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5/25/2010
05:19 PM
Bob Evans
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Global CIO: The Innovation Revolution And IT's Indispensable Role

MIT's Erik Brynjolfsson has a new theory on how leading companies are leveraging IT to unlock unprecedented waves of innovation -- and are reinventing R&D.

Welcome to our fourth installment in our week-long series on "IT's Golden Opportunity."

For all of its faults and shortcomings--its complexity, its cost, its fragility, and its runaway variability--strategically applied information technology has become the primary tool with which leading companies in many industries have begun to separate themselves from competitors, says MIT professor and global IT expert Erik Brynyolfsson.

And that momentous achievement, he says in a recent interview in MIT Sloan Management Review, might be only a hint of the IT-driven business value still to be realized. As Brynjolfsson (brin-YOLF-son) sees it, in addition to the surface-level operational and financial improvements IT has helped to create are some less-obvious but extremely valuable enhancements to the sought-after process every CEO wants to master: innovation. Here's a quote from the Review's interview with him:

"IT is setting off a revolution in innovation on four dimensions simultaneously: measurement, experimentation, sharing and replication. Each of these is important in and of itself, but, more profoundly, they reinforce each other. They magnify the impact of each other... By doing all four of these changes together, companies are, in essence, creating a new kind of R&D."

This is exactly the type of finding that needs to be more widely disseminated in today's challenging economic times as the hunt for scapegoats intensifies: Why do we have to spend so much on IT? We can't measure ROI, so how do we know what we're getting? Shouldn't all those systems have been able to tell us that a downturn was coming? IT is just a cost center--why don't we just get rid of the whole headache and outsource it to somebody who'll do a far better job for half the cost?

Of such assumptions are companies crippled and careers ruined. IT is far from perfect--heck, the proof of that is the existence of businesses like InformationWeek, whose sole mission is to help IT leaders strive to achieve something even remotely approaching IT perfection.

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So let's look at this from the opposite perspective, which is one that Brynjolfsson takes: how can companies leverage their IT assets and the output from those assets for maximum value? In the Review article, Brynjolfsson traces that question through his four dimensions of measurement, experimentation, sharing, and replication--and for each of those four elements I've extracted an excerpt from his comments.

(For much more analysis on the strategic role of IT and today's CIO, please see our "Recommended Reading" list at the end of this column.)

1) Measurement. "It's more like radically improved measurement, through the use of what I call nano data," he says in the Review article. "That includes clickstream data, Google trends, detailed e-mail data, the billions and trillions of bits of information that are thrown off by enterprise planning systems. Even without any conscious effort on the part of the designers, this information is just generated. But 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. The field of business intelligence has been tapping into this explosion of data."

From measurement, on to experimentation:

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