Nicholas Carr’s IT Doesn’t Matter – Take 2

April 21, 2008

As I just wrote last week, my computer threw a fit and died. Over the weekend I was doing the rebuild routine and going through my archives for the tools and data that I wanted to restore to the machine.

On this blog back in March, in response to a particular published article, I wrote a quick post on Nicholas Carr’s IT Doesn’t Matter.

In going through my old data backups, I came across my original argument in support of Mr. Carr’s thesis. This was done after the Harvard Business Review thesis, but prior to the book being published.

I found that my spelling and grammar was just as poor then – so a few “corrections” were made.

UPDATE, there is now a thought exercise on this topic titled; On Why IT Doesn’t Matter (geared towards SME’s)

Does IT Matter?

By S. Elliot Ross

November 2003

A lot of ink has been spilled over an article by Nicholas Carr that was published in the Harvard Business Review titled IT Doesn’t Matter. The spilled ink was in rebuttals of the article, and in good old fashioned “Internet Flaming” of the author.

Mr. Carr’s thesis is based on the premise that IT is no longer a competitive differentiation for corporate competitive advantage. The argument is that IT is now a commodity, and that in and of itself a commodity cannot provide the rapid competitive advantages that that early adopters gained through the use of IT. In other words, the cost of IT is simply table stakes to get into the corporate poker game. Since the table stakes are required to get into the game, by themselves the table stakes cannot give or remove an advantage to any player. One definition in the Merriam-Webster dictionary would seem to accommodate this claim:

“com·mod·i·ty – noun: a mass-produced unspecialized product.”

I am sure that a good proportion of the arguments against this article are because of the title. While I also disagree with the title, (although I believe any article that requires you to really question and think about your assumptions to be an excellent article) I find very little to argue about in Mr. Carr’s thesis, however I believe it should be extended a little. I think a point that eludes many critics of the article is that Mr. Carr states that as IT is a commodity, so it therefore must be managed as a commodity. I would also state that there does not necessarily need to a negative connotation to the word “commodity”.

Extending our analogy, when Henry Ford developed the assembly line, he had tremendous competitive advantage. The assembly line allowed Ford Motor Company to mass-produce automobiles with cost benefits that had no direct comparison with other automobile manufacturers of the time. Within a few years, other automobile manufacturers then emulated this assembly line, thereby negating any competitive advantage for Ford. If we fast forward to today, we can definitely say that if you wished to start a mass production and mass market automobile manufacturing organization today, an assembly line is table stakes to the poker game – or as defined by Mr. Carr – a commodity.

If we accept that an assembly line may be a commodity, or to continue the analogy, to be table stakes to the automobile manufacturing poker game, not all manufacturers turn their table stakes into winning hands. Whereas one automobile manufacturing business will manufacture a car that makes a profit, has low defect rates, and low warranty costs, another business will lose money on each vehicle sold, lose money on warranty claims and lose more money on recalls due to defects. At least a portion of all these costs (or benefits) will appear, (or disappear) on the assembly line. Therefore, I would argue; if an assembly line is a table stakes commodity, the assembly line manufacturing process should have no differentiation on the quality or success of the automobile’s production in the market place. Product differentiation in the market place would have to be through other methods, such as marketing, design or other non assembly related methods.

Empirical evidence would support that a commodity assembly line does translate into competitive advantage, as Consumer Reports, and JD Power surveys show. However, the companies that successfully manage their table stakes, or as Mr. Carr states;  manage their IT as a commodity, will still be able to reap benefits and competitive advantage. If we return to the trusty Merriam-Webster dictionary, another definition of commodity can be:

“something useful or valued.”

If we use this definition and manage IT as something useful and valued we will use our table stakes or commodity IT for a competitive advantage by managing it to obtain other corollary benefits from the use of IT.

If you treat your IT as something of value, and play those table stakes to win, you are going to find and produce more value from your two aces of IT than if you view it as an undifferentiated product and just try to avoid losing with a straight flush.

UPDATE: For an SME thought exercise on this subject, there is a new post here.

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