May's Harvard Business Review article, "IT Doesn't Matter," argues that information technology is inevitably headed in the same direction as the railroads, the telegraph, electricity and the internal combustion engine. From a long-term standpoint (10-25 years) I tend to agree, but at its core this article's argument is too simplistic to be useful in the near-term.
Most importantly there is no mention of what form competitive advantage might take next, a discussion that is a primary focus of my forthcoming book, Brain Wave.
"All of these industrial technologies aged from their boom-time youth to become, in economic terms, ordinary factors of production, or "commodity inputs," the article noted. "From a strategic standpoint, they became invisible; they no longer mattered," wrote Nicholas G. Carr, editor at large of The Harvard Business Review. "That is exactly what is happening to information technology today."
IT will always matter, just as the wheel, railroads and electricity remain critical infrastructures underpinning the functioning of today's global economy. When a train brakes down it shuts down just-in-time supply chains. When a black out occurs entire cities stop dead in their tracks.
In fact, slight gradations in infrastructure stability will continue to drive the regional comparative advantage that companies rely on to stay on the cutting edge of competitive advantage. Just look at Singapore's meteoric rise over the past two decades and the competitive advantage companies accrued as a result of its heavy IT investment.
Using the history of techno-economic waves as his guide, Economist Brain Arthur suggests that the next 10-15 years will in fact witness a massive built out of the global IT infrastructure, albeit as Brad Delong notes, at lower profit margins. During this time new forms of IT competitive advantage will continue to emerge as IT adapts to humans rather than us having to adapt to it.
For instance, although not a punctuated leap in competitive advantage, social software has the potential to accrue significant value for companies that leverage its potential to accelerate innovation. In some industries, two product cycles can be the difference between corporate life and death.
For example, decreasing innovation cycle times in the pharmaceutical industry by 10% could slash years off product research, development and approval processes. When translated into revenue and market capitalization impacts, intelligent adoption of social software could significantly disrupt the balance of power in this multi-billion dollar industry. Who says IT competitive advantage is dead?
More importantly, increasing IT efficiency remains critically important if the supporting infrastructure for the next form of competitive advantage is to arise. As Charles Delisi mentioned at a Santa Fe Institute meeting, "there is no way the past ten years of advances in genomics would have been possible without the computational capabilities brought forth by the microchip."
Imagine if electricity efficiency remained at 1920's levels, would microchips; cell phones or the Internet even be possible? Just as electricity efficiency still matters, so too will IT for some time to come.
So the real question still remains...what will be the next form of competitive advantage? Stay tuned.