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Does IT give any real advantage?

Oct 12, 2007 Business Daily, Technology

“Every year, companies spend more than $2 trillion on computer and communications equipment and services. Underlying these enormous expenditures is one of modern business’s most deeply held assumptions: that information is increasingly critical to competitive advantage and strategic success.
…I will argue that IT’s strategic importance is not growing, as many have claimed or assumed, but diminishing. As IT has become more powerful, more standardized, more affordable, it has been transformed from a proprietary technology that companies can use to gain an edge over their rivals into an infrastructural technology that is shared by all competitors…necessary for competitiveness but insufficient for advantage.”

Nicholas G. Carr, Does IT Matter? (2004)

Nicholas Carr put the cat among the pigeons in 2003, when he published a highly controversial article entitled “IT Doesn’t Matter” in the respected Harvard Business Review. In it, he put the view that IT was no longer a profit-boosting competitive resource – merely a cost of doing business, an entry requirement, a necessary but insufficient condition in attaining strategic advantage.

The response, as you can imagine, was explosive. “Hogwash!” spluttered Steve Ballmer, Microsoft’s CEO. “Dead wrong” was the verdict of Carly Fiorina, then HP’s leader. But others thought the piece useful and necessary. Newsweek claimed that Carr had “performed a service in puncturing some of the starry-eyed and self-serving cant of industry insiders.”

Carr then proceeded to produce a book on the subject (see excerpt above). Here he spelled out his thesis in more detail: he was questioning the importance of the technology (hardware and software) not of the information that flowed through it, nor the talent that used it. Information and talent will always form the basis of competitive advantage; but technology only confers temporary gain.

In Kenya, we have seen advantage gained by early adopters of IT. Bidco was one of the first to invest in an enterprise-wide IT system and satellite communications in the late 1990s. It certainly realised great operational gains from this investment. Safaricom bought an elaborate customer intelligence system that it used to very good effect, tracking the phone usage of its customers and designing new products and tariffs with that knowledge. And Equity Bank used a cutting-edge core banking system to give it the platform with which to serve its explosively growing customer base.

Yet for all these companies, it wasn’t the IT that conferred advantage; IT was an enabling tool that supported other sources of true advantage: a unique market positioning; a bold, entrepreneurial spirit; a unique bond with customers; a steady stream of product innovations. Uchumi Supermarkets, on the other hand, squandered equally big money on IT and seemed to forget all the other basics: well-motivated employees, loyal customers, clear positioning. And that is Carr’s point: IT is good; it’s necessary – but as soon as it’s widely available, it can only support other good things.

Carr’s prescription for CEOs? Don’t get seduced and carried away by IT vendors. IT has become the largest of corporate capital expenditures; yet most of that spending is done in the dark, without a clear idea of the strategic impact. He advises: spend less; follow, don’t lead; innovate when risks are low; focus more on vulnerabilities than opportunities.

Guaranteed to cause a few ulcers in the IT industry!

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