The already rapid rate of change that impacts business is being further accelerated by three factors, says Tony Friscia, president of AMR Research, Boston. These factors are instant information access around the globe, the dissemination of standard business processes worldwide, and the coming of age of a generation that has grown up on technology. Speaking at the AMR Executive Leadership Conference last month in Boston, Friscia said that one result of this acceleration is a shortening of the competitive advantage gained from product innovation. "New ideas can be copied very quickly, so what used to be a two- to three-year competitive advantage from innovation is now reduced to a matter of months," he says. "As a result, companies must differentiate themselves by being best at managing the value chain."
The way to excel at value chain management is to combine investments in business process management with investments in technology, says Friscia. Companies that invest only in business processes see an 8 percent operational benefit, while those that invest only in technology see a 2 percent benefit, he says. "But companies that invest in both business process and technology see a 20 percent improvement."
Erik Brynjolfsson, an author and professor of management at the MIT Sloan School, provided research data confirming that business performance depends on both IT and organizational capital. Firms that adopt a "digital organization" culture and that simultaneously invest more in IT "have disproportionately higher performance," says Brynjolfsson. "IT is the catalyst for the productivity surge, but organizational capital is the bulk of the iceberg."