Does IT matter by Nicholas Carr

When this article was published in Harvard Business Review (HBR-March 2003), it created such a stir, letters to editor ended up saying “enough is enough”. Such was the intensity and volume of response. For copious details refer : http://www.nicholasgcarr.com/articles/matter.html

Garr has a gift of articulating just about anything in a near zero sentimental way. He reminds me of a character in star trek episodes: DATA. The bye line of the title itself would make you sit up – “IT & the corrosion of competitive advantage” (IT as in Information Technology).
Garr declares “the transformation of IT from a source of advantage to a cost of doing business” raises a host of challenges for the business executive. If you think it is too presumptuous a remark to make, you would have read it with his examples to be convinced. Recall Mark Twain’s remark “Nothing is more annoying than a good example” - you may be annoyed mainly because it is more real than we would like.

At the heart of his sprawling argument is this: IT and Technology are means to do business. Now, they are commodity. Hence don’t look at them as differentiators but just as inevitable infrastructure items.

Let us take one of his stunning examples: Early in the 20th century, many large companies created a new management post called “Vice President – Electricity”. This is a clear acknowledgement of electrification transformation. But, in a short span of time, its strategic importance diminished so much that it quietly disappeared from the corporate hierarchy. Their work is done and hence they are out. He stops short of saying that for IT field. During its inception, when one or two manufactures used electricity to produce their products (whatever that is), they had a competitive advantage, but once everyone is into electricity, then it becomes a mere input to the business.

Like the Design guru, Donald Norman, Carr views computers and IT more as infrastructure, and remarks rightly that transformational power of new infrastructure technologies dissipates as they reaches the build out. After giving many examples (Machines Tools, Wi-Fi, Software, Web Services, SABRE system etc) he makes a profound statement: “When a resource becomes essential to the competition, but inconsequential to the strategy, then the risk it creates is more important than the advantage it provides.” How true! For example, take electricity in India. Certainly, it is nowhere near 99.xx % availability which perhaps can be taken for granted in certain advanced countries. In India, there would be power cuts, sudden surges and so on. Yet, the business has to run. So what is the solution?. In-house electricity generation when ever government supplied power goes kaput. Any firm that does not have in-house power generation will be very vulnerable and perhaps eventually earn the dissatisfaction of the customer. But, having them is no recipe for success; it is simply the cost of doing business.

His constant reference to the evolution of electricity is a bit unnerving if you belong to the IT field. At first, electricity was private; soon it became public and can be purchased as per your usage. It has become a utility. So would be data processing. Which computer processed your latest “Google search” he asks and adds that, “you don’t know and perhaps you don’t care” any more than which power plant generated the electricity that you home lights use.

Not long ago, when developing the information systems, companies would first decide how they wanted to do the business and then choose the software package that would support the process flow envisaged. Also, large efforts would be thrown in to customize it. This is true whether it is IT systems or technology side where each time around device drivers and other stuff would be written exclusively. Now, things stands reversed. Question is, how the enterprise systems which are available as packages should be modified to suit our business and also what are process editing which have to happen in-house to use these packages? Good news is that, standard process would be state-of-the-art. Bad news is that, everyone has access to it. As commodity wave hits, the plane of competition shifts. It is clear when it hits users stands to benefit but the sellers would have a nightmare unless they have something more as “value-adds”.

When Humans moved away from “hunting & gathering” to “centralized farming”, society and structures changed accordingly. It was essentially consolidation of physical powers. Per Garr, most of the society structures are temporary – without sounding philosophical, he states that they would be abandoned very easily depending on the spirit of times. Technology shapes economics and economics shapes society. He strongly thinks personal choices have no bearing on this, society is governed by economic trade-offs.

In the long run, it appears there is nothing “exclusive” about anything and eventually, law of gravity catches up. Celebrated sociologist Jane Jacobs observed that: “Invention of public libraries democratized the access to literature. Invention of public schools democratized the access to education. Invention of fashionable cloths democratized the access to personal appearance”. If she were around, maybe she would have added about Internet and so on to the list.

The telling lesson is that, when some stuff gets democratized or made available to a very large set of people, humanity as a whole would be benefited, but it does come at a cost of a small section of people who were selling those products and services when they were exclusive and fragmented. When “exotic” becomes “common” you better watch out. So, it is better to ask (say once in two years?) “Am I getting commoditized? Is my area getting democratized?” If so, you would should pull up your socks. Now I reminded myself, if I don’t come to the table at a good frequency, may be, I am already appearing on the menu!

Thank you for reading thus far.
Regards
madhu



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FREE by Chris Anderson

Mark Twain once said, “The difference between the right word and an almost right word is the difference between lightning and the lightning bug”. Somehow, I felt it was a hyperbole just to make a point. On similar lines, author seems to say, difference between FREE and charging some paltry amount (say one dime or one paisa) could be that much.

Perhaps, on thinking hard, I would agree for I have seen at least one episode of this occurrence. For long, Railways reservations forms used to be FREE. Ever since they started charging very nominal amount most of the problems vanished.

Chris’s main point is that, FREE is a viable biz model in the overall scheme of things. He gives plenty of examples and case studies as well as a good appendix on how it works. When you look at things which are done and deemed as “successful”, it takes some hard work and imagination to explain it in case of business. In case of science, eventually you can come up with a model like benzene rings, but it may be lot harder (like Feynman explanation on Super fluids, Einstein’s Theory, Darwin’s Evolution theory). In all these cases, they themselves took the trouble of telling what it takes to disprove their model. They also tried hard to disprove the model. Likewise, I would love to see, where and when FREE model was employed with lots of potential upside, but it bombed and why? No such examples were to be found in this book. I later reconciled myself saying that for a $30 book, it is too much to expect since it would prove very valuable.

In social systems, there is a concept called “light house effect”. If you build a light house based on the contributions from the community members and if some of them did not contribute in any form to the project, there is no way to deny them the use it brings. Most of the focus in such studies would hover around what is minimum set of people or percentage of people in the group who would have to chip-in so that, the project takes off. If numbers are too less it gets abandoned very quickly. Chris’s point is that, in the “electrons world” unlike “atom world” percentage of contributors required seems to be as low as 1%. He calls that as “FREE RIDER NON-Problem” and gives Wiki as a solid example.

Theodore Levitt, in his landmark article “Marketing Myopia” remarked “If Railways defined their business as Transportation business instead of Railways, they would have certainly taken advantage of the Airways”. A similar sentiment is expressed here about Ryan Airways,” they have defined their business not as an airline seats biz but as travel biz”. Certainly, it is a good observation but only in retrospect, like taking the same question paper for second time after preparation.

His views on piracy are worth re-reading. Also, his examples of Craigslist, Encarta, Roomba vacuum cleaner, Jell-O-o, Gillette, and radio broadcasting are impressive. For sure, he is a master in providing solid examples with a good story line.
There are special sections on “How can …………..be FREE” where the dotted lines represents Air travel , Car, DVR etc . Totally there are 14 examples. Most of the case studies are worth giving a thought for it may bring in some crucial insight to pricing decisions in the area we operate on.

Last chapter (Chap-16) focuses on doubts about the model. There, he takes head-on some of the myths and misconceptions of FREE model as quoted by some famous folks and tries to confute it. This section too deserves a closer reading.
Author recounts his experience with a friend who works for Google in his office. When he explained what he does as an editor of “WIRED” magazine, he witnessed a “mounting disbelief” from his friend because his friend was doing exactly the opposite. It was a good example where one’s poison could be other’s food.
When the availability/resource model moves from scarcity to abundance, it appears humans have not yet developed a good strategy to take advantage of the situation. His observation on Google and its CEO’s worry is worth pondering. FREE as a model works too well for few folks leaving others in dust.

FREE as a pricing concept has been there for ages. But, when to apply and how to get most of it is still an art (to the point of black magic) rather than an exact science. So, I would modify the standard Prayer like this.

“Oh God, Give me the serenity to give things which I have to give FREE anyway; courage to charge for the things which I can – and the wisdom to know the difference”
Well, you would get plenty of examples for gaining serenity and courage from this book. 

As to wisdom, you would have to try for yourself : )

Thanks for reading thus far.

Regards,
madhu