IT Does Matter! IT is the main contributor to the competitive edge of IT-intensive companies. Actually IT correlates with competiveness more than R&D spending (innovation).
Prof Erik Brynjolfsson of MIT Sloan School and Prof Andy McAfee of Harvard Business School have published an article in HBR – Investing in the IT That Makes a Competitive Difference by Andrew McAfee and Erik Brynjolfsson – showing how IT enables companies to be more competitive. Their studies of corporate performance reveal a growing link between certain kinds of technology investments and intensifying competitiveness.
Erik’s and Andy’s article rebuts scientifically Nicolas Carr’s 2003 HBR article “It Doesn’t Matter”. http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml;jsessionid=FU1BHFAE4KQEIAKRGWDR5VQBKE0YIISW?id=R0305B.
Nic Carr has claimed in his HBR article that IT has become a commodity much like railways and electricity; IT doesn’t contribute anymore to the competiveness of companies. Erik and Andy have proven in their research that Nic Carr is wrong. The MIT Sloan and Harvard scientists have shown that for IT intensive industries we have seen a Schumpeterian Transition in the late 90’s and (what a surprise!) this transition is causally related to and strongly enhanced by usage of IT.
The idea and theory that there are economic cycles of innovation followed by economic growth goes back to Joseph Schumpeter. Erik and Andy use this Schumpeterian Transitions to prove that IT leads to competitiveness in companies.
Joseph Schumpeter was an Austrian Economist who was never fully recognized by his peers during his life time though he was Austrian Minister of Finance, founded a bank, was a professor at different Austrian and German universities before he had to flee from the Nazis and became a professor at Harvard where he taught till his death in 1950.
Many economists including Nobel Laureate Robert Solow have doubted for a long time that companies were getting productivity growth from all their IT spending. Robert Solow observed in an interview in 1987, “We see evidence of the computer age everywhere except in the productivity statistics.”
I am happy that we have now scientific proof that IT has been crucial for economic growth and progress in the past 20 years; makes me feeling good to work in IT industry.
Have fun reading the article.
Short version, http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?ml_subscriber=true&_requestid=240126&referer=/hbsp/hbr/articles/article.jsp&reason=freeContent&productId=R0807J&OPERATION_TYPE=CHECK_COOKIE&FALSE=FALSE&TRUE=TRUE&ml_action=get-article&ml_issueid=BR0807&articleID=R0807J&pageNumber=2
Long version at HBR, http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml;jsessionid=5ICROOB3A4MICAKRGWCB5VQBKE0YOISW?id=R0807J&referral=2340http://custom.hbsp.com/b01/en/implicit/viewFileNavBeanImplicit.jhtml?_requestid=233427
The elevator pitch (quote form the HBR article),
“… To gain-and keep-a competitive edge in this environment, McAfee and Brynjolfsson recommend a three-step strategy:
- Deploy a consistent technology platform, rather than stitching together a jumble of legacy systems.
- Innovate better ways of working.
- Propagate those process innovations widely throughout your company. By taking these steps, elevator-systems maker Otis realized not only dramatically shorter sales-cycle times but higher revenues and operating profit. …”
The work at MIT Sloan School has been sponsored in part by SAP Research.