The 4 Ways IT Is Revolutionizing Innovation

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.

Erik Brynjolfsson, director of MIT’s Center for Digital Business

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?

Findings
  • 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.

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2 Comments On: The 4 Ways IT Is Revolutionizing Innovation

  • Peter Hanik | February 10, 2010

    One significant point that Dr. Brynjolfsson makes is that the information gather from IT can reveal causality. I have used function models to reveal how, when and when and system delivers value. This causality is easy to model in say a manufacturing system. We clearly know what functions (useful and harmful) are provided by pieces of equipment in a manufacturing plant. Understand functions and their causal relations in products and services is not so clear. The kinds of experiments Dr. Brynjolfsson describes are key to getting causal information about functions in a system. Once modeled you can look for contradictions between useful and harmful functions in the system which fundamentally limit the delivery of functionality. Resolution of these contradictions can lead to breakthroughs in performance. One question that I would like to hear more about is what can the IT organization do to get senior management to recognize the value they can unleash?

    Peter Hanik

  • Loretta Mahon Smith | June 30, 2010

    If we live in the “information age” and data is the raw material, then it stands to reason that Data Management needs to become a practice understood and embraced by business executives.

    Dr. Brynjolfsson’s answers Mr. Hopkins questions never address the “how” of data management, and the risks associated to poorly managed data. DAMA International is a not-for-profit, vendor-independent, global association of technical and business professionals dedicated to advancing the concepts and practices of information and data management. The organization offers a community that is working across all industries to elevate the awareness of the profession. This volunteer-only organization has collaborated to create a Guide to the Data Management Body of Knowledge from more than 100 practicing professionals around the world. http://www.dama.org/i4a/pages/index.cfm?pageid=1

    Experiments will only provide value with a good sample; and a sample is only as good as the data!

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