11.1 Introduction

This chapter examines technology strategy. In the discussion, you learn what navigating technological disruption entails, including the role of digital transformation and its impact as a megatrend on business and strategy as well as the role of Industry 4.0, the Fourth Industrial Revolution. Next you learn the importance of new and emerging technologies and their strategic implications. This includes big data and data analytics, artificial intelligence and machine learning, cloud computing, Internet of Things, blockchain technology, and quantum computing. Then you learn a framework that considers technology as a strategy or an enabler of strategy. You learn that there are a few relevant intersections of technology and strategy, where technology can create value and drive competitive differentiation. These areas of value and differentiation include data governance and the responsible use of AI, implementation of Industry 4.0, technology-enabled new business models and enhanced customer experiences, technology as a strategic resource, digital transformation, architecture, and the creation of an agile organization. Finally, you learn how to analyze technology strategy.

11.2 Technology Strategy

Like all strategy formulation, formulating technology strategy answers the question “Where are we going?” All firms need to address the role of technology and technology strategy.

Like innovation and sustainability and ethics, technology is another strategic focus that is formulated at the strategic business unit level of a company and embedded in business-level strategy. As such, technology strategy also answers the “right to win” question of how specifically a firm is going to win or compete in its chosen markets and market segments.

Like all strategy, technology strategy focuses on an outside-in perspective. Companies carefully monitor their external environments and analyze trends and formulate strategies that are forward-looking. Robust technology strategy considers the volatile, uncertain, complex, and ambiguous nature of the firm’s external environment.

This chapter analyzes how changes in the external environments of firms drive strategic responses and how companies formulate technology strategy to create and sustain a competitive advantage.

Technology strategy uses digital technology to improve an organization’s processes, operations, products, and services. Technology strategy frames the “rewiring” of an organization, with the goal of creating value by continuously deploying technology at scale.

11.3 Navigate Technological Disruption

The previous chapter focused on sustainability and ethics strategy, providing a framework for how disruptive megatrends impact strategy (in the form of new ESG strategy, for example).

This chapter introduces a second disruptive megatrend with significant impact on strategy, digital transformation, which involves new and emerging technologies that impact both strategy formulation and strategy implementation. Digital transformation is the process of using existing or new digital technologies to address evolving market conditions and customer expectations.

We are living in the era of technological disruption, and we are in the middle of the Fourth Industrial Revolution. This rapidly evolving landscape of technology changes the way we work and the way we live. It also has significant implications on businesses, their strategic positioning, and their ways of looking for technology-driven and technology-enabled opportunities of competitive differentiation. Digital transformation changes how companies make strategic decisions and how companies operate and deliver value. Digital transformation also drives strategic shifts that every firm needs to embed in its business-level strategy. Hence, developing strategy in the age of technology requires a deep understanding of technological trends and their strategic impacts in a technology-driven environment.

Figure 11.1 shows disruptive technologies.

According to Boston Consulting Group’s Transformation Benchmarking Survey, digitization and digital transformation are the main drivers of companies evolving to survive the Fourth Industrial Revolution. This transformation needs to be driven by strategic considerations and must be a part of the technology strategy embedded into the business-level strategy of a firm.

Some data points and examples that illustrate the acceleration of technology development:

• In terms of new technologies, it took the telephone fifty years to reach fifty million users, the ATM eighteen years, the cell phone twelve years, and the internet seven years. It took Pokemon Go just nineteen days to reach fifty million users.
• During the First Industrial Revolution, it took four hundred years for human knowledge to double. IBM states that we are currently seeing a doubling of knowledge every twelve hours. We are living in the information age, and new technologies like the Internet of Things drive the trend of rapidly increasing knowledge, but they’re also becoming obsolete quicker than ever before.
• You all use AI every day, driverless cars are already operating on U.S. streets, and technology companies are powering the economy, creating more than 50 percent of total market value growth across all sectors since 2015 (Bain & Company).
• Ninety percent of the world’s data has been created in the last two years. In 2022, more than one trillion objects were connected, and more than 90 percent of stock trading is now done by algorithms.
• In a PwC study of 4,700 CEOs, 56 percent stated that technological change is the main factor that drives change in the way their companies create, deliver, and capture value.
• When you apply for the job you will have after graduating from university, it will most likely be AI, not a personal recruitment specialist, that decides whether your application advances beyond the screening round in the application process.

These examples show that technology is a true game changer and that companies need to factor in a robust and holistic technology strategy. Disruptive innovation is much more common than ever before.

Another concept that emphasizes the strategic implications of technological disruption is the fact that we are living in the era of the Fourth Industrial Revolution. The First Industrial Revolution happened in the eighteenth century with the development of mechanical production equipment that replaced human labor, leading to enormous increases in productivity. This was followed by the Second Industrial Revolution with mass production and then the third, driven by the internet. The Fourth Industrial Revolution does not replace the “hand” (manual labor) with machines as the first did, but it replaces the “head” with smart machines, which is truly revolutionary and disruptive. The impact of this Fourth Industrial Revolution goes beyond economic impacts like productivity increases and mass production, also showing a significant social impact. Business is now embracing the concept of Industry 4.0, leveraging the rapid technological advancement that blurs the separation between the physical, digital, and biological worlds. Industry 4.0 drives fundamental shifts in the global production and supply chain networks using smart technologies, automation, robotics, AI, machine learning, and embedded connectivity.

Figure 11.2 shows the evolution from Industry 1.0 (or the First Industrial Revolution) to Industry 4.0 (the Fourth Industrial Revolution).

A practical example of a company navigating Industry 4.0 is BASF, the world’s largest chemical company. While the chemical industry is an old and traditional industry, BASF uses Industry 4.0 concepts to change the way that the company operates. BASF implemented what it calls “smart manufacturing,” stating, “We are increasing the effectiveness of our plants and the efficiency of our production processes through the use of digital technologies and data. With mobile devices, we have access to relevant information for our daily work. The tight integration of production and business processes allows us to make better and fast decisions” (basf.com). BASF uses augmented reality and the Internet of Things (discussed in detail in section 11.4) to make the maintenance and repair of their physical assets quicker and more productive.

The BASF example illustrates that new and emerging technologies are the game changer in Industry 4.0, showing significant impact on strategy development and strategy implementation.

Figure 11.3 provides an overview of disruptive Industry 4.0 technologies that drive the digital transformation and that need to be factored into the strategy process.

The remainder of this chapter explores the critical intersection of technology and strategic management, examining how emerging technologies reshape business landscapes, competitive dynamics, and organizational capabilities.

11.4 New and Emerging Technologies and Their Strategic Implications

New and emerging technologies are shaping strategy. The following technologies are game changers in the ongoing digital transformation, and they have a significant impact on strategy. Their impact on business and the strategy process needs to be understood, and the insight and opportunities made possible by technology need to be integrated and leveraged into a firm’s technology strategy, which is embedded in its business-level strategy.

Big Data and Data Analytics

Business has an abundance of data available that can be used and leveraged for strategic decision-making, including critical strategic topics like market analysis, customer insights, and competitive intelligence. In the current digital age of data-driven decision-making, the data has a high strategic importance. Data is a strategic asset that provides insights into customer preferences, market trends, and operational efficiency. By collecting and analyzing vast amounts of data, companies can make informed, evidence-based strategic decisions, optimize their processes, personalize customer experiences, and forecast future trends, thus shaping their competitive advantage.

For example, many companies use data from rewards apps to analyze their customer preferences to tailor their promotions and recommendations to their individual users. In return, the apps offer value to customers, such as the convenience of quick and remote ordering. Data analytics allows these firms to gain a better understanding of customer behavior and preferences. A few examples of this include Starbucks, Waffle House, Taco Bell, and Kroger.

Artificial Intelligence and Machine Learning

While AI is not necessarily a new technology (computational linguistics started in the 1950s), its full game-changing impact on business has fully developed in recent years. AI, including generative AI, is used to automate processes, enhance decision-making, and provide predictive insights into the strategy process. It is used and leveraged throughout the entire strategy process. These uses include identifying complex market patterns and trends, strategically understanding past performance, forecasting future outcomes, using scenario planning for strategy formulation and implementation, and formulating and evaluating strategic alternatives. Advanced algorithms enhance strategic scenario analysis and optimize resource allocation. For example, Shell uses scenario planning to prepare for various future energy landscapes, ensuring that its business model provides adaptable strategic responses to a rapidly evolving external business environment.

Amazon uses artificial intelligence in its strategic management process to maintain its position as a leader in e-commerce and logistics. The company uses AI-driven algorithms to analyze vast amounts of customer behavior data, identifying complex market patterns and trends, such as changes in purchasing habits during economic shifts. Predictive analytics help Amazon forecast future demand for products in order to ensure inventory optimization and resource allocation.

Together with AI, vastly large data sets, known as big data, can be used strategically to scan the external environment, identify emerging technology, create a technology roadmap, and detect weak signals. It can be used to anticipate demand patterns and consumer behavior, provide recommendations for optimal strategic decision-making, and support strategic planning in a dynamic VUCA environment.

Kroger has been exploring ways in which AI can be used to improve customer experience. In a Forbes interview, Kroger Chief Data & Technology Officer Todd James explains, “We are using AI-enabled dynamic batching to reduce Pickup lead time while enhancing the store associate experience. Through the power of machine learning and AI, we are developing new ways to elevate the Pickup experience for customers.”

Cloud Computing

Cloud computing enables on-demand access to computing resources, reduced infrastructure costs, and the flexible scaling of cloud solutions. This supports strategy by enabling faster responses to customer needs, collaboration and knowledge sharing, enhanced innovation, and faster execution of strategic initiatives.

For example, Netflix uses cloud computing in order to flexibly scale its streaming services. When a new season of a very popular show is released, the platform scales up its server capacity to handle increased viewer traffic in real time, ensuring uninterrupted service.

Internet of Things (IoT)

The Internet of Things (IoT) is a network of physical objects that can connect and share data with other devices and systems over the internet. IoT devices are also known as smart objects and can include common household items like fixtures and kitchen appliances. According to Statista, the number of Internet of Things devices worldwide is forecasted to almost double from 15.9 billion in 2023 to more than 32.1 billion IoT devices in 2030. The Internet of Things is one of the drivers for the abundance of data that businesses can use in their strategy formulation. In strategy, the Internet of Things is used to improve operations, enhance the customer experience, and improve service offerings. IoT-enabled businesses can use real-time data to make informed decisions, respond to market shifts, and anticipate challenges.

For example, Siemens uses the Internet of Things in its factories to improve productivity and operational efficiency. John Deere uses the Internet of Things to integrate their sensors on their agricultural equipment, allowing farmers to collect and analyze real-time data on soil moisture, weather, and crop health. This data allows farmers to make data-driven decisions improving their yields and overall operational efficiency.

Blockchain Technology

The blockchain offers a decentralized and secure way to record transactions. Its implications for strategy include enhanced transparency, reduced fraud, and the possibility of new business models.

IBM uses blockchain in supply chain management to create secure transaction mechanisms and to improve transparency and traceability. Another example is international shipping and logistics giant, Maersk. Maersk uses blockchain in global shipping to create an end-to-end transparent supply chain tracking system with higher levels of visibility, a reduced administrative overhead, and an enhanced compliance tracking across complex global logistics networks.

Blockchain technology also allows for supply chain transparency. IBM uses blockchain to enable their supply chain partners to share trusted data through permissioned blockchain solutions. This approach provides end-to-end visibility that allows businesses and consumers to verify product authenticity and responsible sourcing, in return gaining trust from customers across the supply chain.

Quantum Computing

Quantum computing promises unprecedented computational power. The applications for quantum computing are primarily centered around speed. Quantum computing allows for the processing of vast amounts of datasets and complex calculations at extremely high speeds that are unattainable by normal computers. While this is not yet a market-ready technology, businesses need to monitor its development closely and possibly use first-mover advantages in this area as a possible source of a sustainable competitive advantage.

Quantum computing also allows for advantages in securing sensitive government communications and protecting financial transactions and personal data.

11.5 Framework: Technology as a Strategy or an Enabler of Strategy

Technology can be either a strategy or an enabler of strategy.

Technology strategies co-evolve along with the emergence of new technology systems. New technology systems such as printed electronics and fiber optics, are rapidly emerging at the interfaces of unrelated technology areas. Therefore, new technology systems, result from the convergence of these distinct yet now intersecting technology systems. When formulating a robust and value-adding technology strategy, firms need to integrate new and existing technologies into a coherent strategy. Firms are dealing with unrelated knowledge rooted in different technologies and must decide how systemic (complete technology system) or focused (single component of the technology system) their engagement in technology development in the converging technology system is going to be. Companies also must decide strategically the extent to which to develop specialized or design knowledge. From a systems perspective, technology strategy can be considered from the perspective of the scope (focused vs. systemic engagement with the technology system) and type of technological knowledge (specialized or design knowledge) (Wambsganss, et al., 2023).

A firm’s technology strategy must directly support and enable the firm’s broader strategic objectives. Technology needs to create value and drive competitive differentiation, and technology strategy needs to address this. Technological investments in a firm’s resources, capabilities, and core competencies need to align with the firm’s mission, purpose, vision, and values, and the investments must directly enhance the firm’s technology strategy. In this sense, technology strategy is a success-critical strategy.

As an enabler of strategy, the more extensive the adoption of new digital technology, the larger the change in strategy (Van Zeebroeck, Kretschmer, & Bughin, 2023).

When firms approach technology as an enabler of strategy, technology is not the primary focus of strategy. In this case, technology is neither the starting point nor the solution for a firm’s strategy. Taking the approach of technology as an enabler of other strategies, a firm first must define strategic opportunities and threats that arise from its external environment; then it defines the strategic strengths and weaknesses that result from internal resources, capabilities, and competencies. Then the firm needs to analyze how new and emerging technologies can position the company to take advantage of its opportunities and mitigate its threats by enhancing its strengths and bolstering its weaknesses.

As an enabler of strategy, technology needs to be closely aligned with strategy, and the firm’s approach to technology must be derived from the firm’s other strategies and embedded in them, directly supporting the firm’s broader strategic objectives. Technology needs to create value and drive competitive differentiation while aligning with the firm’s mission and other strategies. Here, technology is a success-critical strategy enabler but not the starting point of strategy.

While there is no “one size fits all” approach to integrating technology into a firm’s other strategies, the following are a few relevant intersections where technology and strategy interface and where technology can create value and drive competitive differentiation.

Data Governance and Responsible Use of AI

While the use of technology provides unprecedented business opportunities, every company also must address the risks and threats that accompany the use of new technologies. The abundance of available data about customers can cause issues related to privacy rights. Data breaches in an increasingly digital world pose a significant risk both to customers and the firm. Cybersecurity is not just a technical concern but a strategic business concern because of the threats to brand reputation and financial stability when data is breached. A robust cybersecurity strategy helps organizations build trust with customers and other stakeholders, protect critical assets, and ensure compliance with all applicable laws and regulations.

It is also important that companies establish robust data governance strategies and policies. Transparent AI development and use are critical. As AI becomes more advanced and integrated into various business processes, it raises ethical concerns around fairness, accountability, transparency, and privacy. Responsible AI development and deployment should prioritize the principles of fairness (avoiding bias), accountability (ensuring explainability), and privacy (protecting user data). Companies must implement ethical technology governance and comprehensive data governance with compliance mechanisms that consider the social implications of technological implementation in business. It is also important that companies implement risk management strategies for technologies that they use.

Boston Consulting Group identifies the following responsible AI principles that companies need to embrace and cover in their AI and technology strategy:

• Accountability
• Fairness and equity
• Data and privacy governance
• Social and environmental impact
• Safety, security, and robustness
• Transparency and explainability

Implementation of Industry 4.0

The implementation of Industry 4.0 principles presents tremendous strategic opportunities for companies. Using Industry 4.0 technologies can drive operational efficiency and increase productivity. Embedding sophisticated sensors in machinery to monitor the health of production assets enables preventive maintenance and significantly reduces operational downtime (predictive maintenance). Automation and robotics reduce labor costs and increase productivity. For firms, it is critical to understand the implications of automation and robotics. According to the U.S. Bureau of Labor statistics and consulting firm McKinsey, up to 40 percent of current jobs will disappear by 2030. Companies need to understand the transformation of industries and business models, declining and growing job families, and the new skill sets and new ways to organize work that are necessary. Against common belief, automation and robotics are not issues that only affect unskilled work. There are well-qualified job categories that are impacted by the potential to automate work.

Technology-Enabled New Business Models and Enhanced Customer Experience

Technologies enable disruptive and enhanced business models. For example, technology is at the core of how Uber disrupted the taxi market and how Airbnb disrupted the hotel market. E-commerce and platform-based business solutions provide new approaches to meeting and exceeding customer needs. Microsoft’s shift to cloud computing with Azure has transformed its business model and revenue streams significantly. The same is true for Amazon Web Services (AWS), which currently generate more net profit than the traditional Amazon e-commerce business.

Amazon also uses AI to enhance its recommendation algorithms, improving customer satisfaction and increasing sales. Hence, there are a variety of opportunities for using technology like AI to enhance customer experience and customer engagement in support of gaining a sustainable competitive advantage.

Another example of using new technologies to enhance customer experience is Netflix’s use of data analytics to monitor viewer preferences and optimize content production. In the finance industry, Goldman Sachs uses sophisticated algorithmic AI approaches and machine learning for their risk assessment, automated trading strategies, and personalized investment recommendations.

Technology as a Strategic Resource

As you now know, strategy is the quest to create a sustainable competitive advantage. Any firm that can use technology as a means of competitive differentiation has a strategic resource that they may capitalize upon to build strategic capabilities and turn them into core competencies that meet all criteria of a VRIO analysis (valuable, rare, inimitable, and organized to capture value). Firms that use technology to gain technological differentiation, technology-enabled innovation, and product development are especially well positioned for success.

Digital Transformation Framework and Architecture

As you now know, it is critical that a firm has resources, capabilities, and core competencies that can provide a sustainable competitive advantage. The technologies reviewed here are potential candidates for these strategic resources. Every company needs to invest in digital transformation to enable the use of technology as a competitive advantage. This digital transformation investment includes talent and capability development with the upskilling and reskilling of employees, treating knowledge workers as a strategic resource, and investing in the technological infrastructure. Creating AI and technology literacy throughout the whole organization through workforce development becomes a strategic differentiator, making human resources a critical factor. The firm needs to develop a comprehensive roadmap for digital capabilities and create a flexible corporate infrastructure that supports rapid technological adaptation and the ability to design and scale technology in support of profitable growth.

Creating an Agile Organization

In times of continuous technological disruptions, traditional organizational structures with hierarchical levels and functional and organizational silos are no longer appropriate. Companies must design organizational structures and key processes in support of technological and strategic business agility. This allows organizations to respond swiftly to a quickly evolving and changing environment that is characterized by disruptive and continuous change. Companies need to build agile paradigms into their strategies and organizational capabilities. This includes the ability to continuously adapt strategy. The former approach of developing strategy and then just focusing on implementation for the next five to ten years is no longer a successful approach to strategy. It is a strategic imperative for successful organizations to employ continuous strategy adoption mechanisms backed up by real-time performance management.

11.6 Analyze Technology Strategy

When you conduct a case analysis, you analyze a firm’s technology strategy. This is step six in the case analysis process.

11.7 Why Technology Strategy Is Important to Business Graduates

As you now see, technology strategy may be both a strategy and an enabler of strategy. As a recent business graduate starting as a business support unit manager in support business units in a large company (such as an accounting manager), you are directly impacted by all uses of technology. You may also be asked to support strategic business managers in formulating technology strategy (such as data governance, the responsible use of AI, or how to use Industry 4.0 technologies to drive operational efficiency and increase productivity).

Business graduates that enter either internal or external consulting roles require a high level of competence with technology strategy to communicate with business executives how their consulting projects fit into the overall technology strategy of the firm. For example, you may be asked to consult on how to create an more agile organizational culture to capitalize quickly on new and emerging technologies. For business graduates who are or will become entrepreneurs, fluency with technology strategy is essential to establishing and growing a successful firm. How will you invest in digital transformation to enable the use of technology as a competitive advantage?

11.8 Conclusion

In the current era of technological disruption and digital transformation, technology and strategy are closely linked and interconnected. Technology is crucial in building competitive, agile, and resilient organizations. It is integral to strategic success by allowing companies to leverage data analytics and compete more effectively. Technology is shaping business strategy by driving competitive differentiation, enabling innovative and disruptive business models, opening new markets, improving efficiency and productivity, and fundamentally changing the way businesses operate. It is important to align technology with core business objectives, focusing on customer needs, fostering innovation, and ensuring security. With the strategic opportunities that new technologies present, companies also need to address possible risks through robust data governance, cybersecurity strategies, and policies regarding the responsible use of AI. Emerging technologies such as quantum computing will continue to shape strategy. Companies must continuously balance and evaluate opportunities and risks, making it essential for companies to stay vigilant, adaptable, and forward-looking in their strategic approach to technology as a driver of long-term success.

Figure Descriptions

Figure 11.1: Twelve disruptive technologies: (1) renewable energy, (2) mobile internet, (3) automation of knowledge work, (4) internet of things, (5) cloud technology, (6) advanced robotics, (7) autonomous and near-autonomous vehicles, (8) next-generation genomics, (9) energy storage, (10) 3D printing, (11) advanced materials, (12) advanced oil and gas exploration and recovery. This graphic is purple.

Figure 11.2: Industry 1.0 (1784): mechanization, steam power, weaving loom. Industry 2.0 (1870): mass production, assembly line, electrical energy. Industry 3.0 (1969): automation, computers, electronics. Industry 4.0 (today): cyber physical systems, internet of things, networks. This graphic is purple.

Figure 11.3: Industry 4.0 includes 3D printing, internet of things, artificial intelligence, big data analytics, cloud computing, augmented reality, and mobile devices. This graphic is purple.

Figure References

Figure 11.1: Disruptive technologies. Kindred Grey. 2025. CC BY.

Figure 11.2: Evolution from Industry 1.0 to Industry 4.0. Kindred Grey. 2025. CC BY.

Figure 11.3: Disruptive Industry 4.0 technologies. Kindred Grey. 2025. CC BY. Includes the following icons from the Noun Project (Noun Project license): Virtual reality (krisna arga muria, 2024, https://thenounproject.com/icon/virtual-reality-7432738), AI (Ketileng Design, 2024, https://thenounproject.com/icon/ai-7464800), data (Najwa Himma, 2024, https://thenounproject.com/icon/data-7553891), cloud (Ecem Afacan, 2015, https://thenounproject.com/icon/cloud-165891), internet of things (MUHAMMAT SUKIRMAN, 2024, https://thenounproject.com/icon/internet-of-things-7552002), cell phone (Dong Gyu Yang, 2024, https://thenounproject.com/icon/cell-phone-6835678), and 3D printing (miftakhudin, 2024, https://thenounproject.com/icon/3d-printing-7223752)

Figure 11.4: Amazon. AMAZON. 2020. Public domain. https://commons.wikimedia.org/wiki/File:Amazon_PNG6.png

Figure 11.5: Kroger is an example of a company using AI to improve customer experience. Ambrosia LaFluer. 2019. CC BY 2.0. https://commons.wikimedia.org/wiki/File:Kroger_Pharmacy_-_Shepherdsville,_KY_%2850980791912%29.jpg