Large companies that invest in trendy IT innovations may see their reputations — and CEO compensation — increase the next year.
Enthusiasm for many information technologies (IT) developed for business use often mimics the ebb and flow of fashions. When a research team I led analyzed press coverage of various IT innovations over the period between 1971 and 2002, we found that media coverage of many innovations tended to grow over time to reach sharp peaks in popularity that didn’t last long — in a manner reminiscent of the spiky life cycles of fads and fashions in the apparel and entertainment industries. While fashions in what people wear or how they have fun may seem trivial to a business audience, our research has shown evidence of some not-so-trivial consequences of IT fashions in the business world.
From the Fortune 500 lists between 1994 and 2003, we selected 109 companies that both appeared on Fortune’s America’s Most Admired Companies lists and responded to an annual survey that provided information about their budgeted investments in eight IT or IT-enabled innovations that experienced a period of fashionability. (The eight innovations were: application service provider (ASP), business process reengineering (BPR), customer relationship management (CRM), data warehouse, e-commerce, enterprise resource planning (ERP), groupware, and knowledge management.)