IT as a Competitive Advantage
The College of Saint Scholastica
In 2003, Nicholas Carr, published a controversial article titled “IT Doesn’t Matter”. The premise of his article defines IT as a digital data infrastructure, and compares its build-out to previous impactful infrastructure build-outs like electricity and the railroad. Carr claims that IT has become a commodity, and businesses can no longer use their IT as a competitive advantage. This paper will further analyze Carr’s article, and make recommendations as to how businesses can leverage IT as a competitive advantage for the future.
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“IT is, first of all, a transport mechanism-it carries digital information just as railroads carry goods and power grids carry electricity” (Carr, 2003, p. 44).
During the turn of the 20th century, when electricity was new and scarce, manufacturing businesses gained an efficiency competitive advantage over its competition by building its plant close to a power plant (Carr, 2003). They could do-away with their cumbersome water wheel power generators with complex pulley systems, and convert their equipment to use electric motors, which were far more efficient (Carr, 2003). Electricity, in its early stages was scarce, and technology was proprietary; similar to IT in the 1960s. Pearlson and Saunders (2013) categorize the history of IT usage in organizations in eras. Era I took place in the 1960s, as the primary role of IT was to increase efficiency by automating existing paper-based processes (Pearlson & Saunders, 2013).
At the end of the build-out, electricity became widely available, rendering proprietary systems obsolete due to technical regulations, and standardization of best practices (Carr, 2003). The end of the build-out is similar to Era V, which occurred during the 2000s (Pearlson & Saunders, 2013). The primary role of IT was to create value through collaborative partnerships, and the internet was the dominant, ubiquitous technology (Pearlson & Saunders, 2013).
Carr’s argument that IT cannot be used as a sustained competitive advantage is logical, as it has followed similar life cycles as electricity, railroad, and telegraph technologies. A decade after Carr’s article was published, there are still companies contradicting Carr’s theory by using IT as a sustained competitive advantage. Walmart, for instance, “effectively blocked competition with their inventory control system, which helped the drive down expenses and ultimately offer low costs to customers” (Pearlson & Saunders, 2013, p. 51). A company looking to penetrate Walmart’s marketshare, would need to spend millions of dollars to replicate an inventory control system to rival Walmart.
Google, as another example, has an extremely valuable search algorithm which is extremely difficult for a competitor to duplicate (Pearlson & Saunders, 2013). The complexity of the algorithm in itself is a barrier, but even if a competitor was able to equally duplicate Google’s algorithm, the probability of replacing the search giant is next to impossible. Google has leveraged IT not only to create one of the most valuable algorithms in modern society, but IT played a large part in entrenching itself with its users. The ease of use, has created a habit with its users that is very hard to break.
The super-giants that are Google and Walmart, are examples of extreme success, and could be considered exceptions to the rule. However, this proves that using IT to create a competitive advantage is possible.
Strategies for establishing sustained competitive advantage
To fully understand...