MIT Sloan economist and digital-business expert Erik Brynjolfsson tells how the rising data flood and emerging tools for analyzing it are changing the ways innovation gets done.
There’s always been a performance gap between companies that embrace technology and companies that resist it — what IT innovation thinker Erik Brynjolfsson calls the productivity gap between “leaders and laggers.”
What’s new, though, is that while the gap was fairly steady for decades, in 1995 it suddenly started to widen — and is widening still. Credit the rise of systems like enterprise resource planning, the expanding use of the Internet and the fact that every dollar buys incrementally more computerization.
Brynjolfsson found not only that the leader-vs.-lagger gap has grown in the past decade but also that it has grown the most in IT-intensive industries. Why? Because the leaders are capitalizing on technology advances to pioneer a whole new innovation paradigm, based on the ways they measure, experiment with, share and replicate information.
The Leading Question
How are IT advances changing innovation?
- Tech advances aren’t just innovations in themselves, they’re enabling a new process for innovating.
- The real power is combining these new innovation processes — measurement, experimentation, sharing and replication — in sequence.
- Leading companies using business analytics have faster cycle times, more flexibility and a higher metabolism for processing information.
In a conversation with MIT Sloan Management Review editor-in-chief Michael S. Hopkins, Brynjolfsson, the director of the MIT Center for Digital Business and the Schussel Family Professor at the MIT Sloan School of Management, talks about how smart companies have learned to tap the flood of data created by information technology and process it with what he calls a “higher information metabolism” and how they’re changing the ways that innovation gets done.
Your research and work with the MIT Center for Digital Business focuses on the ways that information technology is linked to innovation. Let’s start with your big picture overview.
In the long run, our competitive advantage and all of our living standards depends on innovation, and I would argue that for our era, the most important driver of innovation is information technology. Thanks to Moore’s law, the adjusted power being delivered, for instance, by computers, has grown tremendously. That directly has led quantifiable increases of productivity.