What makes a company a 'tech company,' and is the title worth the responsibility?
Companies recognize the role technology plays in competition. And every industry wants in.
A Silicon Valley zip code doesn't provide any company the God-given right to call itself a tech company.
Take Uber's recent high-profile turmoil. Last year, Uber was reduced to a taxi firm when the Court of Justice of the European Union ruled Uber was not the "information society service" it declared itself.
Uber's case brings forth important questions:
- What makes a tech company?
- Who has the authority to decide?
- What are the qualifications?
- Why are companies so quick to rebrand as tech companies?
Traditional brick-and-mortar retailers, legacy financial institutes and national restaurant chains are capitalizing on the catchphrase of the 21st Century: "Every company is a tech company."
Some argue the "tech company" title can't be self-appointed.
A company is a true tech company if it builds technology for customers to use, according to Ted Schadler, VP and principal analyst at Forrester, in an interview with CIO Dive. If a customer is buying a business service that sits on top of the technology, that vendor is not a true technology company.
Schadler's definition narrows the playing field, though Microsoft, IBM and HP Inc. can rightfully maintain their tech company reputation. However, his definition also means companies like Facebook and Google may need to sit back down.
The new bright and shiny objects
There's something shiny about the "tech company" attribution that brands want their names associated with. These are typically the same companies that recognize the role technology plays in effective competition. And every industry wants in.
Restaurants are using technology to better reach customers and store employees. Pizza delivery chains, in particular, are heavily investing in technology to stand out from competitors. In October, Pizza Hut announced a partnership with Toyota to create a robot pizza-maker in the bed of the SR5 pick-up truck. Even drones are hitting the pizza delivery industry.
Still Pizza Hut has to catch up to Domino's, which has numerous online ordering services, including through PlayStation and Amazon's Alexa.
"To say that they aren't tech companies, some of these guys are pretty much tech companies that serve sandwiches or pizza," said Chris Andrews, Pei Wei CIO, in an interview with CIO Dive. Restaurants like Pizza Hut and Panera Bread have made steady investments in technology, particularly in the restaurant tech space.
"Are you doing technology for technology's sake and thinking that you're special or can you buy versus build?"
CIO, Pei Wei
The retail industry is picking up on data curation. Companies like Stitch Fix, an online subscription shopping service, have made data science the root of company culture. The service collects 90 points of measurement data from user profiles to construct better shopping profiles for customers. The whole business was built on data curation for shopping.
Nike likens itself to a tech company, which just happens to sell sneakers. The Nike House of Innovation 000 in New York allows shoppers to reserve shoe sizes using a smartphone. Shoppers can have shoes waiting for them in a designated locker and check out using the Nike Plus app.
Retailers aren't the only ones eyeing the tech industry's territory. JPMorgan Chase invented a blockchain with an open code based on Ethereum, according to CIO Lori Beer. The company has found success and has engineers moving to its internal blockchain team.
If a company is in a vertical industry, "you feel that off-the-shelf in some cases doesn't really fit your business 100%," said Andrews. This means companies are relying on internal development and partnerships in the tech industry.
Walmart and Microsoft announced an expansion of their partnership in November which includes combining engineers from both companies to work on business applications in Microsoft Azure.
CIOs from these companies are taking an aggressive stance on technology implementation and reliance, and for good reason. However, even as digital customer accommodations grow, these companies are still categorized by what they offer the public: retail, banking and of course pizza deliveries on nights no one can agree on what they want for dinner.
Allure of a title
Nontech companies like to call themselves tech companies because it signals to customers, employees, investors and partners they're innovative.
When a CEO announces the company is making a new tech investment during an earnings call, stocks go up because it indicates to investors the company is spending money to improve the business.
However, it's a signal that is "artificial" at times "because they have to spend the money anyway," said Schadler.
By putting a label on that extra spend or investment in tech, companies can boost their market perception. Granted, companies have to show a return on the tech investment in order to justify the stock market "reward," he said.
Not only do companies want to look like a tech company, they want to function like one by using agile methods, analytics and DevOps. It's understood digital product management supersedes IT product management.
"You have to be realistic about who you are and how you're going to use technology," said Andrews. Companies that want to expand beyond their industry better equipped with technology need to be strategic and honest. "Are you doing technology for technology's sake and thinking that you're special, or can you buy versus build?"
Securing talent and investments needed to move a digital agenda forward is challenging, but it's becoming a top priority.
A dangerous game
The tech industry is known for having few regulations and any conflict "tech companies" run into can be self-inflicted.
"When there are no rules around what you do, then people will blame you for every bad thing that happens because you have maintained the optionality and you have implied to people that you have complete and total control," said Alex Stamos, adjunct professor at Stanford University and former Facebook CSO, while speaking at a Tanium conference in Washington in November.
Since its release in 2004, the social site has "bamboozled the world" into thinking it's a tech company.
VP and principal analyst, Forrester
Facebook is a Silicon Valley company, often walking the tightrope of ethical behavior. But as long as Facebook operates under the guise of a tech company, it has a regulatory safety net.
Facebook, for all intents and purposes, is a publisher and communication company, according to Schadler.
If the public finally called on Facebook to identify itself as a media company, the company would fall into a web of media regulations it could previously bypass. Since its release in 2004, the social site has "bamboozled the world" into thinking it's a tech company, said Schadler.
This isn't to say Facebook and Google have not moved into genuine tech company territory, by Schadler's standards. Facebook launched Workplace by Facebook in October 2016, giving businesses a communication software service. Google Cloud is currently the No. 3 cloud provider and has its hands in true technical offerings.
As time goes on, the lines can easily blur between "tech company" and whatever else they are. Companies outside of traditional tech are indulging themselves and carrying the title proudly.
A universal definition for "tech company" is unlikely, but it will probably always be a title worth pursuing, even with the added responsibility and criticisms.
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