In Nicholas Carr’s controversial 2003 Harvard Business Review article, he argued that IT had become irrelevant, a commodity?no more strategic, he wrote, than electricity. You needed it, but you didn’t have to think about it a whole lot. While the piece certainly generated a lot of buzz, and gave many a beleaguered CIO an unwelcome frisson of insecurity, few people bought the argument in its entirety. (Carr expands his thesis in the book Does IT Matter?, coming out May 18.) As one might expect, CIOs, consultants and IT vendors were harshest in their criticism.
Of course, IT does matter, and not because the usual suspects say so but because economic conditions say so. IT may be the single most important driving force in our economy. So, by extension, you’d think that CIOs would be among the most powerful, influential executives around. Somehow, however, that hasn’t happened. Or at least that’s the perception among CIOs and the reporters and analysts who talk about them.
According to Louis E. Lataif, dean of Boston University’s Graduate School of Management, IT is a major reason why the latest recession was less severe than previous downturns. From 1998 to 2000, spending on Y2K, the euro conversion and the dotcoms propelled the economy into the stratosphere. When (as it was bound to do sooner or later) the economy tanked in early 2001, the fall was hard yet surprisingly short. Technically, Lataif says, the subsequent recession lasted only eight months, from March to November 2001.
“Economic recessions are inevitable,” says Lataif. “A stop in spending is followed by an inventory recession?a shutdown of manufacturing to work down inventory.” Given the heights of the IT-fueled boom that preceded the recession, it was natural to expect any inventory work-off to last much longer than it did. Yet throughout the boom, inventory levels were 30 percent lower than they’d averaged for the previous 40 years. And we can thank IT for that. In effect, Lataif says, IT took the sting out of the recession?at least in terms of its duration?by enabling inventory-reducing practices during the boom, such as just-in-time manufacturing and automated replenishment.
Yeah, But What About Jobs?
Of course, the impact of IT on business cycles hasn’t always been positive. Just ask the millions of displaced workers whose employment prospects remain dim even as most economic indicators begin to glow brightly in this, the so-called jobless recovery. In many industries, lost jobs are the result of businesses becoming more efficient as workers become more productive?two consequences directly correlated to the effective use of IT. So while IT helps drive down costs for businesses and consumers, the gains in both efficiency and productivity take a personal toll on the unemployed. It’s an ironic twist that millions of IT workers themselves have been displaced by (certainly) cheaper and (maybe) more productive programmers and managers in places like India and the Philippines.
Lataif acknowledges that overcoming unemployment is an ongoing challenge. By design, IT is supposed to eliminate jobs. Yet Lataif suggests that IT can help here too.
In the modern capitalist era, companies have always aimed to hit four targets: Lower costs, be faster than the competition, provide quality, and deliver products and services people want. In each of these areas, IT can make a huge difference, particularly in terms of products and services. And it’s Lataif’s belief that innovation (along with a rigorous education system that emphasizes math and science) ultimately will create new jobs.
Well, What About Me?
“Anyone can make the argument that technology is like electrical power, in that every company has access to it,” Lataif says. “But access to technology is not the point. The point is using technology to transform how businesses function.”
And right now there’s still plenty of room for IT-fueled innovation. Online technologies?which to date center around retail and supply chain management?are still in their infancy. As they mature, they will change how many companies do business. Take, for example, mass customization?now an oxymoron. While the Internet allows consumers access to a modicum of customized products?everything from cars, to clothing, to computers?companies have yet to figure out how to design, manufacture and deliver individually customized items faster and cheaper than mass-produced ones. That’s the kind of innovation that needs a technology champion.
Forget about being persona non grata in the executive suite. As a driver of innovation, it’s obvious that IT is essential (and strategic) when it comes to maintaining a competitive edge. It stands to reason that those managers who understand how to use information technology to create new products and deliver new services will be a most valuable asset in any boardroom. As Lataif sees it, line executives are already beginning to catch on to this. “The traditional knowledge once held exclusively by CIOs is being absorbed by executives in operations as a matter of necessity,” he says.
But as technology expertise is dispersed throughout the management ranks, will the CIO become irrelevant? Not at all. Do the traditional profit-and-loss responsibilities of business unit leaders render the CFO redundant? Not so anyone has noticed. As IT knowledge is dispersed, the CIO of today is in a unique position to coordinate, to set agendas and define goals?in short, to lead. “The next generation of CEOs will come from the ranks of CIOs as much as CFOs,” Lataif says.
Whether this happens depends to a large extent on CIOs today. Will they seize the day? That’s hardly a sure thing. If nothing else, the debate that followed Carr’s article revealed an almost neurotic degree of insecurity and defensiveness among CIOs. True, the article questioned the importance of their core competency, but isn’t it interesting to note that unlike CIOs, CFOs (to drag them in front of the class again) haven’t felt the need to justify their existence in the wake of all those financial shenanigans and accounting lapses that we read about in the morning papers almost every day.
IT is a relatively new discipline, so perhaps it’s natural for those who ply the trade to be a bit unsure about where they stand in the grand corporate pecking order. But the time has come for CIOs to stop obsessing about how their peers view them and start working toward the future that Lataif predicts for them. Holding the position of CFO is an accepted stepping-stone to higher office in part because CFOs assume it to be. They take it for granted…and, therefore, so does everyone else. Before IT can be seen in the same light, CIOs have to get over their timidity and assert their right to the corner office.