Study says internal conflict over technology imposes hidden costs
Accounting firms considering a new technology may find themselves facing added costs whether they adopt or not, according to a new study from the National Bureau of Economic Research. When companies make decisions to adopt new technology, internal conflicts can increase costs no matter what the final decision winds up being.
Using both reviews of prior literature, as well as mathematical modeling, the economists determined that while many focus on the cost of technology itself, internal disagreements among employees with different interests can add further expenses, regardless of what the decision actually is. These are generally not direct costs that can be measured on the balance sheet but, rather, are seen to reflect decreased motivation and productivity, as well as the time devoted to addressing internal conflicts.
This psychological effect is likely connected with basically losing the organizational power struggle that a technological question represents. The paper pointed to how IBM’s decision to sell personal computers was heavily opposed by its sales department, which was used to selling large mainframes to businesses. Ultimately, the company spent so much of its time managing conflicts over things like deployment of strategic assets, its reputation, and its relationship with corporate customers that IBM decided to eventually exit the PC market altogether. There were similar conflicts when Blockbuster wanted to enter streaming in response to Netflix, much to the chagrin of its brick-and-mortar employees, and when BlackBerry wanted to emphasize software in response to the iPhone, which rankled its hardware specialists.
In each of these cases, there were factions who benefited from the status quo and therefore resisted adoption of new technologies, which ate away at the economic benefit of doing so. At the same time, companies also have factions that will benefit from new technology, and who will become just as aggrieved should the decision fall in favor of the status quo, imposing their own costs in the form of decreased productivity and increased rancor. In this sense, any decision is likely to anger at least some factions within an organization, with the only difference being which factions lead the resistance.
“While those who will not benefit from a technology’s adoption resist change, creating costs if the firm does choose to adopt, those who do benefit promote change. Those agents create costs for the firm if it does not adopt. In other words, once the technology opportunity appears and there is an adoption decision point, the firm cannot ‘win’ in terms of returning to the status quo. It faces the costs associated with internal disagreement regardless of what it chooses to do,” said the paper.
To mitigate such conflicts, the researchers suggested directly paying off aggrieved factions, shared control that allows for at least bargaining between factions, or restructuring so the factions are less likely to meet (up to, possibly, turning one or the other into an independent unit). In practice, all these suggestions are about balancing competing interests and finding ways to reduce internal conflict, which the researchers say is an inevitability.
“As such technologies are characterized by there being internal winners and losers, it is the very opportunity to adopt such technologies that leads to internal conflict, makes it impossible to completely avoid, and makes it hard to predict unambiguously that such conflict will be a restraint on technology adoption. Instead, that adopt decision is molded by the balance of competing interests and, in an important case, those balance each other out and conflict does not distort the technology adoption decision at all,” said the paper.
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