What we should do before investing in technology


We often think of technology as a good thing – surely having the latest version of something is obviously the best way and people who do that win?

Perhaps not.

Charlie Munger said – The great lesson in microeconomics is to discriminate between when technology is going to help you and when it’s going to kill you.

Most companies would benefit from new production technology that is more efficient and so uses less energy.

The deciding factor, however, is what that technology does for the business

Does it help it create more products, for example.

In a commodity business, being able to push more product out means that the market has more supply and so prices go down.

The cost and energy savings made by the more efficient technology is wiped out by the reduction in prices to customers.

All of the benefit goes the customer, with little staying with the manufacturer.

The Japanese are well-known for having slow upgrade cycles, using older equipment for much longer.

This is because changing things adds complexity and could reduce the amount of time the factory actually operates.

In addition, changes often introduce new problems, and Japanese companies value stability and continuity.

They invest in systems that help them reduce defects, by continually monitoring a number of parameters and warning them when things are going wrong.

This helps them maintain quality.

Having good monitoring systems lets workers manage more systems and machines each – while good working practices, maintenance regimes and stable technology let operations carry on without crisis or constant intervention.

All too often, we look for a silver bullet – a new technology solution that will solve all our problems.

We should start, however, by making sure that we are using what we already have well – and good monitoring systems are our eyes and ears into the operations.

It’s simple really – we need to do the basic things a little better, every day.

And that starts with looking and improving what is in place before buying something new.

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