07/16/08 :: [Other] IT Matters, HBS Style...  [permalink]

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A good friend of mine, Richard Webb, that I highly respect for his knowledge, humor and wisdom has often repeated to me that the Harvard Business School was solely responsible for the abysmal state of the American economy: "They ran this country to the ground".

I always took this statement with a grain of skepticism until today. Andrew McAfee, Assoc. Prof. at HBS, and Grand Commander of IT, published an interesting post. The first part got me interested, it explains that ’standard deviation,’ in batting average for all baseball players for all years is going down steadily.

First, the explanation for why this is happening is totally bogus. It is simply happening because muscular performance has steadily "improved" over the years while we don't know any particular techniques to increase the "clock speed" of the batter. Just look at the tour the France where Lance Armstrong has steadily developed well over 400 Watts when all physiological studies show that man cannot develop powers above 400 Watts without the human body breaking down.

Well the author does not stop here.  The second part got me siding with my friend on the influence of HBS on the American economy.

He starts by noticing that:

If the combination of the Web and commercial enterprise IT really was a ‘game changer’ for the competitive game of business, then the introduction of these technologies should be accompanied not by a decrease in variation in performance, but instead by the opposite—an increase in performance spread among competitors. It would be as if the rules of baseball suddenly changed hugely: if players had to hop on one leg the whole time, or play with a frisbee instead of a ball, or have a hot dog eating contest before each inning. Rule changes this big would upset the game’s equilibrium, and increase the variation in performance among hitters.
 
If the Web and enterprise IT similarly upset the existing equilibrium of the game of business, they would also lead to greater spread in performance. This widening of the spread would start in the mid 1990s, when both technologies became available to companies. And the widening would be biggest in industries that spent the most on IT, since they’d be the ones that had their games changed most profoundly.

Of course, once you know what you want to prove statistically, there is an extremely high probability that you are going to prove it.

Sure enough, companies who spent a lot on IT experience higher profits, higher margins, higher market caps. Who would have believed that? Cramer is a joke let's create the Big IT spenders' fund and all get rich. If you want a promotion, just rush this article to your CIO, you have a chance at doubling your IT budget:

We were all surprised by the strength and clarity of these patterns, which showed up not only in the graphs we drew but also in all the statistical models we created.

There is obviously no other possible explanation: the more you spend, the higher the profits... blablabla. IT is wide and big, be it a lengthy SAP implementation, a switch to SalesForce.com, a successful SOA or BPM implementation, REST or the Cloud, all contribute to these marvelous numbers. It does not matter what you do, just spend. The explanation is a lot simpler than that: visibility. You can manage what you see and measure. Companies that can see where they are at can much more efficiently manage where they want to be. I have seen call center employees copying and pasting fields from their emulators into an XL spreadsheet, just to provide daily reports to management. By the way, this is true for commodity markets too. Just ask Enron's executives. Do you think CXO care about BPI? SOA? SaaS? Agility? they just care about margins and ROI.

Have you ever tried to bat blind-folded? That would be a real game changer.

Now, I don't know if you caught that, but I am a bit biased in writing this post, visibility is all about state. Expressing and surfacing clearly the "states" of your enterprise is key to visibility. I would argue that all IT activities should be geared towards increasing visibility, this is the real game changer and the real value that the business is expecting from IT.