Disrupted by IT

When I lived in the Bay Area and would mention at some dinner the latest turmoil in the IT industry, my friends in other lines of work (lawyers, for example) would shake their heads in wonder. To them, the hectic pace and chaos of the IT industry seemed unfathomable. Down in Silicon Valley, Fortune's Wheel seemed to be spinning at a giddy pace, hurtling hordes of twenty- and thirty-somethings through comically rapid cycles of failure and success. By comparison, my friends' own jobs outside of IT seemed rational, stable, and predictable.

For a lot of people in industries other than IT, that rationality, stability, and predictability are now at risk. These days, industries that use IT, are succumbing to the turmoil that has long characterized the IT industry itself.

Andrew McAfee is an associate professor at Harvard Business School. Erik Brynjolfsson is a professor at MIT's Sloan School of Management. McAfee and Byrnjolfsson have been studying the way that IT technology changes markets and competition outside the IT industry. What they've found is that industries that invest heavily in IT are beginning to behave like the IT industry itself. In other words, take a non-IT industry, add IT infrastructure and ability to automate business processes, bridge operations, increase efficiencies, and so on—and you get the market turmoil and "creative destruction" for which the IT industry itself is famous.

McAfee and Brynjolfsson have published their findings in a Wall Street Journal article that you can find here.

In a nutshell, here's what they found:

"Over the past dozen years . . . information-technology consumption is associated the kinds of competitive dynamics we're accustomed to seeing the IT-producing industries. And because every industry will become even more IT-intensive over the next decade, we expect competition to become even more Schumpeterian."

Joseph Schumpeter was a leading 20th century economist who described the "creative destruction" inherent in capitalist economies. It's the process of incessant revolution in which an existing economic structure is destroyed by a new one that arises within it. Think of QuickBooks' effect on manual ledgers and hiring scores of accountants: creative destruction. Think of mainframe computing giving way to client-server computing giving way to World Wide Web. Incessant revolution.

What McAfee and Brynjolfsson are saying, then, is that technology is becoming a disruptive force in a growing number of markets. The greater an industry's investment in IT, the greater that market's instability. They cite examples of how CVS and Harrah's Entertainment were able to increase profits through the strategic use of technology.

In addition to McAfee and Brynjolfsson's advice, which I encourage you to read in their article, I would add these thoughts:

First, if you're in an industry where businesses are increasing their investment in IT, change your thinking. Don't begin this year with last year's assumptions about the pace of change in your industry and the opportunities available to you. Consider the application of IT—everything from Web portals to mobile computing—in whatever SWOT analysis or other analysis you're performing. How might competitors use technology to improve their offering? How might you use technology to beat them to the punch?

Second, learn from IT thought leaders. IT leaders and strategists have been living with creative destruction and incessant revolution for years. It can't hurt for you to learn from their ideas, their successes, and their failures. Pay attention to how businesses, even businesses outside your industry, are gaining advantage in the marketplace by applying technology in creative ways. How can you change processes and innovate in the area of products and services? Get inspiration from the people who ask these questions every day.

Third, consider bringing strategic IT expertise into your company. Learning to live with incessant revolution is probably a cultural change for you and your company. You'll need some people living and breathing incessant revolution for your own changes and strategies to take effect.