Paul Saffo says technology shouldn’t be exploited to just cut costs or do old things more efficiently, it should be a catalyst for doing new things in entirely different ways.

Question: What are the effective ways companies can reduce operational costs?

Paul Saffo: We have tended to use new technologies in companies in two ways: either to lower costs, or to create more effective ways of approaching the market. Using technology merely to lower operational costs amounts to standing on a whale fishing for minnows. It just allows you to do the old thing more efficiently, where in this moment of deep transformation, it is much more likely that you should be doing something entirely new in an entirely different way. So if you focus on technology solely as a way to squeeze expense out of your existing business, you’re probably doing it at the cost of ignoring what your future business will be.

So my advice is don’t use technology primarily to lower costs. Use technology to create new, effective ways of touching the market and creating new businesses and if you do that right, the cost savings will come.

Conducted on: June 18, 2009.