As a technologist and professional investor, I am frequently called on to make predictions on the future of  technology developments. But prophecy is a thankless task. The Talmud states that at the end of the era of Biblical prophets,  prophecy became the domain of fools. This does not make prophecy a vanishing occupation because every enterprise needs to  build its business plan on certain assumptions regarding the technology that drives its business future.

These cautionary thoughts came to mind recently when I happened to discover in my files Technology Forecast:1995, a 652-page book issued by Price Waterhouse in September 1994. The book was directionally right on “evolutionary” technologies (such as speech recognition)  but missed “revolutionary” developments linked to the Internet and wireless communications that were  not significant when it was written. Furthermore, a striking factor is that most of the  leading technology product  companies of the time  that are  discussed have disappeared  (except for IBM and Microsoft).

I believe  that the  disappearance of so many technology industry leaders in a few  short years is linked to the fact that their and management missed critical technology developments. Even IBM is no longer the behemoth of the 1990s, having missed critical opportunities to benefit from new technology developments, while Microsoft survived well because new management made critical changes after missing the early years of the Internet, particularly the impact of search capability.

The Internet was not  ignored in the forecast. “Perhaps the most significant trend in the last two  years [1992-1994] has been the global discovery of the Internet. In that period the Internet has evolved from appearing to be a purely academic internetwork to a strategic communications platform that offers effective, low cost, global connectivity.” An extensive discussion of communication protocols follows, including the increasing importance of the IP protocol, which now dominates. What is  missing  in the book are useful  projections moving from the concept to the specific services or products that were going to be based on the Internet. So management folks reading this book would have walked away knowing that the Internet could not be ignored, but without  a sense of urgency about how it would impact their company’s products or services.

Regarding the impact of wireless communications, the book noted that small form factor portable PDAs and computers wirelessly connected were becoming popular. Nowhere, though, is there any anticipation of the  the eventual smartphone phenomenon. And this is five years before the introduction of the Blackberry by RIM that ushered in the age of portable data-capable  wireless devices by leveraging the fast chips,  ubiquitous communication networks and novel software that linked together new technological capabilities in what became a  highly successful consumer device – until Apple’s iPhone  obsoleted Blackberry with a more comprehensive and user friendly device.

An interesting insight worth noting regards on line consumer shopping.” Highly mobile individuals will be able to enter a virtual store and shop much as they do today …. Electronic shopping will not replace the standard mall anytime soon but it will become a viable way of purchasing goods and services for many time-constrained mobile consumers.”  Prophetic indeed, but the impact on retailing was swifter than the writers anticipated, with malls losing as much as 40% of their traffic in the past decade and Amazon emerging as the new retailing behemoth while big department stores are seeking new business models to survive. Reading this at the time, would the managers of big stores like Macy’s would anticipate the threat to their business? I doubt it.

The fact that so few of the corporate leaders of the 1990s  have survived should make management all the more watchful. But it is just as easy to overestimate technologies  and bet the business on an ultimately failing concept (driverless general purpose consumer cars?) as it is to ignore major developments by pretending that they are transient. How does management navigate between these extremes? Management must be on a continuous learning mode and not depend on media-driven visionaries who are likely to be charlatans.

In my experience heading  electronic device development at RCA Laboratories, and  later in  private equity technology investing at Warburg Pincus, I found the following guidelines useful to establish as soon as possible whether new technologies  warranted investment:

  1. Making sure that I had access to well qualified technical experts active in the field. Soliciting diverse opinions broadens thinking. There are always diverse opinions on any new development.
  2. Encouraging an  open environment for innovative ideas from the staff to reach the attention of management.
  3. Funding of exploratory work if it appears that certain developments will impact my  businesses.
  4. If promising developments are identified, fund a product entry program with clear objectives and outstanding people. And then carefully monitor developments to ensure timely new investment (or shut down). At Warburg Pincus this would mean identifying a company   to invest in to capitalize on a new technology and if promising progress is made provide additional capital to fund rapid growth.

My objective was to ensure successful product entries early in new markets and to avoid dead ends. For example at RCA Laboratories, we developed industry leading edge products (and patents) that became the basis of multibillion dollar industries such as CMOS chips, semiconductor lasers, solid state imagers and flat panel displays. At Warburg Pincus, for example, we funded in Covad Communications Inc., the first company to offer low cost, high speed  consumer access to the Internet in the 1990s as well as pioneering  semiconductor chips  for Ethernet communications (Level Communications, Inc.) and multicore processors chips for much more efficient  Internet networking (Raza Microelectronics  Inc).

Corporate success does not come from  looking for prophets. There is no substitute for management’s continuous learning, encouraging a corporate environment open to innovation and eternal paranoia in anticipating new technology impact on its business by timely investments.

Dr. Henry Kressel directed electronics research at RCA Labs and subsequently was the senior partner for tech investing at Warburg Pincus, a leading venture capital firm.