Rather than adopting the hackneyed advice to think outside the box, companies often take a different tack: they relabel the box.
The most common way of doing this used to be to declare that what was a carmaker, insurance company, or bank was now a technology company.
Under Armour, which makes sportswear, Jaguar Land Rover, which makes vehicles, and financial institutions such as Capital One, Goldman Sachs and JPMorgan Chase have made such statements in recent years. “Anybody that’s going to live in the future better be [here],” said Under Armour’s chief executive Kevin Plank when asked to explain his presence at the tech-heavy Consumer Electronics Show in 2016.
JPMorgan took this ambition a step further last week when it said it was giving new investment bankers and asset managers coding lessons, in the hope they would learn to “speak the same language as our technology teams, which ultimately drives better tools and solutions for our clients”.
Whether teaching coding will achieve such goals is a subject for another column. But whether JPMorgan and Under Armour are technology companies is an easy question to answer. They are not.
Or rather, if they are, then only in the sense that all companies must understand and invest in technology.
If anything, the ubiquity of tech is rendering old categories meaningless.
Very occasionally, a company is genuinely misunderstood, often for deep historical reasons. Until it sold its sugar and syrup business in 2010, Tate & Lyle struggled to convince analysts that it was in fact a high-tech ingredients producer. One former chief executive went so far as to sport a suit made from corn-based fabric, to show off the group’s science-based strategy.
There are also a few practical reasons for companies to emphasise their tech strengths. As dependency on advanced technology increases, everyone competes for the same developers and programmers. Traditional companies are bound to search for a little more clout in the jobs market against obvious tech heavy-hitters such as Google or Facebook.
Mostly, though, the reasons for dressing in technology’s clothes are less edifying. Some companies simply calculate the sector’s stock market glamour will rub off on their own securities. As the recent volatility of US technology stocks has shown, this is far from a one-way bet.
At its extreme, the hunt for a hot sector can lead to such shape-shifting absurdities as the renaming of humdrum manufacturers as go-go dotcoms in the 1990s or the more recent pivot of tea brewers, biotech companies, sports bra makers and others into pioneers of blockchain.
In the early 2000s, some companies fighting against growing opposition to stock option perks lobbied to be reassigned to the technology sector, in the hope their lavish grants of options would look less outlandish when compared with Silicon Valley. According to an insider, one traditional industrial company even argued it was a technology company because it had a website.
This sort of quest often ends in retreat, restructuring and regret.
A more solid strategic approach is to buy into the sector — witness legacy banks’ takeovers of fintech stars. But a company that merely tries to pass itself off as something it is not risks annoying, or worse, confusing, its front-line staff and customers. Common sense says most users of banks, carmakers and athletic wear want to save or borrow money, to buy a reliable car, or to find some comfortable leggings. If they start to worry about how the technology works, it has either gone wrong ( banks, please note), or is somehow obscuring the core product.
The trend towards sector fluidity is unlikely to slow down. Even the boxes into which companies were once placed are being shuffled. S&P Dow Jones Indices has just moved multiple stocks, including Google’s parent Alphabet and Facebook, out of the “information technology” sector and into “communication services”.
“We started thinking how different companies use Facebook and the answer was: ‘They communicate through it’,” explains David Blitzer, who heads the S&P DJI index committee.
This matters most for investors’ industry-weighted portfolios. But the sector is so broad — it embraces telecoms groups such as AT&T, advertising agencies and computer game makers — that it allows for even more change in years to come.
These days, we talk to the technology hidden in our phones, our cars, our banks, our shops and our household appliances. They talk back.
Pretending to be a technology company is so yesterday. Anybody who’s going to live in the future better be in communication services.
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