IT Depends

Information technology has trickled down to the little guys, forcing them to think through purchases carefully

By Waleed Al-Shobakky [Published in Business
Today Egypt magazine, Sep 2004]

Some technological products are so ubiquitous that we can’t imagine how the world would go on without them. Microsoft Word, for instance, is used by almost everybody on the globe. When the application was first released, it made word processing easier, and granted the companies that adopted it the advantage of higher productivity. So, at the time, investing in the Microsoft Office package was considered a strategic investment in pursuit of creating a competitive advantage.

But the wide adoption of Microsoft Word that ensued neutralized the advantage. Even though we continue to ‘invest’ in Word by buying more recent versions, we no longer consider this as a way of sustaining the competitive advantage, but rather as another cost of doing business.

This is the premise of Nicolas Carr’s recent provocative book, “Does IT Matter: Information Technology and the Corrosion of Competitive Advantage.” Formerly an editor-at-large of Harvard Business Review and currently an IT consultant, Carr argues that as IT, including both hardware and software, “has become more powerful, more standardized and 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.”

The author urges executives to assume a new perspective concerning the role of IT in creating a competitive advantage. IT, in Carr’s view, is following the same path of previous technologies like rail, telegraph and electricity. Gradually, the prices of these technologies dropped, and small businesses were able to adopt them. Ultimately, exclusive proprietary and infrastructural technology became available to all. With this in mind, the author argues that the role of IT in creating an advantage to companies as it is advertised by IT producers and vendors is misleading and extravagantly hyped.

Citing many examples, the author shows that companies like Wal-Mart (the giant supermarket chain) and Dell (the PC and consumer electronics producer) that adopted IT ahead of all the competitors of their industries have achieved an enviable advantage. However, he promptly emphasizes that in both cases IT was not the strategy that created the competitive advantage. It was rather the inherent efficiency in the operations of Wal-Mart and the build-to-order model of Dell that truly created the advantage.

Yet, with IT infrastructure reaching its maturity, Carr argues, it still may not be wise for executives to try racing ahead of everybody else in adopting IT.

This is mainly for two reasons. Firstly, even though there’s been an overwhelming amount of investment in IT, you may not be able to tell with any certainty whether it has paid off or not. Secondly, the first-mover strategy is risky. The author cites FedEx versus UPS. When FedEx introduced the logistics management systems in the 1980s, UPS was criticized as being a “technological slowpoke.” But when UPS rolled out its logistics systems in the late 1990s, more advanced and cheaper than those of FedEx, customers started to switch to UPS.

Finally, Carr rolls out a “manifesto” for IT users: spend less; follow, don’t lead; innovate when risks are low; and finally, focus more on vulnerabilities than opportunities.