Tom Davenport: IT's Wonderful Life
Posted on The Next Big Thing: December 26, 2007 6:17 AM
My editors asked me for a prediction post for 2008. I didn't quite do that, but I think what follows covers a topic people will be thinking about a great deal in the coming year.
At the holiday season, I'm inclined to give most people and things the benefit of the doubt. Negative comments about information technology, for example, would bring to mind Ebenezer Scrooge or Mr. Potter, the scroogish banker in Frank Capra's It's a Wonderful Life. Just as Potter told the earnest George Bailey that his life in Bedford Falls had no meaning, it's tempting to focus on the hype and breathless predictions coming out of the IT industry (as I did somewhat Grinch-ly last week). Bailey's guardian angel helped him see how much worse off the residents of Bedford Falls would have been had he never lived. I'm nobody's angel, but perhaps the same kind of analysis can put things in perspective for IT.
If IT had never existed, a number of companies who have depended on it for their survival probably wouldn't exist either—and their employees might well be out of work. This includes roughly 10 million Americans who work in the IT industry or primarily work with IT in their jobs.
There are also many companies that don't make IT, but use it to run their businesses in an efficient and effective way. Without IT, Wal-Mart, which achieved much of its growth because of its ardent embrace of technology, would probably be at best the size of KMart, which employed computers and communications much less aggressively. Without point-of-sale scanners and electronic data interchange and satellite data networks and data mining and other IT innovations, WalMart wouldn't have grown any faster than its primary competitor. That would mean that 850,000 employees—roughly the difference between Wal-Mart's and K-Mart's workforces—would be employed elsewhere if at all. OK, they're not great jobs, but they are jobs.
Almost all airlines are having a tough time now, but the large, established carriers such as American and United would be having a much tougher time without IT. In fact, they'd probably be out of business. The only thing that has allowed them to survive is sophisticated IT for such applications as customer loyalty, flight operations, and "yield management"—charging business and last-minute travelers higher prices than vacationers and early planners. Both airlines might have gone out of business two decades ago, when discount airlines like Southwest and People Express entered their markets aggressively. That would have been 100,000 people out of work, or at least making much lower salaries at discount airlines; United's employees would add another 68,000 to the total.
Bankers like Mr. Potter and George Bailey wouldn't be out of business without IT, but their industry would be a lot smaller. Banks wouldn't be able to build branch networks across cities, regions, and countries without IT. They couldn't do global financing transactions for corporations, nor could they provide loans or mortgage commitments (not all sound, to be sure) within minutes, as they do today. Without IT, banks would be the size of Mr. Potter's Bedford Falls establishment, or even George Bailey's tiny and impoverished Bailey Savings and Loan. Without electronic money transfer, George's Uncle Billy would still be getting in trouble by misplacing the S&L's daily deposits.
There would be no electronic commerce. Amazon, eBay, Google, and other giants of the Internet world wouldn't exist at all without IT. No shopping online; get in the car and drive to do your shopping. Forget about calling your mom from the mall to check her sweater size; cell phones were never invented. Take your ATM and credit cards out of your wallet—we'd have a (much smaller) cash economy without IT.
A variety of firms that compete on the basis of sophisticated IT-based analytics would have lost their primary strategic asset. Virtually every major industry would be smaller. Industry leaders such as Progressive in the insurance industry, FedEx and UPS in the express shipping industry, Harrah's in gaming, and Capital One in credit cards would be laggards. All of these companies compete on the basis of the information and analysis they employ, and if they didn't have IT, both they and their customers would be much worse off.
From a personal standpoint, there would be no holiday emails from friends and family. The pencil industry would be doing better, but we'd be doing a lot less writing and communicating—and certainly no blogging. And we had a lot less mobility in the old days. Without IT I'd be writing this post from a sterile cubicle in longhand, rather than on my PC on a ferry to Martha's Vineyard.
The world without IT would be a very different—and poorer—place. Sure, technology by itself doesn't accomplish much; it requires strong leadership, smart strategies, efficient and effective business processes, and capable people to be truly valuable. And certainly not everything IT has wrought has been positive. It can lead to a lot of bad decisions quickly, as in the subprime mortgage crisis. In our personal lives, we need to learn when to turn off our mobile phones and PCs, and enjoy our families and our holidays. I predict we'll be doing more of this in the year ahead—learning when we should be employing this powerful resource, and when we shouldn't. But I and most experts feel that IT has increased productivity, fostered a global economy, and put a lot of money in a lot of average peoples' pockets. Like George Bailey, IT has lived a wonderful life.