MIT Sloan Management Review

Corporate Strategy, Management of Technology and Innovation

 

IT-Enabled Business Transformation: From Automation to Business Scope Redefinition

By N. Venkatraman

January 15, 1994

THE ROLE OF IT IN SHAPING TOMORROW’S BUSINESS OPERATIONS IS A DISTINCTIVE ONE. IT HAS BECOME A FUNDAMENTAL ENABLER IN creating and maintaining a flexible business network. Using a framework that breaks IT-enabled business transformation into five levels, the author describes each level’s characteristics and offers guidelines for deriving maximal benefits. He suggests that each organization first determine the level at which the benefits are in line with the costs or efforts of the needed changes and then proceed to higher levels as the demands of competition and the need to deliver greater value to the customer increases.

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During the past decade, articles and books on the virtues and potential of information technology (IT) and information systems (IS) to provide new sources of advantage for business operations have besieged managers.1 Indeed, the operative phrase today is “IT changes the way we do business.” These publications either have developed intuitively appealing prescriptive frameworks that provide alternative approaches to leveraging IT competencies or have described cases of successful exploitation of IT as a way to encourage managers in other companies and industries to consider IT as a strategic weapon.

We entered the 1990s highly skeptical of IT’s benefits. The productivity gains from IT investments have been disappointing. Loveman observed that “Despite years of impressive technological improvements and investment, there is not yet any evidence that information technology is improving productivity or other measures of business performance.”2 Max Hopper of American Airlines —whose SABRE Computer Reservation System (CRS) is often invoked to illustrate IT’s competitive potential —remarked that the era of competitive benefits from proprietary systems is over, since computers have become as ubiquitous as the telephone, and that any travel agency could replace its CRS within thirty days.3 Looking at the macroeconomy, Strassman observed essentially no correlation between levels of investments in information technology and such business performance indices as sales growth, profit per employee, or... To read the complete article, login or sign-up using the form below.

 
 

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