Four reasons why IT is more than a 'commodity'

Not everyone is convinced that IT simply is becoming a standard utility, much like the water and electricity that flows into our businesses. Michael Shrage, director of the MIT Center for Digital Business, for one, says the perceptions about IT as a standard utility miss the mark, and that IT is a huge value creator -- if applied properly.

And Erik Brynjolfsson, management economist at MIT, says IT is an innovation machine. Both Shrage and Brynjolfsson shared insights on the capabilities IT offers to organizations seeking greater value and innovation in the most recent issue of MIT Sloan Management Review.

Shrage says it's a mistake to view IT simply as a commodity -- as he put it, those that those who aren't clever and innovative with their resources will get what they pay for:

"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."

Shrage says the issue with IT is that companies become too focused on the technology itself, which should be secondary. He urges managers to "work backwards from the value they want to create." Companies need to be looking at what value they can bring to the world, then leveraging technology to support that initiative.

Brynjolfsson observes that "IT can change the innovation process itself," and outlined the four key ways IT is making a difference in the companies' capacity to innovate:

Measurement: Corporate performance measurement is radically improved through what Brynjolfsson calls "nano data:" clickstream data, Google trends, detailed e-mail data, and ERP system data, for example. "By studying these data very carefully, companies can have much better knowledge of their customers, of their business processes, of their product quality, and of defects of their supply chains"

Experimentation: The virtual environments enabled through IT allow for testing and simulations at little cost. "You can get at causality in a way that you can’t with just pure measurement and observation. And that, of course, is the gold standard for being able to have actionable knowledge about what’s really happening in your business, what innovations are paying off and which ones aren’t."

Sharing: Through new tools such as social networking wikis and blogs, new ideas can quickly be surfaced across the enterprise. As Brynjolfsson puts it, there are "1,001 small innovations that regular business managers and line workers do every day at their jobs."

Replication: IT makes it possible to quickly replicate the tools and documents that enable innovations to scale up across the enterprise, Brynjolfsson says. Not only does this apply to bits of software and data, but also "business processes themselves."

(Photo Credit: Josh Miller/CNET)