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About this author
Zack Lynch is author of The Neuro Revolution: How Brain Science Is Changing Our World (St. Martin's Press, July 2009).
He is the founder and executive director of the Neurotechnology Industry Organization (NIO) and co-founder of NeuroInsights. He serves on the advisory boards of the McGovern Institute for Brain Research at MIT, the Center for Neuroeconomic Studies, Science Progress, and SocialText, a social software company. Please send newsworthy items or feedback - to Zack Lynch.
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Brain Waves

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May 19, 2003

IT Competitive Advantage, Hardly Over

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Posted by Zack Lynch

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.

Comments (2) | Category: NeuroWave 2050


COMMENTS

1. Joe Gazillo on February 6, 2004 6:02 AM writes...

The real underlying problem with information technology is that for so long many companies viewed it as being mystical and required a very special skill to understand it. The algorithms, which run software applications that are in use today, were developed over 35 years ago. The basic structure of programming has not changed. Companies like Microsoft add to the complexity by adding features that do little to improve the process in many information technology systems.
As Nicholas Carr points out in his article: “some companies are spending in excess of 50% of the operating expenses on information technology”. I am force to ask myself this question, why? American society has changed from a culture whose values were to maximize the use of all natural resources to a culture that views these resources as deposable. Having worked in the field of Information Technology for the last 20 years and seeing the numbers of personal computers that I have personally acquired in those 20 years, I understand why many of the leaders in the industry are fearful of what Mr. Carr is saying.
Now add to this complexity a global economy where the software that was traditionally developed here can now be developed for a fraction of the cost in foreign markets. This is what I believe is the real issue. We have an industry that capitalized on the ignorance of the business community to create an illusion of competitive advantage. The coined phrase “mission critical software” has been exploited and been marketed to sell systems to all industries regardless of need.

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2. benjamin on May 1, 2004 7:37 AM writes...

hello sir
iam just in my initial stages of my management studies so pls do help me up by giving me some information about how the IT is related with competitive advantage

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