Leveraging More Than Just Information Technology
In the May 2003 issue of the Harvard Business Review, Nicholas G. Carr artfully grabs one’s attention with the deceptively titled piece “IT Doesn’t Matter.” While a clever play on the word “it,” Carr focuses less on the issue of whether information technology matters, and instead seeks to convey his opinion on the strategic value of readily available information technology. Breaking down his multi-faceted article into its parts reveals a flawed argument with financial advice of mixed value.
Carr’s flawed argument begins with his somewhat limited view of information technology. He defines it as “the technologies used for processing, storing, and transporting information in digital form” (Carr, 2003, p. 12). As such, Carr quickly sets up his analysis by depicting information technology as a modern day form of infrastructure technology. Placing information technology in the same class as the steam engine, railroad, and telephone, Carr’s analysis centers on the commoditization of information technology. Carr feels that the ubiquity of information technology has transformed its role into that of a commodity input for business. As a commodity, Carr (2003) believes that it can no longer serve as a competitive advantage once it has become standardized and universally available to the masses.
I disagree with the core elements of Carr’s argument on the basis that information technology is not merely about infrastructure. Neither is it just about the storage and transmission of data. Instead, when information technology is viewed outside of merely an infrastructure role, it has infinite potential to transform business. New applications are being developed daily that create new strategies and capabilities. Brown and Hagel (2003) concur, believing that information technology can create new and fresh possibilities that were previously economically non-existent. Organizations seeking competitive advantages over rivals and strategic differentiation need not look at information technology for the answer, but to the possibilities it enables.
These possibilities can only be enabled by perhaps the most crucial element of information technology that Carr ignores. This element, which one may call “The Human Element” of information technology is essential to creating competitive advantage. To answer the question posed by the title of Carr’s article, “Yes, IT does matter,” but only to the extent that it is put to use by skilled people. Only then can it provide strategic advantage. As Broadbent, McDonald, and Hunter (2003) put it, “The source of competitive advantage shifted from simply having a computer to knowing how to use it. (p. 10)”
Understanding the human element of information technology is exactly the point Mark S. Lewis (2003) makes when he states, IT is a tool that automates and facilitates activities that otherwise would be done manually. Strategic advantage comes from how we apply IT, the unique and differentiating ways in which we marry information technologies with our intellectual capital (p. 12).
Intellectual capital seems paramount to his view. This is illustrated by his bold statement that information technology, as a source of strategic advantage, never really mattered (Lewis, 2003). Brown and Hagel (2003), who accept Carr’s notion that information technology may become ubiquitous note that skilled professionals are not so ubiquitous. Gurbaxani (2003), in addition, implies that competitive advantage was never derived from a scarcity of technology, but rather, it was people with skill sets who created value with information technology.
Creating such value requires determination to continue innovation and to take technology to new levels. Carr, however, believes that technology has reached its peak and nothing more is attainable. He states that the information technology industry is reaching the end of its “buildout” phase and that the window of opportunity to capitalize on technology is gone (Carr, 2003). Citing such trends and events as vendors changing their business models and the bursting of the investment bubble, Carr (2003) paints a scene depicting the end of information technology-prompted industry transformations. In Carr’s limited infrastructure view of information technology, this may be an accurate assessment, but on the grander stage that Carr conveniently ignores, this notion is mistaken. This is the second major flaw in Carr’s view. Industry experts such as Paul A. Strassman, Executive Advisor to NASA, agree. Strassman (2003) states that this notion is “hubris” (pp. 8-9). Information technology is not limited by physical boundaries and constraints such as those that eventually curtailed the spread of infrastructure such as the railroad system. Mark S. Lewis (2003) concurs, noting that information technology differs from electricity, which remains relatively unchanged since it was harnessed. In contrast, the potential for information technology is vast. To put this into perspective, one only needs to choose any point in history, declare that society has reached its technological peak, and then advance to any arbitrary time in the future. Six months, one year, or perhaps an entire decade of innovation reveals the nearsightedness of Carr’s view.
Ironically, Carr (2003) uses the term “myopic” in his explanations (p. 7). Carr’s nearsighted view of information technology as merely a form of infrastructure to be consumed like electricity or water limits his understanding of the value of information technology to an organization. Carr uses the aforementioned points about infrastructure and the peak of technology as support for his views on investment strategy. As the third major flaw in his argument, Carr seems to suggest that organizations devote only the minimum amount of resources, budget or otherwise, to information technology as necessary for the business to function. He even advocates “delaying IT investments” as a “powerful way” of cutting an organization’s costs (Carr, 2003, p. 12). Information technology, however, has a history of breaking through barriers and achieving the unthinkable in record time. When some technologies do become commodities, license is not given to dramatically under fund them, as Carr might suggest. In effect, the cost of these technologies becomes the cost of operating one’s business. Carr (2003) acknowledges this. Yet he fails to see that these technologies become requirements for building platforms that support the research and development of new technologies.
As a case-in-point, Carr (2003) rightfully recognizes that FedEx gained an advantage over its competition by innovating with information technology. FedEx was the first with a package tracking system. Its competitors, however, soon responded with similar and perhaps more advanced systems. One might suggest that Carr would view package tracking technology as commoditized since FedEx, the USPS, Airborne Express, DHL, and the United Parcel Service all have some form of this technology. FedEx no longer had a competitive advantage in this area and had it subscribed to Carr’s views, FedEx may not be exploring wireless technologies and their impact on package tracking today. In much the same manner, the United Parcel Service continues to innovate. The United Parcel Service is leveraging technologies such as wireless, Bluetooth, and GPRS to add value to its package tracking system (Farber, 2003). These capabilities provide real-time data transmission and features that were not available at the time when package tracking was “commoditized.” Much like FedEx, had the United Parcel Service chosen to cut costs, innovation would have suffered. In other words, Carr’s cost cutting at the expense of innovation effectively cripples an organization, potentially limiting future advances.
To be fair, Carr raises several important industry observations. Overspending on information technology is indeed a great risk. Managers must make intelligent business decisions so that funds are not wasted and are instead directed toward promising technologies. Similarly, resource waste is a growing problem. The plummeting cost of commoditized information technology only facilitates this wasteful activity. Finally, Carr (2003) accurately notes that vendor strategies often spur across-the-board upgrades. Currently this is accepted by the industry with virtually no change in sight.
Nicholas G. Carr suggests that information technology investment is less valuable today than it was during its initial buildout phase. Once commoditized, it can no longer be a source of strategic advantage in his view. However, if one looks beyond Carr’s view, one sees information technology is an enabler of potential. This potential, however, requires skills and intelligent business decisions. Broadbent, McDonald, and Hunter (2003) have it half-right when they say “it’s not about the box; it’s about what’s inside the box” (p. 10). Let us not forget the other half that creates strategic advantage, the person operating the box.
References
Alter, Steven, Broadbent, Marianne, McDonald, Mark & Hunter, Richard, Brown, John Seely & Hagel III, John, Carr, Nicholas G., Gurbaxani, Vijay, Hyatt, Cathy, et al. (2003). Does IT Matter? An HBR Debate. [Letters to the Editor]. Harvard Business Review, 1-17.
Carr, Nicholas G. (2003). IT Doesn’t Matter. Harvard Business Review, 5-12.
Farber, Dan. (2003, April 25). UPS Takes Wireless To The Next Level. ZDNet. Retrieved September 8, 2003, from http://techupdate.zdnet.com/techupdate/stories/main/0,14179,2913461,00.html
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Carr’s flawed argument begins with his somewhat limited view of information technology. He defines it as “the technologies used for processing, storing, and transporting information in digital form” (Carr, 2003, p. 12). As such, Carr quickly sets up his analysis by depicting information technology as a modern day form of infrastructure technology. Placing information technology in the same class as the steam engine, railroad, and telephone, Carr’s analysis centers on the commoditization of information technology. Carr feels that the ubiquity of information technology has transformed its role into that of a commodity input for business. As a commodity, Carr (2003) believes that it can no longer serve as a competitive advantage once it has become standardized and universally available to the masses.
I disagree with the core elements of Carr’s argument on the basis that information technology is not merely about infrastructure. Neither is it just about the storage and transmission of data. Instead, when information technology is viewed outside of merely an infrastructure role, it has infinite potential to transform business. New applications are being developed daily that create new strategies and capabilities. Brown and Hagel (2003) concur, believing that information technology can create new and fresh possibilities that were previously economically non-existent. Organizations seeking competitive advantages over rivals and strategic differentiation need not look at information technology for the answer, but to the possibilities it enables.
These possibilities can only be enabled by perhaps the most crucial element of information technology that Carr ignores. This element, which one may call “The Human Element” of information technology is essential to creating competitive advantage. To answer the question posed by the title of Carr’s article, “Yes, IT does matter,” but only to the extent that it is put to use by skilled people. Only then can it provide strategic advantage. As Broadbent, McDonald, and Hunter (2003) put it, “The source of competitive advantage shifted from simply having a computer to knowing how to use it. (p. 10)”
Understanding the human element of information technology is exactly the point Mark S. Lewis (2003) makes when he states, IT is a tool that automates and facilitates activities that otherwise would be done manually. Strategic advantage comes from how we apply IT, the unique and differentiating ways in which we marry information technologies with our intellectual capital (p. 12).
Intellectual capital seems paramount to his view. This is illustrated by his bold statement that information technology, as a source of strategic advantage, never really mattered (Lewis, 2003). Brown and Hagel (2003), who accept Carr’s notion that information technology may become ubiquitous note that skilled professionals are not so ubiquitous. Gurbaxani (2003), in addition, implies that competitive advantage was never derived from a scarcity of technology, but rather, it was people with skill sets who created value with information technology.
Creating such value requires determination to continue innovation and to take technology to new levels. Carr, however, believes that technology has reached its peak and nothing more is attainable. He states that the information technology industry is reaching the end of its “buildout” phase and that the window of opportunity to capitalize on technology is gone (Carr, 2003). Citing such trends and events as vendors changing their business models and the bursting of the investment bubble, Carr (2003) paints a scene depicting the end of information technology-prompted industry transformations. In Carr’s limited infrastructure view of information technology, this may be an accurate assessment, but on the grander stage that Carr conveniently ignores, this notion is mistaken. This is the second major flaw in Carr’s view. Industry experts such as Paul A. Strassman, Executive Advisor to NASA, agree. Strassman (2003) states that this notion is “hubris” (pp. 8-9). Information technology is not limited by physical boundaries and constraints such as those that eventually curtailed the spread of infrastructure such as the railroad system. Mark S. Lewis (2003) concurs, noting that information technology differs from electricity, which remains relatively unchanged since it was harnessed. In contrast, the potential for information technology is vast. To put this into perspective, one only needs to choose any point in history, declare that society has reached its technological peak, and then advance to any arbitrary time in the future. Six months, one year, or perhaps an entire decade of innovation reveals the nearsightedness of Carr’s view.
Ironically, Carr (2003) uses the term “myopic” in his explanations (p. 7). Carr’s nearsighted view of information technology as merely a form of infrastructure to be consumed like electricity or water limits his understanding of the value of information technology to an organization. Carr uses the aforementioned points about infrastructure and the peak of technology as support for his views on investment strategy. As the third major flaw in his argument, Carr seems to suggest that organizations devote only the minimum amount of resources, budget or otherwise, to information technology as necessary for the business to function. He even advocates “delaying IT investments” as a “powerful way” of cutting an organization’s costs (Carr, 2003, p. 12). Information technology, however, has a history of breaking through barriers and achieving the unthinkable in record time. When some technologies do become commodities, license is not given to dramatically under fund them, as Carr might suggest. In effect, the cost of these technologies becomes the cost of operating one’s business. Carr (2003) acknowledges this. Yet he fails to see that these technologies become requirements for building platforms that support the research and development of new technologies.
As a case-in-point, Carr (2003) rightfully recognizes that FedEx gained an advantage over its competition by innovating with information technology. FedEx was the first with a package tracking system. Its competitors, however, soon responded with similar and perhaps more advanced systems. One might suggest that Carr would view package tracking technology as commoditized since FedEx, the USPS, Airborne Express, DHL, and the United Parcel Service all have some form of this technology. FedEx no longer had a competitive advantage in this area and had it subscribed to Carr’s views, FedEx may not be exploring wireless technologies and their impact on package tracking today. In much the same manner, the United Parcel Service continues to innovate. The United Parcel Service is leveraging technologies such as wireless, Bluetooth, and GPRS to add value to its package tracking system (Farber, 2003). These capabilities provide real-time data transmission and features that were not available at the time when package tracking was “commoditized.” Much like FedEx, had the United Parcel Service chosen to cut costs, innovation would have suffered. In other words, Carr’s cost cutting at the expense of innovation effectively cripples an organization, potentially limiting future advances.
To be fair, Carr raises several important industry observations. Overspending on information technology is indeed a great risk. Managers must make intelligent business decisions so that funds are not wasted and are instead directed toward promising technologies. Similarly, resource waste is a growing problem. The plummeting cost of commoditized information technology only facilitates this wasteful activity. Finally, Carr (2003) accurately notes that vendor strategies often spur across-the-board upgrades. Currently this is accepted by the industry with virtually no change in sight.
Nicholas G. Carr suggests that information technology investment is less valuable today than it was during its initial buildout phase. Once commoditized, it can no longer be a source of strategic advantage in his view. However, if one looks beyond Carr’s view, one sees information technology is an enabler of potential. This potential, however, requires skills and intelligent business decisions. Broadbent, McDonald, and Hunter (2003) have it half-right when they say “it’s not about the box; it’s about what’s inside the box” (p. 10). Let us not forget the other half that creates strategic advantage, the person operating the box.
References
Alter, Steven, Broadbent, Marianne, McDonald, Mark & Hunter, Richard, Brown, John Seely & Hagel III, John, Carr, Nicholas G., Gurbaxani, Vijay, Hyatt, Cathy, et al. (2003). Does IT Matter? An HBR Debate. [Letters to the Editor]. Harvard Business Review, 1-17.
Carr, Nicholas G. (2003). IT Doesn’t Matter. Harvard Business Review, 5-12.
Farber, Dan. (2003, April 25). UPS Takes Wireless To The Next Level. ZDNet. Retrieved September 8, 2003, from http://techupdate.zdnet.com/techupdate/stories/main/0,14179,2913461,00.html
Labels: Academic Papers
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