Thismemorandum addresses the applicability to IVK of Nicholas Carr’s article It Doesn’t Matter, published in 2003 by Harvard Business Review. While thearticle shares valuable insight, Carr’s recommendations (“Spend less”1, “Follow, don’t lead” and”Focus on vulnerabilities, not opportunities”) cannot be taken as a general recipeand cannot be applied as such at IVK.
The central idea underlying Carr’s recommendations isthat “Scarcity – not ubiquity – makes a business resource truly strategic” andthus “IT has become a commodity. Affordable and accessible to everyone, it nolonger offers strategic value to anyone.”2 Although the assertion seemsto make sense, the abundance of counter-examples make its generalizationimpossible: take human resources, available and accessible as they are, butstill making a lot of competition difference (IE in Madrid stands out among theEuropean business schools, while all have teachers as their main resource);take operations management, omnipresent in banks or airlines, and yet ING andSouthwest Airlines are able to turn this resource into a huge competitiveadvantage; take marketing and the difference Swatch or Starbucks made, andfinally take IT and the advantages Zara or Amazon created themselves.
Even incheating, Volkswagen’s emissions advantagewas based on an innovative (yet unethical) software.We should avoid however falling into the same reasoningtrap as Carr’s article. By citing some counter-examples to his inference wearen’t stating a generally valid conclusion (Carr isn’t always wrong). In fact,some of his observations are true and should engender serious reflection: i. Thereis a lot of excessive optimism in ITinvestments, partly fuelled by the hypevendors create, leading many firms to overspending and to low ROI.
The2000-2002 dot-com bubble was a stark warning; ii. Competitive advantages are nowadaysharder to find and shorter lived, as IT is widespread, and many solutions were eitheralready explored or easier to replicate. Standards spread fast, as does accessto rented web-based platforms, software and even infrastructure; iii. IT has become an essential resource, “entwined with so many business functions”, and thusit is generating important risks. Manyfirms don’t address these risks thoroughly; iv. Finally, cutting-edgetechnology is expensive and risky: new launches are often hasty and do not deliver on their promises; onceIT solutions are established, price drops quickly.
Cutting the long story short, as it became mature andwidespread, it’s not the mere presence of IT, but the way it’s valorised thatcan bring some firm real competitive advantages. For capturing IVK specificities,we propose alternatives to Carr’s three recommendations, plus an important additionalone, which should actually come first:1) Definean IVK IT governance, formalising the role and expectations from IT.As a framework for this initiative,we first propose the approaches of Harvard professors Nolan and McFarlan3 for choosing the correctgovernance depending on the role, stakes and potential of IT inside IVK. McFarlanproposed an “IT Strategic Impact Grid”, where firms are located in one out offour quadrants, depending on:· theirhigh or low Need for Reliable IT – IVK is definitely on the upper side, as evena short interruption would bear significant risks. The daily functioning of thebusiness4 is reliant on informationsystems, from Customer Service to Loan Operations. Moreover, having takenadvantage on internet technology allowed us cheaper development and efficienttransaction processing, but exposed us in the same time to security threats orservice interruption risks.· theirhigh or low Need for New Technology – IVK is honestly somewhere at the middleof the grid, but given our strong growth ambitions we should be prepared for anOffensive approach, thus IT mode shouldbe “Strategic” from a McFarlan perspective. Indeed, IT has proven its role as differentiating factor in IVK’s case, agood example being the competitive advantage we hold thanks to the applicationsbuilt on top of our ERP4.
In this context, we proposed in our presentation forthe Board of Directors4 a top level governance for IT, aligning itspriorities with overall Board strategy and with business units. As MIT’s Rossand Weill5 suggest, for ensuringstrategic coherence, decisions like the IT budgeting, arbitrating among ITpriorities and local versus centralized approaches should be taken at a levelhigher than IT. 2) SpendWiser – while overallunderinvested, IT spending allocation in IVK can be optimized. On one hand, there are areas in which Carr’srecommendation makes a lot of sense:· Currently,business units can use the IT budget on internal IT “products” or deal directlywith external providers, such as buying mobile solutions from various vendors (andmoreover outside the IT budget). Acquisition costs could be lowered bymutualisation, while maintenance could be made cheaper and more efficient bychoosing a common technology.· Advances in project management should continue.
IVKshould adapt and choose Waterfall or Agile methods depending on expected outcome(fixed vs adjustable), on error impacts (fatal vs they can afford to try, failand fix), on the possibility to have the beneficiary in the project team.Cheaper alternatives could be explored by the IT governance bodymentioned above. The Infrastructure project, where we fired anexpensive and underperforming vendor4, is a good internal example.Outside IVK, Zara offered a compelling example of IT simplicity and efficacy6.