Information and communications technologies (ICT) have revolutionized the way we work. But do we really understand their organizational impact? In recent research, Raffaella Sadun, Thomas S. Murphy Associate Professor of Business Administration in the Strategy Unit at Harvard Business School, argues that, in spite of the shared acronym, the effects of information technologies and communication technologies should not be lumped together. In fact, their influences within the enterprise not only differ but actually diverge. Better communication pushes decision making up the organizational hierarchy while better information decentralizes and pushes decisions down, giving greater autonomy to workers. Sadun talked to MIT Sloan Management Review about whether a more nuanced understanding of these transformative changes should make us rethink how we view ICT, and the role of leadership in harnessing its value.
Let’s begin with the relative roles of information and communication technologies. If more information pushes decisions down and better communication pushes decisions up, is it desirable to focus on one rather than the other?
This is something that was initially studied by Luis Garicano. We tend to conflate technologies that have very different effects on the allocation of decision making authority within the firm. But if you look more carefully at what these technologies do, you will find very different effects on decision making and where it happens in a company.
Let’s begin with information (or knowledge acquisition) technologies: The easiest starting point is to think about the technologies that help front-line workers and functional managers gather knowledge that would otherwise be inaccessible to them. In manufacturing, enterprise resource planning (ERP) software is a good example. It’s a technology that gives the plant manager a tremendous amount of visibility about what happens elsewhere across the firm, from the supply chain to operations to customer relations and so on; this information enables them to act much more autonomously.
So to the extent that you can find the skilled employees who complement the technology, and that managers at the top of the hierarchy are time constrained, it shifts the decision making down in the hierarchy. This is what we consider the empowering effect of knowledge-acquisition technologies.
Now let’s look at the communication aspect of these new technologies.