IT Doesn’t Matter – Carr Flashcards
IT Doesn’t Matter – Carr
Introduction
- main paper message: as information technology’s power & ubiquity have grown, its strategic importance has diminished
- IT has become backbone of commerce
-> IT’S power & presence have expanded = more investments - simple but false assumption: IT’s potency & ubiquity have increased in sync with its strategic value but what makes a resource strategically valuable is scarcity
-> lacking here as IT’s core functions (data storage, data processing, data transport) have become commodity factors
IT Doesn’t Matter – Carr
VANISHING ADVANTAGE
- when determining how technology influences competition at firm level, distinction needs to be made between proprietary & infrastructural technologies (IT rather infrastructural)
IT Doesn’t Matter – Carr
Proprietary technologies:
can be owned (actually or effectively) by a single company (eg pharmaceutical firm that holds patent on compound that serves as basis for family of drugs) as long as protected, they are foundations for long-term strategic advantages
IT Doesn’t Matter – Carr
Infrastructural technologies:
offer far more value when shared than used in isolation – become part of business infrastructure; at beginning phases of buildout can take form of proprietary technology as long as access to technology is restricted; often lead to broader market changes
* firms that see what is coming in buildout phase of infrastructural technology can gain step ahead but trap that firms fall into is assuming that opportunities for advantages will be available indefinitely
IT Doesn’t Matter – Carr
BUILDOUT PHASE STAGES: beginning:
advantage possible as long as access is restricted
IT Doesn’t Matter – Carr
BUILDOUT PHASE STAGES: * middle:
commercial potential of technology is broadly appreciated, amounts of cash are invested, buildout proceeds with extreme speed -> more competition, greater capacity and falling prices = easily affordable and accessible – forces users to adopt technical standards
IT Doesn’t Matter – Carr
BUILDOUT PHASE STAGES: end:
opportunities of advantage largely gone as easily available for everyone but companies can hope for cost advantage after buildout phase (hard to achieve)
IT Doesn’t Matter – Carr
BUILDOUT PHASE STAGES: end:
opportunities of advantage largely gone as easily available for everyone but companies can hope for cost advantage after buildout phase (hard to achieve)
IT Doesn’t Matter – Carr
BUILDOUT PHASE STAGES: conclusion
conclusion: influence of infrastructural technology small on firm level in the end but great on macroeconomic level (nations who didn’t implement eg communication infrastructure will suffer as domestic industry) technology potential to differentiate a firm from competitors (strategic potential) is reduced as technology becomes widely accessible
IT Doesn’t Matter – Carr
THE COMMODITISATION OF IT : *How has IT characteristics of infrastructural technology?
guaranteed rapid customisation
-> buildout phase of IT leads to great homogenisation of functionality & standardisation; isolation by not adopting standards would be too costly; highly replicable (processes); rapid price deflation = increasing affordability that has destroyed potential barriers to competitors
IT Doesn’t Matter – Carr
THE COMMODITISATION OF IT: How do some companies gain advantages by deploying IT innovatively?
gaining operating or marketing advantages by leapfrogging the competition in one process or activity (eBay auction process)
sometimes dominance gained through IT can bring additional advantages such as economies of scal, brand recognition etc that is more durable that original IT (Walmart, Dell)
IT Doesn’t Matter – Carr
What are SIGNS THAT IT BUILDOUT IS ENDING ?
1) IT’s power is outstripping most of business needs it fulfils
2) price of essential IT functionality has dropped so that it is affordable to most all
3) capacity of universal distribution network (Internet) has caught up with demand
4) IT vendors are rushing to position themselves as commodity/utilities suppliers
5) investment bubble has burst: indication that infrastructural technology is reaching end of buildout
IT Doesn’t Matter – Carr
FROM OFFENSE TO DEFENSE
- when resource becomes essential to competition but consequential to strategy, the risks it creates become more important than the advantages it provides IT disruption can paralyse a firm’s ability to operate (deliver products, connect with customers, foul reputation)
IT Doesn’t Matter – Carr
FROM OFFENSE TO DEFENSE: Hoiw in the long run?
greatest IT risk companies face is overspending on IT thus important to separate essential investments from ones that are discretionary, unnecessary or counterproductive
-> sloppy expenditures other than overspending: data storage wasted
-> * oftentimes waiting to make IT expenditures results in late-mover advantage
* greater expenditures rarely translate into superior financial results
rather opposite = companies that only spend little on IT have better performance
