The brouhaha that surrounded my Harvard Business Review article “IT Doesn’t Matter,” published in May 2003, seems to have scared HBR away from the topic of IT altogether. I can’t for the life of me think of a single substantial article that it’s published on the topic in the succeeding three and a half years. Now, I’d like to believe that’s because the academic crowd embraced my message lock, stock and barrel – if IT doesn’t matter, why write about it in executive journals? – but, given the apoplexy with which some of Harvard’s elder IT statesmen greeted my argument, something tells me there are other forces at work.
Anyway, I was glad to see that one my favorite academic thinkers about IT, Andrew McAfee, has a big article in the new edition of HBR. (And I was even happier to discover that HBR is allowing free access to the piece, at least for a few weeks.) McAfee, unlike some of his colleagues, doesn’t try to fit the post-internet IT world into tired pre-internet frameworks. He comes at it fresh. And that’s good.
But McAfee’s HBR article, alas, lacks the freshness, the intellectual zip, of his best work. It feels like it may have been left in HBR’s blandification machine a little too long. Compared with the recent piece he wrote on “Enterprise 2.0” for the MIT Sloan Management Review, which argued that Web 2.0 technologies may require a basic rethinking of the way businesses approach IT, the new piece, called “Mastering the Three Worlds of Information Technology,” is more, well, academic. As its title suggests, it’s one of those dry scholarly exercises in categorization that spend a lot of time explaining stuff that most managers understand intuitively.
Echoing the work of other IT scholars, most notably MIT’s Erik Brynjolfsson, McAfee argues that IT success in business today is less about technology than about good old-fashioned management: “Everyone who has studied companies’ frustrations with IT argues that technology projects are increasingly becoming managerial challenges rather than technical ones.” Success hinges, in particular, on how well you manage IT’s “organizational complements” such as the design of processes, the rules of governance, and the talents of people. What’s new in McAfee’s piece is the idea that the importance of such complements, and hence management’s role in IT management, varies according the type of IT a company is installing.
McAfee identifies three categories of IT: “Function IT” (FIT) is the kind that, like a word-processing or computer-aided-design program, “make[s] the execution of stand-alone tasks more efficient.” “Network IT” (NIT) is the stuff that, like Lotus Notes or wikis, helps employees communicate and collaborate. Finally, “Enterprise IT” (EIT) consists of the heavy-duty systems that automate big corporate processes – CRM and ERP systems, for instance. While FIT and NIT don’t “impose complements” on companies, EIT does. In other words, EIT forces you to make certain changes to your processes, your governance structure, and so on. And while FIT and EIT typically require a strong top-down management push to encourage their adoption by employees, NIT tends to be, McAfee argues (not entirely convincingly), welcomed by employees. Management’s main role is to get the hell out of the way.
This kind of categorization can be useful in adding precision to the language we use to discuss complex subjects. It helps us get beyond big, ill-defined generalizations. But there’s a drawback. It can prevent us from seeing how categories blend together. By drawing bright lines between things, it can give the illusion that those things are more distinct than they really are. I sense that problem here (even while granting the usefulness of McAfee’s categorization). Take the identification of CRM as an enterprise information technology. Isn’t that assumption exactly what doomed so many big CRM projects? The projects lost sight of the fact that CRM is as much a functional tool, a tool that helps individual employees, like salespeople, do their work better, as an enterprise system. CRM, in other words, is as much FIT as EIT. And, in fact, there’s a lot of NIT in it as well.
What’s exciting about IT today, I’d argue, is that we can finally begin to get beyond old dysfunctional categories. Software-as-a-service products, like the CRM systems provided by Salesforce.com or NetSuite or RightNow, are compelling not simply because they allow companies to avoid big capital expenses, but because they begin to break down the monolithic complexity of traditional enterprise systems and give more control to the individual user – they turn EIT into FIT. We certainly need to appreciate the differences in IT tools and systems, but, even more important, we need to begin to see beyond the distinctions that weren’t true differences at all, but were merely the byproducts of immature technology. From this perspective, McAfee’s article may not be quite as clarifying as it is intended to be.
Although McAfee’s argument that that IT success in business today is less about technology than about good old-fashioned management may not be new I think it is a concept that bears repeating. The reason I say this is that many still do not understand this. At the risk being accused of repeating an overused cliché, success in implementing new technology really is about people, processes and technology.
I believe that many people view new technologies as a silver bullet – If I install this software my salesmen will be more effective and sales will go through the roof! Unfortunately, we in IT are often guilty of fostering this misperception in order to “sell” the project. Under the silver bullet approach technology implementation solely equals IT installing software. The truth is that technology implementation is really is communication, process redesign, organizational development, training and employee and management involvement at all levels both inside and outside of IT plus IT installing the software. This is a concept well worth repeating.
I agree with your comments on the three categories: FIT, NIT, EIT. While useful in explaining and understanding these uses of IT, too much emphasis on the distinction can be dangerous. As you point out, there really is a blend in the use of these. There is also a dynamic flow – something may start out as a FIT and flow to be a NIT and even an EIT eventually. The use of technology is a constantly moving target that doesn’t like to be pigeonholed.
The part that concerned me most was the implicit assumption that “IT projects” are different than the implementation of any other disruptive influence. The implementation of a new IT proposal can be a disruptive influence to an organization in the same way a change in production methodology, a new sales strategy, or a change in organizational responsibilities can. To me the keys for a successful implementation are the same regardless of what the disruptive influence is – IT or otherwise.
Thanks for highlighting this article Nick. Whilst, as I discuss here: http://www.ebizq.net/blogs/softwareinfrastructure/2006/10/on_gpts_organisational_complem.php,
I agree with some of your criticims of McAfee’s model, I think your conclusion does not do the article justice. By marrying the technology classification to the organisational implications McAfee does help to clarify things. It helps to facilitate a dialogue between business and IT in a language which both sides understand. Equally importantly, it moves beyond the technology selection phase to outline the role of the business during adoption and subsequent exploitation.
My tuppence worth …
The majority of I.T. systems do appear to be CODB and no matter how you categorize them, they would appear to fail to meet the criteria of valuable, rare, inimitable, and non-substitutable. However, this doesn’t mean there aren’t examples of novel and new processes which are differentiators with real return (CA).
Whether you agree with his ideas or categories, in my view Andrew does make one exceedingly good point.
The process of execution is separate from the purpose of the activity i.e I can just as easily wreck a viable CA through poor management as I can wreck a CODB.
Poor implementation of a CA doesn’t mean it wasn’t a potential CA and a single fantastic implementation of something which is CODB doesn’t turn it into a CA.
Upgrading the power to a factory in such a way that you leave it without electricity for two months is costly, whilst getting the upgrade done in a day means we can start producing again. This upgrade is all about the cost of a CODB like activity and the cost of implementation is part of this.
Of course if being good at implementation of CODB projects is novel and rare in your industry – then that is a potential source of CA.
If everyone else’s power upgrades knocks out their factories for two months, and I have the only team in the world that can seem to do it without such problems – I have a source of genuine if maybe temporary CA – that team.
It only remains an advantage whilst everyone else is constantly making a mess of the implementation, so when I have “power installation consultants” knocking on the door with examples of simple easy installation in a day as “Best Practice” and horrors of not doing “Best Practice” – then any source of advantage has long since gone.
Getting it right, when others do with a CODB like activity, is not a source of advantage or a benefit – it should be expected. In such a world, “cheap as chips” becomes the order of the day with CODB, and this is why commodity like operating environments and services are now becoming more relevant.
Times up on this merry go round. Salesforce, Amazon’s EC2 and others have pointed the way.
Of course this says nothing about how you deal with genuine CA-like I.T. projects (the rare examples) for which a VC like approach is more appropriate.
that’s another topic …
An off-topic penny worth …
Of course this brouhaha is probably small fry when compared to the upcoming commoditisation of the manufacturing process itself through additive digital fabrication techniques such as printed objects and printed electronics.
I’m looking forward to a future article on “Does it Matter? 3D printing and the corrosion of competitive advantage” and the howls of transition in the industrial world as the process of manufacturing becomes ubiquitous and distributed.
Of course, that’s commoditisation for you.
Nick,
One point you didnt challenge Andrew on was IT spend. Andrew notes that IT spending is on the up. “corporate IT spending has bounced back from the plunge it took in 2001”
This is very different from your position here.
https://www.roughtype.com/archives/2006/10/the_rebound_tha.php
and the market research here.
http://www.tekrati.com/research/News.asp?id=8023
The financial performance of SAP, IBM and Oracle points to a healthy market in the EIT space.
The explosion of startups in the NIT and FIT spaces points to serious future growth there too. Salesforce is a really impressive salesforce automation success story. Socialtext and other network plays are doing well.
For something that doesnt matter, IT is doing rather well.
Thomas,
Thanks for the comment. I was going to mention the IT spending assertion, but decided it was peripheral to my main point. But since you asked . . .
At the start of the article, McAfee writes that “corporate IT spending has bounced back from the plunge it took in 2001.” He then backs up the assertion with two points: “In 1987, U.S. corporations’ investment in IT per employee averaged $1,500. By 2004, the latest year for which government data are available, that amount had more than tripled to $5,100 per employee. In fact, American companies spend as much on IT each year as they do on offices, warehouses, and factories put together.” Note that, while both these points are certainly true, neither tells us anything about whether IT spending has bounced back since 2001. Both are about long-term trends.
The preponderance of the evidence I’ve seen indicates that there hasn’t been a bounce back since 2001, in terms of spending per employee, at least among larger firms. That doesn’t mean that there hasn’t been significant variations in growth between different IT sectors and IT vendors.
Nick
Nick,
ERP is supposedly one of the most mature application areas, yet howcome new software sales for ERP keep going up? It isn’t just that my clever German employer is taking other folks crust.(there is some of that) As an example core HR app business grew at nearly 50% in the US last year. All sorts of new apps are popping up, and are doing well.
I bet there is a lot of department level spending through SFDC and successfactors and the like that IT heads dont even know about.
Maybe some hardware spend is down, but enterprisey software spend isn’t.
I’ve written more here…
http://theotherthomasotter.wordpress.com/2006/10/31/it-matter-mutter/
I’m not sure if you have seen this more detailed paper from andrew et al. http://www.hbs.edu/research/pdf/07-016.pdf
The graphs at the end rebound.
TOTT (Totally off the topic) I’d be interested to get your views on the Stern Report on the economics of Climate change. http://www.hm-treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternreview_index.cfm
this links to something you wrote some time ago about Googles powerplant…
Regards from Walldorf
Thomas