I heard an interesting story today about how IBM funded some research by several economists approximately 8 years ago which ended up finding that IT investments were having a positive impact on company performance. By happen stance, the same week IBM published that report, McKinsey was cited in the Wall Street Journal saying that based on some studies they conducted, there was not a positive increase in value coming from corporate IT investments! How, and why, did these two different pieces of research indicate such different results?
Luckily, IBM got the economists and the McKinsey team together to sort through this, and the answer was quite intriguing. It was explained to me as a difference between a glass being half empty vs. being half full view of the world. But basically, the economists did indeed find several companies that saw a positive impact on performance from their IT investments. And the McKinsey team did find several companies that saw NO increase in performance from their IT investments. What's probably more interesting though is to look at the differences between those companies.
What they found was that their were three critical factors that were characteristic of the companies that saw the positive results. These were:
1) They tailored their IT investments to industry-specific business processes and linked them to key performance drivers
2) They deployed technology in a sequence that built up capabilities over time, as opposed to trying to tackle too large a project (reminds of a Jonathan Kozol quote I heard today - "Pick battles big enough to matter, small enough to win")
3) They co-evolve IT deployments with managerial innovation - in other words, IT investments are part of a broader innovation effort
In a follow up report in 2004 by McKinsey, entitled Next Generation CIOs, they indicate that "CEOs say that IT isn't meeting their (admittedly high) performance expectations." Even more interesting though is the fact that the CEOs attribute the gap between expected and actual performance mainly to "insufficient involvement of business units in IT projects" and/or "IT's inadequate understanding of their business requirements."
These lessons still hold true today. And it highlights the importance to make sure that your IT investments are aligned with your business needs. IT investments can help an organization make significant performance improvements...don't think otherwise. But I guess the lesson is that you must make sure it is focused on addressing specific business challenges, whereby improvements will result in increased enterprise value. In other words, innovation that matters!
