tend to over-emphasize the novelty and risks of the idea, which, in turn, decreases their likelihood to invest.”
Focusing on the details
By contrast, when decision-makers focus their attention on the details and the concrete aspects of the technology in the present time, they’re much more likely to accurately assess the feasibility and benefits of it to their organization.
Such an approach appears to reduce any sense of risk while also presenting the technology in a way that makes it appear less novel than what has gone before, both of which lower the barriers to adoption.
So, if executives want to get better at assessing the merits of the numerous new technologies that are promising to disrupt their business, then thinking about them in a more concrete way could be the way to do so.
“By shifting the way in which they evaluate novel ideas—from abstract to concrete—managers will improve their ability to recognize the potential value of groundbreaking ideas, maintaining a technological edge on the competition,” the researchers conclude.
