This is the first in a series of articles on technology economics.
More than a decade ago, writer Nicholas Carr caused a stir with a Harvard Business Review article titled “IT Doesn’t Matter.” He argued that as costs fall for infrastructural technologies such as computers and the internet, the technologies would—like railroads, electricity, and telephones—become widely available commodities. Once a technology is ubiquitous and available to all—neither scarce nor proprietary—it no longer confers a lasting competitive advantage.
Although we agree that factors such as commoditization can erode a product’s advantage over time, we take fundamental issue with the notion that companies cannot create lasting advantage from widely available technology. In this series of articles, we challenge the conventional wisdom that the powerful effects of technology aren’t visible in economic metrics. Our research shows precisely why technology matters to a company’s bottom line and exactly how it has impact. The use of proprietary metrics such as “technology intensity” to make the most of technology lies at the heart of creating what we call technology advantage.
Given the rapid emergence of disruptive products and business models and the transformative power of digital technologies on business and society, executives must become masters of the global “technology economy,” capable of detecting the economic impact of rapid technological change and able to respond with speed and foresight. In these articles, we explore the new metrics and consider the new ways that companies need to think in order to navigate the technology economy and approach the many investment decisions in which technology plays a role.