Lots Of Firms Invest In IT, But Does This Make Them Competitive?
I’m not sure if you remember, but way back in 2003 Nicholas Carr wrote a piece for the Harvard Business Review called “IT Doesn’t Matter“. Man o Man did this set off a firestorm in the IT community – it was sorta like someone calling your sister ugly. However, time has passed since then and so perhaps it’s a good time to stop for a moment and ask ourselves, was Carr right after all?
Carr’s point at the time was that the tools of IT have become so standardized and available to everyone that IT can no longer provide a company with a competitive advantage. At first glance, it looks like he’s got a good point here.
What do we spend most of our time on today? Keeping things up and running, meeting legal compliance issues, and trying to reduce IT costs. Sure doesn’t seem like there is a lot of innovation going on there.
The arrival of Cloud computing and web-based services such as Salesforce.com seem to drive the point home even further – anybody can get their hands on the same sets of IT services. So are we just technicians these days?
Well hold on just a moment, all may not be as bleak as it seems at first. Jeanne Harris over at Accenture is the author of a book called Competing on Analytics: The New Science of Winning
It turns out that some companies know how to use IT to get value. Some don’t. If you average out all companies, then you end up with a result that says that companies don’t get much value from IT. Harris points out that what Carr seems to be missing is that many firms do get a lot of value out of IT because they know how to use it.
Given all of this, here is a quick list of firms that “get” IT and have been putting it to good use. Yes, the components that they are using are available to everyone, it’s how they are using it that makes the difference:
- Walmart: has used IT tools to create set of a supply chain management applications that has allowed it to grow to occupy the top spot on Fortune’s top 500 list of largest firms.
- FedEx: used IT tools to create an integrated package tracking system that allowed it to offer greater visibility to its customers and thus zoomed by UPS to become the world’s biggest cargo airline.
- Citibank: used the new technology of ATMs to double its share of the New York City market back in the early 1980′s.
- American Airlines: used its inside IT resources to create the SABRE computerized airline reservation system that went on to become an industry standard.
- Harrah’s Entertainment: IT has been used to create their Total Rewards customer tracking database and their Fast Cash real-time incentive gambling management program.
- Toyota Motor Corp: IT has been used to create their just-in-time supply chain and its associated management systems.
- Exxon Mobile Corp: IT is being used to help search for the oil and gas deposits that are becoming increasing hard to find.
- Proctor & Gamble: IT provides the analytical tools that are needed for data mining that is required to track product sales and adjust pricing and promotions.
- Boston Red Sox: use IT to perform sophisticated data analysis of players, stadiums, other teams, and salaries in order to remain competitive.
Well there you go. In the end, Carr makes a good point – lots of IT shops are making the investment into IT hardware and software; however, they aren’t getting any real benefits from this investment. However, there is a subset of firms that are using those generic IT parts to build tools that help them to be highly competitive.
Does your firm do a good job of using the IT resources that you have? Which of the firms that I listed do you think has made the best use of IT? Who did I forget and leave off of my list? Leave me a comment and let me know what you are thinking.
Tags: business, does IT matter, information technology, innovation, investment, IT, it alignment, Nicholas Carr
[...] Welcome To 2009: Does IT Matter This Year? | The Accidental Successful CIO [...]
[...] These include consulting firms, UN organisations, “aid†agencies, research institutions, Welcome To 2009: Does IT Matter This Year? – thebusinessofit.com 02/09/2009 [ Lots Of Firms Invest In IT, But Does This Make Them [...]
I think your points are right on the mark. I’ve been involved in various aspects of the software industry for over 20 years. One thing remains a constant – two companies can purchase the exact same software tool to support their business – and get radically different results.
Investments in IT can absolutely have a huge positive impact on a business in terms of productivity, customer service, cost savings, etc. However, it’s never just about the IT investment. To fully realize the value from these investments, companies have to have smart people, the right leadership and great processes (to name a few things).
I was just talking to someone today that relayed a story consistent with this. He previously worked for a company that sold a solution to a manufacturer – a solution that had delivered value elsewhere. But at this particular company, they never really got it deployed and then they had turnover amongst the people that had championed the purchase of this solution. When the new leaders came in, the problems were still there, so they set out to find a solution.
I’ve seen this cycle replay itself repeatedly over the years. Many (but not all) IT capabilities have become commodities and, thus, deliver no unique value to a company if everyone else has it. However, the ability to truly leverage these tools to realize the inherent value they can deliver is not a commodity. This is what can make technology a difference from one company to the next.
Randy: you bring up a really good point – how much time do we in IT spend trying to select the right product? We create RFPs, we interview vendors, we do pilots, etc. However, once the decision is made and the product is installed, rarely do we have a plan for how to incorporate it into how we do business. Maybe it’s time for a whole new type of IT planning…?
[...] Welcome To 2009: Does IT Matter This Year? [...]
[...] Welcome To 2009: Does IT Matter This Year? by Dr Jim Anderson on The Business of IT [...]
I think Carr fell into a the generalization that, computers, gadgets, the Internet and IT (a.k.a. the geeks) are all the same. The same generalization that puts together sales and marketing (a.k.a. the hype) or finance and accounting (a.k.a. the bean-counters).
There are aspects of IT which are, and possible should, be treated as commodity. Things such as e-mail servers. However, if management (or the board), assumes that the IT support of core functions of the business can be based on commodities, that usually means that the business, in on itself, has an issue of providing values, as any competing business can achieve the same functionality.
Gil: you make a good point. Ultimately, the value of an IT department is not in how good of a job that it does on keeping email servers up and running, but rather how it can help the company move faster and do more.