Wednesday, August 19, 2009

Does IT Matter? Depends on How You Define IT

After naming this blog based on a chapter in Nicholas Carr's "The Big Switch", and reading his controversial Harvard Business Review article "IT Doesn't Matter", I felt compelled to read his 2004 book "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage", which expands upon the article and addresses the debate that it triggered. Carr's argument is basically that obtaining a sustainable competitive advantage through IT is unlikely, since your competitors will be able to duplicate that advantage, and that it is often difficult to deliver the logically anticipated business benefits of IT projects.
Over last sixty years, IT has progressed from a complex, risky and expensive investment to a ubiquitous and increasingly shared "infrastructural technology". To make matters worse, IT has become "The Universal Strategy Solvent", providing all companies with the same set of powerful tools to globally source, market, and distribute their products. In this environment, competitive advantages with are difficult to sustain. Therefore, they must be leverageable for the creation of new advantages. This idea reminds me of, which started out as an online bookseller, branched out into myriad merchandise categories, added an online public marketplace, and became a provider of cloud infrastructure.
To manage the IT "Money Pit", Carr recommends spending less, following in the footsteps of other organizations that work the kinks out of new technologies, having business partners take on innovation risk, and managing IT defensively by preventing catastrophes before searching for breakthroughs.
Carr ends by debunking the notion that computers have, or will magically transform our society. Certainly, we have many of the same dominant institutions and challenges, with some complex new ones, like the shifting of skilled jobs to low-cost economies.
But, does IT matter to business seeking to get ahead? Certainly, early moves by already-strong players, like American Airlines' Sabre System, and American Hospital Supply's purchasing and fulfillment system for its customers, yielded long-lasting competitive advantage, but these occured at the early stages of IT's ascendancy. But Carr's detractors point to counterexamples of IT making a difference, and there are many successful businesses that depend on creative and effective uses of IT.
I have found that, if we define IT as the application of technology to business requirements as taken from those outside of IT, then there is there is little chance of achieving competitive advantage or even much of a return on investment. However, if the practice of IT includes the application of systems thinking and modeling to collaboratively define and rapidly implement new ways of doing business, then there is the possibility for significant and leverageable sucess. At the heart of all of today's IT success stories, there is a cross-disciplinary conception of how the business could operate differently.
I encourage all of my IT colleagues, as well as any one who cares about the success of IT investments, to read this book. It is now five years old, but still holds important ideas.