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strategy and business
 / Summer 2004 / Issue 35(originally published by Booz & Company)


Does Nick Carr Matter?

A controversial new book on the strategic value of information technology is flawed — but right.

Photograph by Opto
When the Harvard Business Review (HBR) published “IT Doesn’t Matter” in May 2003, the point was to start an argument, or, as they say in the more genteel world of academia, a debate. The provocative title of the article and its timing — at the tail end of a long slump in technology spending — ensured that a dustup would ensue. The resulting debate has been impassioned and often revealing, and is still going on.

For those who may have missed it or might welcome a reminder, the central point of the essay, written by Nicholas G. Carr, then editor at large of HBR and now a consultant and author, was that there is nothing all that special about information technology (IT). He declared that information technology is inevitably going the way of the railroads, the telegraph, and electricity, which all became, in economic terms, just ordinary factors of production, or “commodity inputs.” “From a strategic standpoint, they became invisible; they no longer mattered,” Mr. Carr wrote. “That is exactly what is happening to information technology today.”

The reaction was swift. Within weeks, Mr. Carr was branded a heretic by many technologists, consultants, and — especially — computer industry executives. Intel’s Craig Barrett, Microsoft’s Steve Ballmer, IBM’s Sam Palmisano, and others felt compelled to weigh in with varying degrees of fervor to reassure corporate customers. Their message: Don’t listen to this guy. Keep the faith in IT’s power to deliver productivity gains, cost savings, and competitive advantage. And the reaction continued. HBR got so many responses that it set aside a portion of its Web site to accommodate them, and Mr. Carr kept the controversy bubbling on his own Web site. He became a traveling celebrity of sorts, defending his stance in forums across the country, from the Harvard Club in New York City to the Moscone Convention Center in San Francisco, where he traded verbal jabs with Sun Microsystems’ Scott McNealy. The article became fodder for countless columns in newspapers, business magazines, and trade journals.

In the interest of full disclosure, I should note that I contributed to the phenomenon. I did not know Mr. Carr before his article was published, but HBR had sent me an advance copy of the manifesto, which I quoted in a long Sunday business piece for the New York Times on the maturing of the IT industry. To the best of my knowledge, it was the first mention of Mr. Carr’s article in the press. Two weeks later, I cited Mr. Carr again in a piece headlined “Has Technology Lost Its ‘Special’ Status?”

When “IT Doesn’t Matter” was published in HBR, I thought Mr. Carr had delivered an important, thought-provoking reconsideration of the role of IT in the economy and inside companies. Now that his analysis has been expanded to book length, I still do. This time, his ideas are packaged with a less incendiary title, Does IT Matter? Information Technology and the Corrosion of Competitive Advantage (Harvard Business School Press, 2004). But his message is unchanged, though more fleshed out and nuanced.

Mr. Carr’s thinking, in my view, is flawed — at times seriously flawed — but not necessarily in ways that undermine his essential thesis. So let’s first examine what his fundamental point is, and what it is not.

The title of the original HBR article was misleading. Mr. Carr is not arguing that information technology doesn’t matter. Of course it does. Among other things, IT improves productivity by reducing communications, search, and transaction costs, and by automating all sorts of tasks previously done by humans. But Mr. Carr asserts that as IT matures, spreads, and becomes more standardized, the strategic advantage any individual firm can gain from technology diminishes. Paradoxically, the more the economy gains from technology, the narrower the window of opportunity for the competitive advantage of individual companies. This was the pattern for railroads, electricity, and highways, which all became utilities. In the IT world, Mr. Carr sees evidence of mature standardization all around him. The strategic implication, according to Mr. Carr, is clear. “Today, most IT-based competitive advantages simply vanish too quickly to be meaningful,” he writes.

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IT Resources:
Works mentioned in this review

  1. Nicholas G. Carr, Does IT Matter? Information Technology and the Corrosion of Competitive Advantage (Harvard Business School Press, 2004), 208 pages, $26.95
  2. Does IT Matter? An HBR Debate. Letters to the Harvard Business Review: Click here.
  3. IT Doesn’t Matter, responses, articles, and resources related to Nicholas Carr: Click here.
  4. Steve Lohr, “Is the Technology Business Still a Growth Industry?”  Originally published in the New York Times: Click here.
  5. Remarks by Bill Gates, chairman and chief software architect, Microsoft Corporation, CEO Summit 2003, Redmond, Wash.: Click here.
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