Lesson 3- Value of IT

The central focus of this lesson is the article "Does IT Matter?" by Nicolas Carr, where he argues the value of IT.

This article provides a small part of  Nicolar Carr broader exploration of information technology and business strategy contained in the book "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage", published by the Harvard Business School Press.

Carr argues that IT has no value because he believes that IT is a transport mechanism, highly replicable, & subject to sharp price deflation. Meaning that is is an infrastructural technology, and therefore will become commoditized to the point that it can no longer offer competitive advantage to firms.

He concedes that, at the industry level, information technology will be important. Industries that lag behind the technology curve will be disadvantaged; those who leverage technology will gain competitive benefit. However, org's within an industry will not be able to get this value.

Carr also argues signs commoditization is occurring:

• IT’s power is growing (& is greater than the needs placed on it).

• The price of IT has made it affordable for most. 

• The Internet is widely available. 

• IT vendors are positioning themselves as suppliers of commodities/utilities (consider, for example, cloud computing). 

• The dot-com bust signaled a global re-valuing of IT.

I don't believe that Carr arguments is correct in his assumptions.  Since, IT is not a transport mechanism in the same way as railroadswere. He draws a parallel between information & goods. This is not plausible. Also, technology is replicable; however, the processes that surround & are supported by the technology are not.

Carr believes IT cannot lead to competitive advantage, he suggests managers

• spend less on IT.

• be a follower in implementing new technology, rather than a leader.

• focus on vulnerabilities, not opportunities.

Carr argued that IT is like other “infrastructure technologies” that lost their competitive potential once they became “accessible and affordable to all.” But IT is different, it has constantly expanding functionality, while Carr’s other technologies—steam engines, railroads, electricity, telephones—have narrow functionality. Electricity—which was Carr’s key historical analogy in his subsequent book, The Big Switch, hasn’t changed much since we found a way to harness and deliver it. Unlike electricity, IT is very different from what it was even ten years ago.

Electricity is a commodity, IT is not. But again, Carr was in great company (see Lesson #3). The so-called “Moore’s Law” is interpreted by Carr and others to mean that the relentless reduction in the cost of computing makes IT a “commodity,” widely available and abundant. Another interpretation of Moore’s Law is that there are endless new possible applications of IT.  Bernanke again: “Some would say that we are still in the early days of the IT revolution; after all, computing speeds and memory have increased many times over in the 30-plus years since the first personal computers came on the market, and fields like biotechnology are also advancing rapidly. Moreover, even as the basic technologies improve, the commercial applications of these technologies have arguably thus far only scratched the surface.”

The mistaken view of IT as a commodity made Carr miss the greatest application of IT over the last decade—the use of IT to drive the business (or the competitive advantage, the strategic differentiation, that Carr thought could no longer be associated with IT) by Web-born companies. “The article was really about the IT infrastructure,” Carr explains to Network World, “which is basically what IT departments were mainly concerned with 10, 11 years ago. I think that has become fairly uninteresting from a strategic point of view.” Tell this to Amazon, Google, Facebook, LinkedIn, Netflix, and so many other new companies that IT begat and that thrive, among other reasons, because of their innovative IT infrastructure and innovative use of IT.

Finally, important practices to consider for IT value:

The layers of IT value are the important factors:.

1. What value with be delivered?
2. Where will value be determined?
3. Who will deliver value?
4. When will value be determined?
5. How will value be determined?

Do understand the meaning of IT Value Proposition:

Identification of Potential Value + Effective Conversion of the Idea to Reality + Realizing Value after Implementation = IT Value

The best practices for identifying potential value:

• Establish a joint IT-biz structure to recognize & evaluate opportunities.

• Define a means of comparing value across projects.

• Use a portfolio approach to project selection.

• Define an appropriate funding mechanism for infrastructure.

The best practices for realizing value:  

• Plan a value-realization phase for all IT projects.

• Measure outcomes against expected results.

• Look for & eliminate root causes for problems.

• Assess value realization at all levels in the org..

• Have provisions for acting on new opportunities to leverage value.

The principles for delivering IT value:

Principle 1: Have a clearly defined portfolio value management process.

Principle 2: Aim for chunks of value.

Principle 3: Adopt a holistic orientation to technology value.

Principle 4: Aim for joint ownership of IT initiatives.

Principle 5: Experiment more often.

References

Austin. R.D., Nolan, R.L. & O'Donnell, S. (2009). The Adventures of an IT Leader. Boston: Harvard Business School Publishing Corporation. 

Carr, N. (2003). IT Doesn't Matter. Retrieved April 23, 2016, from https://hbr.org/2003/05/it-doesnt-matter

Google Bilder. (n.d.). Retrieved April 23, 2016, from http://images.google.de/imgres?imgurl=http://image.slidesharecdn.com/the-value-of-itpptx3888/95/the-value-of-itpptx-1-728.jpg%3Fcb%3D1263346418

McKeen, J.D. & Smith, H.A. (2012). IT Strategy: Issues and Practices (2nd ed.). New Jersey: Pearson Education, Inc.

Press, G. (2013, May 20). 6 Lessons From The Success Of 'IT Doesn't Matter. Retrieved April 23, 2016, from http://www.forbes.com/sites/gilpress/2013/05/20/6-lessons-from-the-success-of-it-doesnt-matter/#251233ad185d