In today’s age of rapid technological innovation, businesses have access to groundbreaking tools like artificial intelligence (AI), blockchain, and electric vehicles. However, despite the availability of these technologies, many businesses struggle to reap substantial rewards from their investments. According to a McKinsey & Company study, more than 70% of attempts to implement new technologies fall short of expectations. Understanding why this happens—and how firms can improve their chances of success—is essential for staying competitive in this digital era.
The Trap of Using Technology to Only Improve Existing Products
It’s common for businesses to focus on efficiency when adopting new technologies. However, merely upgrading existing products or processes does not lead to meaningful, long-term success. To unlock real value, companies need to rethink how they operate, questioning assumptions about whether certain processes or products should be retained at all.
While it’s true that technology can help improve efficiency, this often represents just a small part of its potential. According to Goldman Sachs, despite companies spending over $1 trillion on AI, many still have little to show for it. To maximize the return on such investments, business leaders should approach technology adoption with a mindset of transformation, not just incremental improvement.
The Difference Between Innovation and Skeuomorphic Thinking
When new technologies emerge, businesses tend to first use them in ways that only make existing processes easier or faster. This is referred to as “skeuomorphic thinking”—where digital tools are used to replicate traditional, physical processes. An example of this can be seen in the early days of digital cameras, where consumers still printed photos at physical stores using memory cards. It wasn’t until years later that technologies like Instagram revolutionized the way we shared and stored images.
Similarly, many businesses today use AI and other innovations to enhance traditional processes, but the real potential of these technologies lies in how they can enable entirely new ways of doing business. Companies that use technology to fundamentally change their operations rather than just speed up old processes can unlock new, disruptive markets.
Breaking Free from Skeuomorphic Thinking
The key to embracing new technologies lies in shifting from skeuomorphic thinking to a more “native” mindset, where businesses question whether certain operations are necessary at all. Instead of asking, “How can we improve this step?”, businesses should ask, “Why is this step even needed?”
A prime example of this shift can be seen in Amazon’s approach to innovation at Whole Foods. In some stores, Amazon has eliminated checkout lines altogether, allowing customers to shop and pay without ever interacting with a cashier. This goes beyond just speeding up the process—it’s about eliminating unnecessary steps altogether.
Eliminating Friction to Create New Business Models
One of the biggest barriers to adopting new technologies is the resistance to change established ways of doing things. Many business models are built around friction points—steps or processes that make the system more complicated or costly than it needs to be. But these friction points often remain unchallenged, even when they could be eliminated by new technologies.
Take the financial technology sector as an example. Remittances, for instance, often come with high fees and long processing times. These systems are still tied to outdated, skeuomorphic thinking, much like the old days of waiting for photos to develop in a store. With the right application of modern technology, such as digital payment systems, sending money across borders could be seamless, just like sending an email.
Using Technology to Tap Into Its True Potential
To fully capitalize on new technologies, businesses must go beyond improving old systems and processes. Instead, they should identify the unique powers of these technologies and apply them in ways that eliminate friction and create entirely new ways of doing business. For example, AI’s true strength lies in pattern recognition, not simply enhancing web search results. By using AI to scan medical images for anomalies that humans may miss, businesses can create far more impactful solutions.
Similarly, in healthcare, AI-powered wearables could help detect health issues earlier, preventing costly medical interventions. The U.S. Department of Defense, for example, used AI to detect early signs of COVID-19, demonstrating how AI can reduce friction in healthcare by identifying potential problems before they escalate.
Conclusion: Rethinking Innovation for Greater Impact
The key to thriving in today’s technological landscape is not just about adopting new tools—it’s about rethinking the way we approach innovation. Instead of simply improving existing products and processes, businesses should challenge long-held assumptions and explore new possibilities. By focusing on eliminating friction and leveraging the true power of new technologies, companies can unlock lasting economic and social value.
