In 2003, Writer Nick Carr shook up enterprise C-suites around the world with his seminal article for Harvard Business Review he provocatively titled IT Doesn’t Matter.
Fresh off the dot-com crash but before cloud computing took off, Carr observed that the belief that IT’s strategic value increases in parallel with its potency and ubiquity was seriously mistaken.
His central thesis: “What makes a resource truly strategic—what gives it the capacity to be the basis for a sustained competitive advantage—is not ubiquity but scarcity. You only gain an edge over rivals by having or doing something that they can’t have or do. By now, the core functions of IT—data storage, data processing, and data transport—have become available and affordable to all.”
Carr then explained how proprietary technologies can provide strategic advantage, but over time, technology becomes more valuable when people share it, thus limiting such advantage as its value increases.
Writing during the rise of Web 2.0, as social media and other collaborative technologies rose to the fore, his admonition that such tech would provide value but no strategic advantage to its consumers now rings true, as social media are free and available to all.
In the decade following his article, cloud computing further cemented Carr’s perspective. Compute, storage, and network resources have become simple utilities, available at the proverbial turn of the faucet. The value they provide is immense, but the cloud playing field is amazingly level. Carr’s quote above presaged the cloud to a T.
Today, however, we’re in the digital era. Mark Andreesen’s ‘software is eating the world’ prognostication is coming to pass, as enterprises realize they must become software companies to remain competitive.
The value IT brings to such companies is unquestionable. If Carr’s conclusions hold up, however, such technology will become less strategic as it becomes more ubiquitous – suggesting that digital enterprises are in for a world of hurt.
Perhaps we should set aside his conclusions as more applicable to a decade gone by. Or maybe there’s more to digital transformation than meets the eye?
Many people simply think of strategy as long-term while tactics are short-term. Or perhaps strategy is what a business wants to accomplish and tactics are how it achieves those goals. Neither characterization is particularly precise.
Carr, however, pinned down the definition of strategic when he wrote that strategic resources give companies a sustained competitive advantage.
It’s important to note, however, that tactical resources can also provide a competitive advantage – they simply won’t be able to sustain it.
Carr’s observation that many IT resources provide no competitive advantage whatsoever is very true today. After all, putting your app in the cloud gives you no competitive advantage, because your competition can easily and cheaply to the same thing, thus gaining the same advantages that you have.
Not all technology is as ubiquitous and frictionless as the cloud, however. As a result, in periods of broad-based innovative disruption like today, some technology may very well provide tactical competitive advantage.
For example, many cybersecurity vendors provide this advantage to their customers. Having better cybersecurity than your competition gives you an advantage, after all, because the hackers will just target them instead of you.
Such an advantage is tactical, however, because all your competition needs to do is buy the same (or equivalent) products to even the playing field once more.
Given the turbulent state of the cybersecurity market, therefore, shrewd choices of technology can give you an edge – for a while. Once everybody has the same capabilities, however, then nobody has an advantage over anybody else.
The one question remaining about Carr’s 2003 article: in today’s digital world, can software provide strategic competitive advantage to enterprises?
I add the word enterprises to the previous sentence, because software generally does provide strategic competitive advantage to vendors. In fact, in our analyst briefings with such companies, among the first questions we ask are what the vendor’s differentiators and barriers to entry are.
In other words, we ask what makes them different, and how are they keeping their competition from doing the same thing: aka, what is their strategic competitive advantage.
Such advantage inures to the vendor to be sure – but not its customers, since the vendor wants to sell the same product to as many customers as possible. The vendor cashes in, but any competitive advantage its customers gain from its products are tactical and thus short-lived.
With the rise of Agile methodologies and now DevOps, enterprises are getting much better at building their own software, in the hopes that the software they are creating is increasingly likely to give them strategic competitive advantage.
In fact, given that vendors (as well as open source efforts) are building increasingly sophisticated enterprise software, we could argue that the only reason enterprises still build bespoke software at all is to gain such an advantage. Otherwise, they’d simply buy all of their gear off the shelf.
Enterprises were building bespoke software in the years leading up to 2003 as well, of course – and in many cases, this software afforded strategic advantage. Carr mentioned several examples, including American Airlines’ SABRE reservation system – the gold standard across the airline industry for decades.
Carr, however, threw cold water on this trend. “The opportunities for gaining IT-based advantages are already dwindling,” he wrote. “Best practices are now quickly built into software or otherwise replicated. And as for IT-spurred industry transformations, most of the ones that are going to happen have likely already happened or are in the process of happening.”
We could argue that improvements in the speed and quality of bespoke enterprise software have staved off Carr’s dire warning – at least for a time. To be sure, companies that are successful with DevOps are able to deliver better software faster – and the pace of deployment only continues to accelerate.
The question for enterprise software development efforts broadly, however, is whether such acceleration provides strategic, or merely tactical advantage. After all, if every enterprise in an industry – say, every retail bank, for example – gets fully up to speed with DevOps and continuous deployment, then we could easily argue they will soon level the playing field once more.
In enterprises’ mad rush to implement strategic technology ever faster, perhaps they are doing no better than the Red Queen in Through the Looking Glass – running as fast as they can simply to stay in place.
Carr’s dismaying conclusion runs rampant once again.
We thus appear to be at an impasse. Vendors can achieve strategic competitive advantage for themselves, but end up leveling the playing field for their customers.
Enterprises can gain tactical competitive advantage by transitioning to DevOps more successfully and more quickly than their competitors, but such advantage is inherently short-lived – and the timeframes are growing ever shorter.
Carr’s conclusion is truer now than it ever was. Given the increasing pace of change in software innovation, any competitive advantage is less and less likely to be strategic – for any particular piece of technology.
Only by building the capability to continually improve our technology over time can any company – enterprise or vendor – hope to maintain any kind of strategic advantage long-term.
Carr was right – as far as his argument went. But he missed the digital transformation paradigm shift from the focus on IT to the ability to change.
At Intellyx, we say that digital transformation is not about transforming to a particular ‘digital’ state. It’s about adopting change as a core competency.
As the pace of change continues to accelerate, the fundamental truths that Carr brought to light become even more urgent. The window of opportunity for strategic advantage for any piece of technology is shrinking to nothing.
Any company that thinks that digital transformation is about technology or who believes that they will ever achieve a final, digitally transformed state is doomed to fail.
IT matters even less than it did in 2003. The only way to remain competitive long term is to up your game and get better at change overall. How fast are you willing to run without going anywhere?
Copyright © Intellyx LLC. Intellyx publishes the Agile Digital Transformation Roadmap poster, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, none of the organizations mentioned in this article are Intellyx customers.