REDMOND, Wash., Dec. 28, 2004 — In May 2003, business writer Nicholas Carr sparked a heated debate when the Harvard Business Review published his article “IT Doesn’t Matter.” The premise of his article and a subsequent book “Does IT Matter?” is that business technology has become a commodity that offers little or no competitive advantage.
A compelling counter-argument to Carr’s thesis can be found in the book “In Search of Business Value: Ensuring a Return on Your Technology Investment.” Published in November by Select Books, “In Search of Business Value” was co-written by Robert McDowell, Microsoft vice president for Business Critical Solutions and William L. Simon. Based on discussions McDowell had with business leaders from a wide range of industries, the book makes a strong case for the benefits that information technology delivers when business and IT executives work together to use IT as a catalyst for rethinking business processes.
McDowell, a senior Microsoft executive since 1990, sat down recently to talk about his book, the controversy stemming from Carr’s article and the business value of information technology.
PressPass: You’ve said that the debate sparked by Carr’s article was a good thing. What did you mean by that?
McDowell: I think there are a lot of business people who are pretty happy with the value they get from their IT investments who sometimes wonder whether enough is enough. That’s a valid question. But it’s not a new issue. In my book, I reference articles going back to the 1960s that question the value of things like office automation.
What Carr has done is to help raise the level of the discussion to the point where people on both the business side and the IT side are sitting down together to talk about how this issue applies to their business. Regardless of what you think about Carr’s conclusion, the debate is extremely valuable.
PressPass: What do you think of Carr’s conclusions?
McDowell: A lot of the points he makes are valid. Some of the data points he uses are overspending on IT during the 1990s, the hype around Y2K and the fact that too many IT investments don’t receive the rigorous review that they should. I agree with many of those points.
But I don’t agree with the conclusion he draws from those points. He says IT is a commodity that no longer delivers competitive advantage because no matter what you do, your competitors can copy you. His position is that IT is not strategic and is a cost of doing business that should be kept as low as possible.
I think that’s a dangerous conclusion. In my book, someone brought up the story of the guy who wanted to close the U.S. Patent Office at the start of the 20th century because he thought all of the important inventions had already been invented. That may be an apocryphal story, but it’s useful because Carr’s conclusion is similar.
I believe that, today, the value proposition for IT is greater than ever. At the same time, we’ve already picked most of the low-hanging fruit.
PressPass: If the low-hanging fruit has been picked, where do the opportunities lie?
McDowell: The real value of technology is in its potential to be a catalyst for change. There are incredible opportunities for organizations that are willing to rethink processes from the beginning. Organizations often limit the potential for benefit by only focusing on the idea of business-process reengineering. But that assumes that what you have in place is worth re-engineering. Maybe you should blow the process up and start over.
The core issue now is that companies have to do a better job of linking IT with business priorities. Today, the idea of the IT organization making the business case for IT decisions is no longer valid, because they don’t have control over which groups in the company must adapt and change to reap the benefits. Unless business leadership is held accountable for important IT decisions, the value just won’t be there.
PressPass: The subtitle of your book is “Ensuring a Return on Your Technology Investment.” Is return on investment the critical metric when it comes to technology investments?
McDowell: ROI is a valid measure, but in my book, I didn’t try to articulate a methodology for measuring it. I believe that every organization needs to determine what appropriate measures are for return on investment. For a bank, ROI might be measured in terms of reducing loan-processing time and increasing the hit rate for new loans. The CIO of the Army looks at life and death on the battlefield. That’s his ROI.
PressPass: How can companies mitigate the risk that is inherent in using IT as a catalyst for fundamentally rethinking processes?
McDowell: The kind of transformation I’m talking about can be threatening both personally and institutionally. So you have to be smart about helping people through the process. You have to provide the tools and the training employees need in a way that’s sensitive to their concerns. If you can make everyone part of the solution rather than part of the problem, the benefit will be much greater.
PressPass: What are some of the examples of successful companies from your book that you find most inspiring?
McDowell: One important lesson of the book is that this issue is important regardless of the size of your organization, the industry you are in or whether your organization is private or public. One of my favorite examples from the book is East Industries, a 23-employee company in North Carolina that manufactures wooden pallets. You can’t get much more straightforward than that. In the book, the CEO is extremely articulate about how he uses technology to differentiate his business, to provide information to customers that adds real value and to manage his employees more efficiently.
At the other end of the spectrum is the U.S. Army, which is Microsoft’s largest customer. I spoke with the Army CIO and Army generals who talked about their value proposition, which is winning battles and saving lives. They say there’s no doubt that technology has allowed them to be more successful on the battlefield.
PressPass: What is the future of IT for business? What does that future mean for Microsoft?
McDowell: I came away from writing the book feeling very strongly that the potential for IT delivering value has never been greater. The impact you can have on your cost of doing businesses and your ability to anticipate customer needs is phenomenal.
I also think that the potential for us as a company has never been greater. Our challenge now is to tell our story to both the IT side and the business side and to tell it from their perspective and the perspective of their customers, rather than from our perspective as a technology provider. That’s the heart of what I learned from writing “In Search of Business Value.”