Businesses have a lot in common with electric fish — a fact I can state with authority as the only person on earth who has studied them both.
One example: A deep knowledge of evolution helps to understand fish and business. IS Survivalist Thomas Munnecke recently shared an insight along these lines.
Tom differentiates performance from adaptation. IT contributes a lot of its value by improving adaptation. Since accounting systems measure only financial performance, they are blind to adaptation. Check out Tom’s paper at http://www.ncsa.uiuc.edu/SDG/IT94/Proceedings/Overviews/munnecke/www94.html if you like this thought.
A month ago, using similar arguments, I critiqued Paul Strassmann’s new book, The Squandered Computer, and his highly publicized conclusion that information technology hasn’t led to business benefits. Needless to say, Strassmann wasn’t happy with me.
After Strassmann accused me in a recent letter to InfoWorld of not reading his book he made this “point”: “Mr. Lewis’s attempt to prove that computers are essential, regardless of cost, because nobody ‘…types on Selectric typewriters or manages inventory on index cards…’ is without merit. There is no question that trucks are superior to horse-drawn carriages. However, if all firms use trucks, their freight-carrying productivity must be evaluated in terms of trucking, not in terms of horses. That’s exactly what I do. I compare the productivity of firms that use identical computer technologies.” (For the full letter, see To the Editor, Jan. 12, page 62.)
Strassmann is using a common polemicist’s trick — by speaking for me, he’s able to have me say something he can successfully refute. Regardless of cost? Puhlease!
Well, Paul, I did read your book … all 400 pages and $49 of it. It’s better than your “freight-carrying productivity” argument, at least. Seems to me if you’re trying to prove that investing in trucks hasn’t paid off, the best comparison is with other freight-carrying techniques.
Strassmann and I do agree on one basic point: that it’s important to align IT spending with business goals. It isn’t much of an insight, but it is valid.
But his daunting array of numbers cries out for statistical analysis instead of simplistic financial ratios. (I searched The Squandered Computer in vain for a multiple regression analysis, ANOVA, or even a simple paired T-test — probably the best test of Strassmann’s hypothesis.)
That’s one reason collecting facts and drawing proper inferences are two different matters. Inappropriate measures are another. Numbers folks don’t always accept that financial statements no more measure competitiveness than reproductive capacity measures biological adaptation. But they don’t.
Here’s another way of putting the situation into perspective: Imagine two Sumo wrestlers. We’ve all seen movies of these guys, pushing and struggling, expending all kinds of energy to move each other.
For a long time they don’t, though, and if you tried to measure the effectiveness of their energy expenditure by the amount one moved the other, you’d conclude they’re both wasting a lot of energy to no effect.
We know better: The moment one of them weakens, the other wins the match. The energy expenditure’s value is measured by lack of backward movement.
This isn’t just theory. A client I once worked with developed a financial outlook that was pretty grim. It showed profits plummeting to a fraction of current levels over a decade, due to fundamental competitive and marketplace changes. That client wisely decided to invest large sums of money into a business transformation, which requires significant IT spending.
Its forecast, with the investment, improves its profit picture from disaster to status quo. If all goes according to plan, profits will stay at current levels. Strassmann, seeing increased IT spending but flat profits, will conclude that this company wasted its investment.
Its executives, though, will compare their profits to the original financial outlook and be deservedly pleased.