Harvard Business Review has recently updated its Web site to reflect the contents of the July-August issue, which is the second of two issues celebrating the Centennial of Harvard Business School. This one is devoted to "Honing Your Competitive Edge" and contains an article written by myself and MIT‘s Erik Brynjolfsson called "Investing in the IT That Makes a Competitive Difference." This is a descriptive title, but not a terribly interesting or provocative one. Erik and I tried to get the editorial staff brainstorming around titles like "Deploy, Innovate, and Propagate: How to Harness IT for Competitive Advantage." or "How, and How Much, IT Matters," but no dice.
The title aside, we’re excited to see the article in print. It builds on and expands ideas we wrote about last year in Sloan Management Review and the Wall Street Journal, and that I’ve blogged about a couple times.
We present data showing that competition in the US has become significantly nastier, or more ‘Schumpeterian,’ since the mid 1990s, and that the increase in competitive intensity is biggest in the industries that spend the most on IT. To put it a bit more precisely, we found a positive correlation between nastier competitive dynamics and IT investment at the industry level since the mid 90s; the article includes graphs that show this relationship.
To put it a bit more loosely, we found that competition started to heat up in the middle of the last decade, and that it heated up most in industries that installed a lot of IT.
We use analogies, case studies, logic, and previous theoretical and empirical work to argue that this is not just an interesting correlation, but a story of cause-and-effect. We believe that IT is a primary engine of the observed changes in the landscape of competition. The article lays out why we believe this, and what the implications for technology-fueled competition are for companies and their leaders.
I won’t try to summarize our arguments, conclusions, or recommendations here. Instead, please read the article if you’re interested in the topic; It’s available for free for the next month on HBR’s site.
And please let me and the rest of this blog’s community know what you think. Are you persuaded by our evidence and arguments? If not, why not? What did we overlook or get wrong? What do you think of the paper’s recommendations to executives? Are they the right ones, or recipes for disaster? What questions did the article leave you with? Leave a comment and share your thoughts; I’ll take up feedback in later posts. There’s a lot more to be said on this topic, so let’s start the conversation.
{ 10 comments… read them below or add one }
Another excellent article Professor McAfee!
Few questions about Rite Solution’s “Mutual Fun”:
NYTimes[1] covered the concept in early 2006. Did you get a chance to talk to the CEO, James R. Lavoie, of Rite Solutions on the success of this program, and innovative ideas that came out of the program?
Would it be possible to invite the Mr Lavoie to comment on this blog post about “Mutual Fun” and whether he thinks it was a good idea or a bad idea?
Professor:
I am a corporate manager for a Fortune 100 company and work at our R&D Center. Your article states the obvious … investment in information technology can be a competitive advantage. While the case studies are interesting, I would have been more interested if you could have used the new web and made the article as posted on HBR have both links to example and a wiki element (or something similar) for expansion of your ideas. However, HBR’s 30 day limit on making the article available on line limits my idea.
Oh well … Three cheers obviously for seeking feedback via your blog.
It is a very interesting article. Yes, more and more companies are using the internet to explode their business. It is the way of the future. But, one must realize that the internet evolves quicker than most text books.
Understanding the web is very important and technology is taking over.
Thanks,
Matt
Start A Home Business On The Internet
Professor,
I have read your article with great interest. Nevertheless, in my country (Chile) recent studies shows that IT investments are stalled for the last three years, indeed there are declining in last year. Last year the IT investment were around 2.4% of the revenues.
Then, Which ideas have been critical to encourage U.S. CEOs to invest in IT, in your opinion?
I just stumbled across this post and the article definitely made for an interesting read. I think we will only see the ferocity of competition increase as IT costs continue to drop while online niches become ever-more saturated. I think we will start to see most markets becoming over-crowded with small to mid-sized competitors who will continue to push the envelop.
As the barrier to entry becomes lower, the pace of technological innovation will have to accelerate to shape the market.
Anyway, this made for a very interestin read. Thank you, Professor.
Another interesting and highly appreciated article you wrote professor, I strongly agree that the evolution of IT businesses since the beginning of the new millennium had been very competitive. More IT investments and players is saturating the Industry,sad to say the ferocity towards competition has become unpleasant, however, this trend pose an advantage for IT subscribers due to its depleting cost,following the Law of Supply and Demand.
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Really cool article…. thanks for sharing !!!
Really cool article…. thanks for sharing !!!