by Jack Bergstrand

Why New Technology Demands New Business Models

Feb 23, 2011

You’ll get the most from investments in cloud computing, mobile applications and other emerging technology if you apply them to fresh ways of doing business.

Recently, I participated in the Drucker Centennial event and attended the Drucker Institute’s Innovation Forum with participants from, among other companies, Boeing, Coca-Cola, Intuit and Lockheed Martin, along with nonprofits Teach for America and the Rainforest Alliance. It was a great time to reflect on Peter Drucker’s legacy and what he had to say about successful and unsuccessful innovation.

The future of our national and corporate competitiveness, we all agreed, depends upon our ability to innovate. And the call for innovation tied to new technologies has not been this intense since the late 1990s, when the dotcom revolution exploded.

Unfortunately, many CIOs are not participating strategically or systematically enough in innovation. Because of this, many companies falter despite having access to an avalanche of ideas from almost every department.

One problem with systematic innovation is that CIOs are simultaneously held accountable for running the current systems and complying with do-more-with-less mandates, while also being expected to support an ever-growing array of “innovative” ideas from their colleagues.

But you can learn a lot from Peter Drucker about how to innovate with today’s emerging technologies, including cloud computing, mobile technology, social media and collaboration tools. He had brilliant insights about innovation that can help CIOs take the right risks on new technologies and avoid the failures that ultimately sank so many dotcom companies.

Make a Fresh Start

Drucker defined innovation as “change that creates a new dimension of performance.” Such change depends on making intelligent enterprise trade-offs—planning to abandon some activities and taking deliberate action to do something new. New initiatives require business-model changes at the enterprise level. Probably no one has a better view of what needs to be on this corporate to-do list, or what should be on the what-not-to-do-anymore list, than the CIO.

Successful innovation has three outcomes: First, it makes your current enterprise more effective; second, it helps the enterprise identify and realize its potential; and third, it allows you to create a new type of enterprise for a different future. Without the not-to-do list that defines required business-model changes, attempts at innovation often recall the old joke about the child who fed birdseed to his cat, because that’s where his canary was. As the CIO, it’s your job to make sure your company isn’t feeding technology birdseed to expired business canaries.

If we pour new technologies into old business models, innovation will never get translated into customer orders and new revenue. At the same time, we must never mistake great technology for great innovation.

Remember Warren Buffett’s advice to dotcom investors? He said to be wary of buying stock in companies that weren’t making money, because the investments could not sustain their value.

In the same way, don’t throw money at new technologies just because they’re popular. Drucker would say, “Don’t tell me that you had a great meeting with me. Tell me what you are going to do on Monday that’s different.” Change won’t happen by magic. You need to focus on how to apply innovative IT in ways that will enable your company to grow as Drucker envisioned.

Jack Bergstrand is a former CIO of the Coca-Cola Company and former CFO of Coca-Cola Beverages. He is founder of Brand Velocity, a consultancy that helps companies accelerate business growth, and the author of Reinvent Your Enterprise. Contact him at