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IT, the secret formula for success

IT (information technology) is apparently vital to companies for business growth, although it has to be applied judiciously. This is not simple and in fact is somewhat complicated, to the extent that some are devoting their academic lives to understanding how, where, when and why IT actually succeeds in its mission. This is the case of Kristina Steffenson McElheran, business administration professor at Harvard Business School but above all passionate empirical scholar of the interactions between information technology, corporate performance and competition strategies. All this with a single goal: to understand how companies use information technologies to work together and compete on the market.

Interesting and above all useful research for those who have to manage companies in real life.

The combined thinking and results achieved by Steffenson McElheran can be found in an article which appeared in Working Knowledge of the HBS – Why business IT innovation is so difficult by Maggie Starvish, two pages that sum up the theoretical ideas and practical conclusions of years of investigations.

The basis for the reasoning is apparently simple: IT has the power to flatten hierarchies, shrink supply chains and speed communications. In successful cases the result can be summarised in one sentence: “people can spend more time thinking up new products and servicing customers, and less time checking boxes”. One of the examples dear to Steffenson McElheran is Walmart, the US retail chain which currently claims to be, probably rightfully, the largest chain operating in the area of organised distribution.

However there is only one in the Walmart world, while many more companies struggle in the IT area and some, believing that they are really applying information technologies, are sensationally wrong. For Steffenson McElheran there is “a tremendous gap between the most IT-savvy firms and the IT laggards”. To understand this we only have to think that the former succeed in increasing their revenues radically while the latter only manage this through incremental input.

But what are the missing ingredients in companies that fail in IT applications? For Steffenson McElheran there are at least three essential conditions: so-called “organisational understanding”, then effective “executive backing” and, finally, the ability to look to the long term and live in the unknown rather than seeking fast fixes. IT translates properly into a competitive edge only when the company succeeds in changing the organisation. Which is not easy for many.

Why Business IT Innovation is So Difficult

Maggie Starvish

Harvard Business School Working Knowledge

October 2012