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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.

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|In: Industry Commentary|Last Updated:

In all the world, there’s nothing more irritating than someone stating obvious, widely accepted, and often wrong or misunderstood conventional wisdom as something profound.

“People need to take personal responsibility for their actions!” I recently heard an acquaintance declaim to a group of us in terms that left no doubt this was a Highly Original Thought (HOT).

Other statements that are currently HOT:

“We should build this application using a thin-client architecture.” (Usually said by people who have no idea what a thin client really is.)

“The mainframe is just the biggest server on the network.” (No, that’s just one of its roles, unless you no longer run batch jobs on it.)

“Our technology investments will be driven by business needs … we’re not going to invest in technology for technology’s sake.” (Gee, do ya think?)

This last statement usually comes from technophobes who wouldn’t recognize the business benefits of technology if those benefits were listed as a line-item on the profit and loss statement, or by defensive technologists conditioned to cringe by years of dealing with the aforementioned technophobes.

And the fact is, it isn’t a very smart statement to make.

It isn’t that the statement is wrong, exactly. Often, inefficiencies or changes in strategy really do lead a businesses to recognize the need for new technology. On rare occasions, that need can drive vendor innovation, as opposed to simply causing IS to buy existing technologies. It can happen.

What this view ignores, however, is that usually new technologies create opportunities for process efficiencies, for improving customer relationships, or for defining whole new markets and marketplaces within which your company can do business, and these aren’t opportunities business executives foresee.

Let’s take a simple and obvious example. In the mid-1970s, world business didn’t approach any of the fledgling PC hobbyist groups saying, “You know, if one of you would just create an electronic spreadsheet program for us, we’d buy millions of personal computers just to run it.”

More recently, Tim Berners-Lee adapted SGML, sponsored by the Department of Defense to facilitate creation of electronic documentation, to the needs of the international physics community. By doing so he invented the World Wide Web and a new multibillion-dollar vehicle for commerce. Business executives didn’t drive the creation of the Web. Most have responded to it nervously, as something they don’t particularly like but probably can’t entirely avoid. Even now only a visionary few recognize it as a huge, still-to-be-defined opportunity.

Chances are high that the requests you get for new technologies and information systems from heads of departments or business units will lead to business improvement if you execute well. That’s important, and not to be taken lightly. It’s only part of the story, though — the part where your company follows others who are the industry leaders. In other words, investing in technology in answer to business requirements is a survival response, not a growth strategy.

A similar principle holds on a macroeconomic scale, by the way. For evidence I offer an extensive analysis in the September 28, 1996 issue of the Economist, which says, “… per-capita growth in output is doomed to be zero — unless the economy is making technological progress.” (Thanks to reader Linda Donaghue for directing me to this fascinating article.)

Business doesn’t drive technical innovation. It only pays for it. Business people usually can’t envision the value of something they’ve never encountered before. That’s why CIOs who wait for the rest of the company to ask for a new technology earn their reputation as sand in the gears of progress.

Yes, technical innovations must create business value. And no, not every technical innovation will create value for your business. You have to be able to recognize what’s really HOT.

That’s what makes the job interesting.

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