I must say that the IT processes are moving so fast that even the traditional IT experts are finding it hard to keep up with the pace. It seems like the Internet Marketers are the real evangelists of Web 2.0.

Will Enterprise 2.0 really take off? I doubt so. Well it will be really interesting if Giants like Google, Yahoo or MSN do decide to launch their own social bookmarking sites.

If this is true, as IT and process innovation continue, the human element becomes the competitive differentiator, magnified or modulated by IT. Knitting together these human/technical systems is then an idiosyncratic process, peculiar to the company, the technology, the people, the timing and the sequence of events.

Turbulence continues.

It is also interesting to look at the crossroads between process-dictating IT and the organizationÂ’s own processes that give them competitive advantage. While this may not have the aggregate perspective you are looking for, Andrew, I find ITÂ’s effect of industry-wide standardization of processes to be a great challenge for a company with innovative processes unless they are able to clearly identify which processes create this advantage and which do not. It is the ongoing battle of customization at a premium or standardization at a discount. How good are companies at making this choice?

You draw attention to a line from the WSJ/SMR article where you state,

“Instantaneous delivery through the Internet to hundreds of millions of consumers means a company with a slightly better online marketplace or search engine, for example, can quickly dominate the market, and just as easily be dethroned by a rival with a new approach.”

What struck me was the notion of a highly competitive market that is dependent on the inherent quality of the products, and not other factors we as economists often like to ignore (geography, transactional costs, consumer bias, etc.). However for a market to operate in this manner we must approach Knight’s “heroic assumption” of perfect information. Is it possible that the IT investments of the 1990s and early 2000’s that you test were responsible, among other things, for providing more perfect information to consumers thus resulting in a more Schumpterian market? Investments in technology such as Web sites and eCommerce should, and in my opinion did, give consumers a level of information that they had never seen before. With this information, market inefficiencies that had previously held the status quo may very well have dropped off, thus changing the market dynamics.

For this to work though a couple of conditions would need to fall into place. First, the markets with the highest IT intensity would likely need to be consumer facing. I looked for a more detailed table in your paper and did not see a breakout of the 63 industries you tested. Second, since eCommerce and other consumer facing IT investments represent only a fraction of overall IT spend we would need to rationalize the impact of the other investments. My assumption is that your conclusions around process replications are dead-on, but also that eCommerce investment would be highly correlated with general IT spend over the period. Is it possible that your model tested both factors as a result of this (possible) correlation?

Ultimately my question is whether the increase in turbulence and concentration you show over the period is not only a supply side phenomenon. Did consumers get into the action as well?

1. IT increases Knowledge Binding Agility (KBA).
2. KBA increases the rate of change in the competitive environment, and improves a firm’s competitive position. Process innovation is one kind of improvement.
3. Both factors (increased rate of change and improved competitive position) increase the demand for IT.
4. The increased demand for IT results in improved IT, which further increases KBA (back to Step 1).

To the degree this is true, IT will be a primary driver of increased turbulence.