Recently, Nicholas Carr, editor at large for the Harvard Business Review, sparked discussion about the competitive advantage provided by IT (see "IT Doesn't Matter" in the Harvard Business Review, May 2003). Carr asserts that the era of IT innovations has ended and that IT is becoming an infrastructure, like electrical power. In Carr's view, every company must have IT, but it doesn't provide a competitive advantage as it used to when PCs, databases and other technologies were new. Therefore, he argues, companies should avoid overspending on IT and should focus most on preventing disruptions to IT infrastructure.

In Gartner's view, the central issue is not technological innovation, as Carr believes, but whether firms can convert IT investments into business results. Innovation alone has never made firms successful. Carr concedes the point when he observes that enterprises investing the most in IT don't turn in the best performances (we've known this for years). Companies that use IT to create business value have integrated business and technology leadership, management discipline, sound processes, and a focus on making the enterprise more effective.

But Carr is also wrong when he contends that IT innovation is winding down. Innovation through electronically enabled services, processes and products has only just begun, and CIOs still need to lead the enterprise forward with risk-managed innovation. Carr goes wrong by equating IT with hardware and networks; rather, the essence of IT is information. Successful firms will use information and IT intelligently and in new ways to solve business problems and create customer value. IT will increase the speed, scale and cost-effectiveness of doing business. So if you want to gain a competitive advantage from IT, focus on two things: first, what the computer conveys and processes — the information on customers, suppliers and processes that remains underused and poorly managed — and second, better governance between the business and IT sides. With this focus, you can assess IT risks well, and you can execute on good IT investments, whether innovative or otherwise.

Recommendations

• Manage costs and risks carefully.
• Integrate business and technology planning and execution.
• Design IT governance so that business and technology executives share critical decisions and accountabilities.
• Ensure transparency about who has the power to make decisions and who has accountability.
• Reinforce the importance of collaborative behavior.
• Continue building on IT-enabled productivity improvements.
• Direct new IT investments toward pre-sale, selling and other business processes largely untouched by IT so far.

Analytical Sources: Marianne Broadbent and Mark McDonald, Gartner Executive Programs, and Ken McGee, Gartner Research

Recommended Reading and Related Research

• "CIO 'Must Do' Resolutions for 2003" — CIOs who do not take the steps described here risk reduced credibility with enterprise executives, and being unprepared for changes in business and technology markets. By John Mahoney and Mark Raskino
• "Drive Enterprise Effectiveness: The 2003 CIO Agenda" — Cost pressures remain the No. 1 business driver. But the combination of security and risk management concerns, along with faster innovation, creates challenging scenario that is changing the CIO's role. By Andy Rowsell-Jones, Marianne Broadbent, Chuck Tucker and Jeannette Kieruj

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