Value-Creation, Experiments, And Why IT Does Matter

“To heck with what the technology can do,” says Michael Schrage of the MIT Center for Digital Business. Great managers, he says, first think about what kind of value they want to create and then consider how IT can help them create it.

Michael Schrage, a research fellow at the MIT Center for Digital Business.

Too often, information technology gets a bum rap, says Michael Schrage. How companies think about it, manage it, and ultimately use IT is hampered by what he calls its reputation as a “back office, report generating, analytical function”—the whole IT-as-commoditized-infrastructure point of view.

Schrage, a research fellow at the MIT Center for Digital Business and a visiting fellow at the Imperial College Business School’s Innovation and Entrepreneurship Group in London, is sufficiently cynical, he says, to argue that the birth of the CIO “wasn't because people said, ‘Ooh, this is a neat resource, we need to have somebody in charge of that.’ It was because information technology was bloody expensive and companies wanted somebody in charge of this huge investment, to make sure that, quote unquote, ‘it worked.’”

The Leading Question

How can managers turn IT into something more than infrastructure?

Findings
  • Have value conversations. Reverse engineer from the impact you want to have.
  • Recognize that the cost of experimentation has collapsed.
  • Get out of your comfort zone. “MBA grads love to analyze data, but technologies that run multi-variant regression analysis can also run complicated experiments.”

But simply expecting IT to work misses the point. Not enough companies, Schrage argues, work backwards from the value they want to create. They need to understand that, thanks to IT, the cost of experimenting in every theater has collapsed, and that this presents a huge competitive opportunity. He spoke with MIT Sloan Management Review’s editor-in-chief, Michael S. Hopkins.

You’ve got strong feelings about what executives should be paying attention to—but aren’t—when it comes to information technology.

Watch the video

Watch excerpts from editor-in-chief Michael Hopkin's conversation with Michael Schrage.

The first, most important thing that executives need to understand about IT is that it's not a commodity. If you think IT is a commodity, get out of business. That's like saying people are a commodity, or talent is a commodity, or capital is a commodity. There's a wonderful line from Warren Buffett, “Price is what you pay, value is what you get.

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1 Comment On: Value-Creation, Experiments, And Why IT Does Matter

  • RalfLippold | September 10, 2010

    Awesome – glad that http://slub-dresden.de has led me to that article :-)

    Power of PULL – in the sense of making it easy for customers, staff!

    Don’t wasting time of your customer/staff makes it automatic to use the best process – you have to be pulled by the passion to save time :-)

    It is also called Lean Thinking (or should I say “Lean Doing”?)

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