John Hagel: Viewpoint- IT Does Matter :: strategy @ the intersection of business & technology



	Speaking I speak on topics related to business, strategy and technology. From conceiving and implementing FAST strategies to pragmatic technology approaches, I seek to challenge traditional assumptions and help uncover simple, yet profitable solutions best suited to your company's situation. Get details >> Papers - Moving from Push to Pull - Emerging Models for Mobilizing Resources (PDF) John Hagel and John Seely Brown - Capturing the Real Value from Offshoring in Asia (PDF) John Hagel - The Agile Dance of Architectures – Reframing IT Enabled Business Opportunities (PDF) John Hagel and John Seely Brown - Overview of Working Paper Series (PDF) John Hagel and John Seely Brown - Break On Through to the Other Side: A Missing Link in Redefining the Enterprise (PDF) John Hagel and John Seely Brown - The Secret to Creating Value from Web Services Today: Start Simply (PDF) John Hagel, John Seely Brown and Dennis Layton-Rodin - Service Grids: The Missing Link in Web Services (PDF) John Hagel and John Seely Brown - Some Security Considerations for Service Grids (PDF) Martin Milani and John Seely Brown - Control versus Trust: Mastering a Different Management Approach (PDF) John Hagel and John Seely Brown - Orchestrating Business Processes - Harnessing the Value of Web Services Technology (PDF) John Hagel and John Seely Brown - Orchestrating Loosely Coupled Business Processes: The Secret to Successful Collaboration (PDF) John Hagel, John Seely Brown and Scott Durchslag	Viewpoint May 15, 2003 IT Does Matter (written in Collaboration with John Seely Brown) For those of you who have not seen it, the latest (May 2003) issue of Harvard Business Review has an article that will have significant impact in the business world. The article, by Nicholas Carr, an Editor at Large for HBR, is provocatively, but somewhat inaccurately, titled "IT Doesn’t Matter". Carr doesn’t actually say that in the article – instead, he argues that the opportunity for strategic differentiation through IT is rapidly diminishing. While he acknowledges that IT is essential for business operations, he makes the case that IT should be managed as a commodity input, squeezing cost out of IT budgets while at the same time ensuring that IT platforms deliver the necessary reliability and security to avoid business disruptions. We believe this is an important article because it very effectively captures the backlash sweeping through executive suites against IT spending. Certainly much of what Carr writes is spot on: companies have spent too much on IT in the past with only minimal (if any returns) and there is a need to focus on the increasing vulnerabilities we face as we become more dependent on automated operations. But Carr’s article is also dangerous because it endorses the growing view that IT offers only limited potential for strategic differentiation. We ended up writing an extensive rebuttal to Carr’s article that will be published in the July 2003 issue of Harvard Business Review. In the meantime, we thought we would briefly recap the three key points we made in this rebuttal, so that we could at least make our voices heard earlier in the debate that is sure to develop around this article: Extracting business value from IT requires innovations in business practices. In many respects, we believe Carr attacks a red herring – few people would argue that IT alone provides any significant business value or strategic advantage. The economic impact from IT comes from incremental innovations, rather than "big bang" initiatives. A process of rapid incrementalism enhances learning potential and creates opportunities for further innovations. The strategic impact of IT investment comes from the cumulative effect of sustained initiatives to innovate business practices in the near-term. The strategic differentiation emerges over time, based less on any one specific innovation in business practice and much more on the capability to continuously innovate around the evolving capabilities of IT. Carr refers to previous technology innovations like the railroad and electricity to make the claim that rapid early investment in the technology is soon followed by commoditization. We argue that IT differs fundamentally from these other technology innovations in two key respects. First, performance improvements in the underlying technology components has proceeded at a faster and more sustained pace than any of these previous technologies. Second, the performance improvements in the technology components have enabled a series of architectural shifts from centralized mainframe architectures to client-server architectures and, more recently, to three tier architectures. Each of these shifts has amplified the power of the underlying technology components, in part by creating more flexibility in the deployment of these resources. In contrast, previous technology innovations began to stabilize and commoditize as a dominant architecture emerged (e.g., think about the standard railway gauges that helped to connect tracks and establish a national railway system). We have yet to see a dominant architecture for IT emerge. In fact, we believe we are on the cusp of another major shift toward a true distributed service architecture that will represent a qualitative breakthrough in terms of delivering more flexibility and fluidity to businesses. In other contexts, John Seely Brown has championed a perspective he describes as radical incrementalism. This perspective emphasizes the role of architecture in facilitating the ability to rapidly build and deploy radical new components. With an appropriate architecture, radical individual components can significantly amplify their impact. We believe that distributed service architectures will be exactly this kind of architecture in terms of amplifying the innovative potential of individual technology components. But it won’t stop there. Distributed service architectures have the potential to create a powerful virtuous cycle when coupled with the FAST strategy outlined below. By amplifying the potential of individual technology components, these technology architectures will expand the range of options available to business executives in terms of how they organize and run their companies. The FAST strategy approach helps business executives to innovate business practices in rapid increments, focused by a longer-term view of the opportunities and requirements for business success. Thus, the technology architecture will amplify options for business innovation and the FAST strategy approach will accelerate the innovation process – giving businesses powerful tools to build and deepen strategic advantage. Bottom line, far from believing that the potential for strategic differentiation through IT is diminishing, we would maintain that the potential is increasing, given the growing gap between IT potential and realized business value. For the more detailed development of this position, you will unfortunately need to wait until the July issue to read the full letter. register for site updates >>	register for site updates >> Blogs - The Big Shift (HBR) - EdgePerspectives blog Books The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion by John Hagel III, John Seely Brown, and Lang Davison ALSO The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization by John Hagel III and John Seely Brown - Out of the Box: Strategies for Achieving Profits Today and Growth Tomorrow through Web Services by John Hagel III - Net Worth: Shaping Markets When Customers Make the Rules by John Hagel, III and Marc Singer - Net Gain: Expanding Markets through Virtual Communities By John Hagel, III and Arthur G. Armstrong Deloitte ongoing research: The 2009 Shift Index The Big Shift Index: Uncovering the Emerging Logic of Deep Change www.edgeperspectives.com Cloud Computing working papers BusinessWeek The Next Wave of Open Innovation April, 2009 Does the Experience Curve Matter Today? April, 2009 Peer-to-Patent: A System for Increasing Transparency March, 2009 How World of Warcraft Promotes Innovation January, 2009 Harrah's New Twist on Prediction Markets December, 2008 Innovation for Hard Times November 2008 How SAP Seeds Innovation July 2008 Student Activism Can Change the World May 2008 Myelin Repair Foundation's Institutional Innovation May 2008 Learning from Facebook April 2008 Learning from Tata's Nano February 2008 Catching the Innovation Wave January 2008 Phoning from the Edge January 2008 Embrace the Edge - or Perish November 2007 Funding Invention vs. Managing Innovation February 2006 Articles - Creation Nets: Harnessing the Potential of Open Innovation (co-authored with John Seely Brown) April, 2006 - Connecting Globalization & Innovation: Some Contrarian Perspectives (Prepared for the Annual Meeting of the World Economic Forum in Davos, Switzerland January 25 – 30, 2006; co-authored with John Seely Brown) - "The Benefits of a Long Distance Relationship" (co-authored with John Seely Brown), August 9, 2005 - "Feed R&D - Or Farm It Out?" (HBR Case Study with Commentary co-authored with John Seely Brown), July 2005 - "Productive Friction: How Difficult Business Partnerships Can Accelerate Innovation" (co-authored with John Seely Brown), February 2005 - "From Push to Pull: The Next Frontier of Innovation" (co-authored with John Seely Brown), 2005, No.3 - "Innovation Blowback: Disruptive Management Practices from Asia" (co-authored with John Seely Brown), 2005, No.1 more articles >>
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