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Saturday, June 16, 2007

IT & Business: Productivity & Competitive Advantage Conundrum

In an age where the accepted wisdom is IT Is Business, Andrew McAfee argues that productivity growth is a critical measure, but it's not the only one managers care about. He is right in pointing out that Productivity growth, in other words, doesn't tell us anything about competitive balances or competitive dynamics. And it's perfectly possible for IT to have no impact on aggregate productivity at the same time that it's having a substantial impact on competition.

The data analysis by MIT's Erik Brynjolfsson, HBS's Michael Sorell and Feng Zhu along with Andrew McAfee makes insightful reading.
I agree with Andrew & Erik about their recommendations to executives as to how IT can be leveraged.
For executives, the key lesson is to treat information-technology efforts as opportunities to define and deploy new ways of working, rather than just projects to install, configure or integrate systems. The three broad areas of focus for top managers:
- First, they need to look at how the company should be doing business differently. That means deciding what new tasks should be enabled with technology, and how widely they should be deployed.
- Second, managers need to lead the deployment of new procedures to success. People don't like changes to their jobs dictated from outside and embedded in software. Overcoming this inertia and resistance requires skillful leadership.
- Third, managers need to foster innovation by encouraging experimentation, collaboration, dialogue and all of the other activities that generate good ideas. That means building a technology infrastructure and an accompanying set of practices that reduce the cost of creating and replicating process innovations.
Good friend and fellow irregular, Jason Wood points out the updated views of Andrew on this theme and writes that the real-world fact that information technology is such a ubiquitous part of the economic model now that you HAVE to measure its impact through multiple, coincident variables. Fully agreed.
As I see it, In today’s hypercompetitive world ,simply put innovation is non-negotiable and innovation streak is of very high value to enterprises and of course much of this would be mainly based on leveraging IT. Business and Technology are getting so integrated; calling by a different name simply does not matter. Absolute truth needs no attorney or an analyst to argue its case. Any productive discussion and insightful analyses such as above would help the cause of business and IT a lot better.

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