Does IT still matter? Interview with Nicholas Carr

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Posted by Matthew Stibbe

In 2003, Nicholas Carr, author of the Rough Type blog, asked the provocative question: “Does IT matter?” His article appeared in the prestigious Harvard Business Review. It was a closely argued, well-written article, which triggered what The Economist called “an existentialist debate” in the IT industry.

I interviewed him recently for an article in another magazine. Here is the interview transcript (in full but edited and tidied up a little). One of the great things about my job is talking to experts and articulate people like Nick. It was a great interview and his views are a useful challenge to Web 2.0 boosters.

What prompted you to write Does IT Matter?

The dotcom crash was a very interesting phenomenon. It showed that technology itself wasn’t a strong basis for the success of an individual company. At that time, I edited a long article by Michael Porter about ‘Strategy and the internet. The dotcoms were doomed because their technology was so easily copied. If that was true of IT used by entrepreneurs, wouldn’t it also be true of IT used in large companies. It’s very hard to to keep anything proprietary or secret.The other inspiration was that I had been doing a lot reading into economic and technological history, especially the first and second industrial revolutions, where a series of technologies had a tremendous impact on business but very quickly disappeared into the background because they were broadly shared by all businesses. It struck me that IT was following that same pattern. When it was new and untested, companies could get a competitive advantage because it took a long time for competitors to copy it. It’s now become a cost of doing business.

Did you expect the furore that your article triggered?

No. I knew that what I was writing was controversial but I thought it would stir some comments for a week or so. What’s interesting is that I looked at a very basic or fundamental question: does it provide a competitive advantage? The reaction shows that up until that article, there hadn’t been much debate about that. The IT industry had succeeded through its marketing efforts to create a common assumption that it is strategic and creates a competitive advantage. My article and book challenged that. I was threatening the core marketing message that the IT industry put out.

On your blog you say that they didn’t run another IT article for several years – why?

In the three years since I left Harvard Business Review, my sense is that they haven’t published any high profile IT articles. There’s still a lot of interest in technology in business. One thing that got me thinking about the original article, when I was at Harvard Business Review, was that we did reader research after each issue. This is the period of the dotcom boom, where IT was all over the place. The reader research showed that IT articles didn’t get read much. That was one indicator that perhaps IT wasn’t as important as it was assumed. IT was something that if it wasn’t managed well could be a nuisance but it wasn’t on top management’s agenda.

Are there still pockets of competitive advantage from IT?

I don’t think its universally true but it’s true for most companies at this point. Even where there are exceptions its still generally true. The only times now where IT becomes strategic is in quite narrow, specialised uses of it that are specific to an industry or an individual company. All the broadly used hardware and software – basically all the hardware and most of the business software, particularly the big enterprise programs for big processes such as supply chain, financial management, CRM. They’re so broadly adopted and standardised. Some companies are still able to create proprietary software to help them do things. For example an investment banks, like Goldman Sachs, who have done some clever thinking about the prices of derivatives and embed that expertise in proprietary software that can assist trading.

Does the rapid evolution of IT mean that new opportunities for advantage are emerging?

Innovation rarely translates into meaningful competitive advantage. Most of the innovation is coming from vendors who can package the valuable new technology and blow it out to as many people as possible. It’s true that your company can buy some new piece of technology but it is also available to everyone else. The price of technology goes down with incredible speed. The early movers end up spending much more on something and fast followers get it cheaper. The speed with which commoditisation happens gets faster all the time so the window for getting any kind of advantage gets small.

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And is every technology susceptible to being rapidly copied? Surely there are ways of preserving exclusivity and preserving advantage?

It is certainly possible. If there is a way to keep it confidential and keep it proprietary. Unlike with earlier machines, IT is very tricky to keep secret. In the age of the internet everything tends to be exposed online. Even if you can’t see the raw code, companies are pretty good at reverse engineering features. Let’s say that there’s some robotics control software and your factory manages to see it coming and your competitors don’t and you can increase the productivity of your factory. It’s rare.Today there are huge numbers of ways in which IT innovation gets communicated and shared, whether through a zillion IT conferences, web sites and magazines. This wasn’t there twenty or thirty years ago.

If IT stops being a competitive advantage, could failing to move quickly enough become a source of disadvantage? If everyone uses telephones but you still rely on telegrams, don’t you look silly?

I think that’s right. In my book I talk about this a bit. I’m not suggesting that companies should be complacent or stagnant. The state of the art in business processes today is often expressed in software. If you don’t follow the curve you can be put at a disadvantage. Even if the ability get advantage has been neutralised the ability to fall behind is still there.

Obviously, Microsoft (and others) disagree with you – what are the most cogent anti-arguments you’ve heard? Do you find them persuasive?

There is new innovation happening all the time. Not just in the underlying hardware but also in the applications of hardware. One of the lines of criticism is that IT is different from railroads in that IT is much more malleable and flexible. The ability to keep innovation proprietary has declined over time. Every innovation of value gets copied and replicated very quickly.

The other objection – which I discuss more in the book – is that the sense that there are still possibilities for companies to take distinctive intellectual capital and build it into a software program and make it hard for competitors to copy.

A final example is that in some industries, some traditional established industries, the existing competitors can all be competing with a very similar business model and all their IT systems have been built up to support that model and some times it becomes possible for an entrepreneur to enter with a different business model and use software to enable it. For example, traditional airlines with complex hubs and pricing models and then you have a Ryanair or a Jetblue with a much simpler business model and they tend to use a lot of new technology to support their business. It is very hard for the old companies simply because they are wrapped up in their existing systems. Theoretically, it would be easy but they’re stuck with what they have but they can’t move quickly.

You gave a talk at a Microsoft event recently. What did you say? Wasn’t that Daniel in the Lion’s den?

I have had a number of debates with [Microsoft people] but in July we did one at Tech Ready and there were 4-5,000 Microsoft employees. They were very hospitable. The interesting thing about my argument is that the reaction to it has changed over the past three years. There was a lot of hostility at the beginning. Today, it’s almost as if my basic argument is being transformed into the common wisdom. I hear people say ‘most of what you say is right but there are exceptions’. It no longer seems as heretical.

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Photo credit: Sandy Fleischmann – originally posted to Flickr as SDIM8501 Telecosm conference, Nicholas Carr