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Where Is Tech Going in 2023?
Looking ahead is always a tricky business. While the turn of the year presents an opportunity to take a fresh look at your strategy and plan where to focus your energies, it can be hard to sort real trends from hype. This is especially true when it comes to tech. Think about this time last year, and the excitement around NFTs, crypto, and the metaverse.
By fall of 2022, NFT markets were down 90%, we’d entered a cold crypto winter, and a bustling metaverse was still more of a dream than reality. Separating real innovation from hot air can be the difference between a big win and a costly flop.
2023 will likely be a more sober year in tech. Geopolitical and economic uncertainties are injecting more caution into the next phase of tech’s evolution. Leaders will have to search for ways to do more with less, find value where innovations overlap, and strategically invest in technologies that are hitting a tipping point.
A group of McKinsey’s technology practice leaders have taken a look at what 2023 might hold, and offer a few new year’s tech resolutions to consider.
Look out for combinatorial trends.
By Lareina Yee, San Francisco
In 2022, we identified 14 technology trends that have the potential to change how we work and live. These included space technologies, clean tech, AI, and immersive reality technologies. For executives in 2023, the challenge will be not just betting on individual trends or ramping up software engineering talent, but thinking about how all these technologies can create new possibilities when they’re used together — what we call combinatorial trends.
In many domains from consumer to enterprise across all sectors, the combinatorial trends are creating exciting new possibilities. Because of the vast array of possible combinations possible, creativity in “mixing the ingredients” becomes a key to success. Consider the technologies in a new electric car: cloud and edge computing that power the networks connecting cars, applied AI and ML that enable autonomous decision making and driving logic; clean energy and sustainable consumption technologies that create the core of vehicle electrification through, among others, new lightweight composites and battery capability advancements; next-gen software technologies enable faster development of customer-facing features and reduce time-to-market, while trust architectures ensure secure data sharing. Together, these technologies combine autonomy, connectivity, intelligence, and electrification to enable a new future of terrestrial mobility.
Prep the board for tipping-point technologies.
By Klemens Hjartar, Copenhagen
Game-changing technologies, such as 5G, AI, and cloud, are hitting tipping points for mass adoption. Our research shows, for example, that companies are looking to move about 60% of their IT estate to cloud by 2025. And more than 50% of companies report they’ve adopted AI in at least one function in their business. While boards may be preoccupied with flattening or reduced investment in IT budgets, they need to keep energies focused on the risks and opportunities in these big shifts.
Doing this requires the board to prioritise budget for upgrading IT foundations that enable speed, security, resiliency, and reusability. These aren’t the sexiest investments, but automating processes, investing in data foundations, cleaning up tech debt, and continually renewing the IT architecture are needed for the business to have a chance of taking full advantage of the new technologies coming online.
The board is better positioned to advocate for this approach than anyone else. IT’s priorities are too often shaped by individual business units or divisions. The investments in tech foundations – “IT for IT” – benefit the entire business, so require the board, working with top management, to guide and direct the effort. A good rule of thumb is that 15–20% of IT’s change budget needs to be allocated to this foundation work.
Leaders can’t assume the board will come to this vision on its own. For the board to be able to engage at this level, the CIO and CTO will need to have more continual and frequent dialogs with individual members of the board about tech priorities and needs.
Free the engineers you already have.
By Aamer Baig, Chicago
Layoffs in the tech sector and belt-tightening measures at most enterprises mean that tech leaders in 2023 will need to master the art of doing more with less.
The trap will be to ask your tech people to simply do more. Instead, try getting them to do less — less admin work, less bureaucratic work, less manual work. We’ve found that in many large organisations engineers spend as little as 50% of their time on actual development. Imagine improving that by just 10 percentage points for a large company that has thousands of engineers. There are huge amounts of productivity there for the taking.
CIOs can capture it by being more scientific and methodical in developing and applying the craft of engineering. Specifically, there are a few steps they can take:
- Be more thoughtful about team makeup and get a handle on who your top performers are. Individual engineer performance can vary 2-3x between teams.
- Look into how many distractions you can take off of your engineers’ plates. Even relatively simple fixes, like cutting down on meetings or making the “agile ceremonies” more productive, can free up substantial time.
- Lastly, go all out on automation to remove the scourge of manual tasks that weigh down engineers. Automating testing or compliance can have a huge impact in terms of freeing up engineer capacity to do what they love.
This isn’t just a productivity issue; it’s a talent issue. If you want your company to become a destination for top engineers, you need to create a work environment where engineers can do what they love.