Does IT Matter ?

We all know how technology is changing the way of doing business and how is able to determine winners and losers.

During the ‘90s the first pure online companies were born and some of those, which survived to the dot-com bubble, will become the huge multinationals we encounter in our everyday life today. Technology did not only create new companies but also profoundly modified the existing ones. The 21st century opens the doors to a new paradigm of doing business where the technological factor became an inexorable aspect of the operating activities.

At the beginning, the main initiatives were all about business process management software such as ERP (enterprise resource planning)which allows an organization to manage the business and automate many back-office functions due to a system of integrated applications. Everybody was talking about it and numerous companies start spending a huge amount of resources in what was called Information Technology (IT), namely all those applications responsible for storing, retrieving, and sending information in a company. As usually happen with buzzwords and fads, contrasting schools of thought arose and new doubts were cast. In 2003, Harvard Business Review published a widely-discussed and debated article from Nicholas Carr with a rather provocative title: IT doesn’t matter. The author claimed that all those investments in IT were useless for a company to gain a true competitive advantage.

 The interesting aspect of this then courageous claim is not about its veracity, but to notice that, more than ten years fast forwarded, the polemic hasn’t changed. The technological thrust is more overwhelming than it was before, consumers and the surrounding world increasingly connected and the need to adapt to the new digital canons even more compelling. For these reasons, an increasing number of companies have embarked on this journey today towards the digital transformation. Massive resources are being invested in new technologies with the ultimate aim to radically improve company’s performance or scope. Nevertheless, the correlation between IT expenditures and profitability is still rather weak, thus supporting Nicholas Carr’s argument that the mere acquisition of technological resources is not a source of competitive advantage per se.

 Capgemini Consulting and the MIT Center for Digital Business conducted a global research covering more than 400 large firms investigating the digital transformation phenomenon. The study shows how, although most of the companies are taking costly measures in digital terms, only a small percentage can capture the real business benefits. The research defines two types of digital transformation dimensions, that is digital intensity and transformation management intensity. The former represents, in simplifying terms, the level of investments made in technologies, whereas the latter describes the leadership capabilities required to drive digital transformation in the organization. The more the intensity of those two dimensions, the more the digital maturity. Companies in their finest in maturity are called Digerati and they have a strong digital culture that actually drives real revenues.

One of the most resounding cases of digital transformation execution come from the English fashion company Burberry. The then CEO, Angela Ahrendts – not by chance current SVP Retail in Apple – understood it was not only about implementing new technologies. She was able to virtuously integrate the online and physical channel (what is called Omnichannel in the modern literature), create a motivated and capable workforce and develop strong and productive relationships between management and IT. Using her own words, she moved IT from the back, where it traditionally sits, to the front of the bus.

 To conclude, Nicholas Car perhaps did have a point when he declared that IT expenditure in itself did not bring about competitive advantage. Yet, it will be still true if we keep considering the IT as a mere department. On the contrary, it is necessary to consider those technologies as an integrated part of the business and make sure there is alignment between digital investments and digital capabilities. In this way, technological resources will be able not only to support the business strategy but also to create new opportunities and business models.