Why IT Doesn't Matter Anymore: Living in the Red Zone

A recent Harvard Business School publication is entitled Why IT Doesn't Matter Anymore. The author, Nicholas G. Carr, argues that "the core functions of IT have become available and affordable to all" which reduces the strategic value of IT. He says:

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.

This is an important article for any IT manager and especially CIOs to read. There are some excellent points. For example, Carr makes the point that thinking strategically may be more fun than the hard work of operational excellence, but the latter is much more likely to be the cause of problems for a company. He also says that vendor needs, more than company needs frequently drive IT purchases. Still, I think the analysis is perhaps too simplistic to be of much help to CIOs trying to prioritize projects.

The problem is that he's only thinking about the problem in one dimension. The figure to the right shows two dimensions: expense of the IT project on the vertical axis and the resulting increase in competitive advantage along the horizontal axis. Take you projects, get a group of your best managers together and go through an exercise where you rank each project on these two dimensions and then plot them on the chart.

The first step of the analysis is easy. Do everything in the green. You probably don't want to do anything in the white until you've finished everything in the green. Now, you may be thinking: never do anything in the red. These are not likely to improve competitive advantage significantly and they're expensive. Well, unfortunately, its not that easy.

The second step in the analysis is to further classify the projects in the red quadrant into two types. To understand the distinction, let me give you an example. If you're in the hotel business and you classified your expenses on this chart, clean sheets would fall into the red zone. Its expensive to provide your guests with clean sheets and all your competitors do it too, so there's no competitive advantage. Still, you'd be a fool to decide that you ought to slash the laundry budget and let your guests sleep in dirty beds. There are a number of "clean sheets" projects in IT:

  • Reliability
  • Scalability
  • Availability
  • Security
  • Desktops
  • LANs

You can see why these things fall in the red zone: they're expensive and, in theory, anyone can do them. In practice many don't. Finding out best practices in these areas isn't difficult and skilled people who know how to run these kinds of operations are available. I think the problem is often that these issues are "red zone" issues and its easy to get distracted by the fun "strategic" projects and let the "red zone" project languish because they don't provide significant competitive advantage.

That's short sighted because even though red zone projects can be done by anyone in theory, they are rarely executed well and plenty of companies fail for lack of execution even with a strong competitive advantage in some other area. I find that many business school analyses start off with the assumption that everyone will execute well and then focus on competitive advantage. That's not the real world and IT has become one of the most important areas in which to execute well---even if you don't believe its strategic.

I don't agree with everthing Carr has written in this article, in fact I think its tone is likely to cause many to miss the entire point. Even so, CIOs and other IT managers would do well to look at their projects and vigorously pursue any that fall in the green zone, while never losing sight of "clean sheets."

The tough thing about living in the red zone is that its not sexy. Its hard to do and no one's going to come up to you and say "Hey, I noticed the computers didn't go down again! What to go!" Its thankless work and it difficult to convince people to spend much on it. The goal is achieve operational excellence and do it as efficiently (read cheaply) as possible. Focusing on it requires different priorities, a different culture and organizational changes. But "red zone" work is the foundation on which everything else is built and success in other areas of the business is unlikely to come if its ignored.

cover Note: Although not specifically an IT book, my thinking in this area has been influenced by Mike Johnson's book Improving Customer Satisfaction, Loyalty, and Profit. Its application to IT is my own invention. I took a class from Mike at the Univ. of Michigan Business School several years ago and was impressed with his formulamatic approach to customer satisfaction. I think there's much to be done in this area for IT as well---particularly when it comes to satisfying customers.

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Last modified: Thu Oct 10 10:47:20 2019.