Is the Internet “Transforming” Business?
12 July 2011 at 12:15 am Peter G. Klein 4 comments
| Peter Klein |
In the 1990s and early 2000s there was a huge debate about the impact of information technology on productivity. Robert Solow famously quipped, “You can see the computer age everywhere but in the productivity statistics.” Robert Gordon, Erik Brynjolfsson, Jack Triplett, and many others participated in this debate, with issues revolving around productivity measurement, workplace incentives, organizational complementarities, and more. (I did some work on this too.) The end result was a rough consensus that IT did increase productivity, but that the effects were modest.
The buzz over “wikified” organizations — open-source communities, highly disaggregated firms, crowdsourced production, and the like — gives me a strong sense of déjà vu. Indeed, we have not been kind to the wikinomics view in these pages. Now Don Tapscott, a leader of this movement, seems to be having second thoughts:
In our 2006 book Wikinomics, Anthony D. Williams and I looked at dozens of companies that have used the Internet to transform their business models and achieve tremendous success.
However, in the five years since the book’s publication, we’ve noticed something striking: the rate of business model innovation has not accelerated. Yes, some individual companies have achieved competitive advantage by exploiting the web and networked business models. But overall the gains have been modest.
The reason, says Tapscott, is that “it’s becoming difficult or even impossible for companies to achieve breakthrough success without changing their entire industry’s modus operandi.” This reminds me of the conclusion from the earlier literature that IT has the biggest effect when combined with complementary organizational practices (e.g., Milgrom and Roberts, 1995), which suggests that change doesn’t occur until all elements of the complementary bundle are in place — maybe a long time after the initial innovation.
Entry filed under: - Klein -, Innovation, Management Theory, Myths and Realities, Strategic Management, Theory of the Firm.
Organizations and Markets 
1.
Peter Lewin | 12 July 2011 at 10:40 am
IT is a “general purpose technology” (Rosenberg). I am not sure how its effects would show up in the data. Because of its ubiquity it affects most (all) sectors of the economy – it facilitates the introduction of new goods and services, and reduces their costs of distribution. It also facilitates transactions that would not otherwise occur – ebay Craig’s list, etc. Perhaps it is reflected in aggregate economic growth, viz, some measure of value-added. Then a measure of its value would require a judgement as to what economic growth would have looked like without it. I am not familiar with the literature Peter K. mentions – perhaps this is addressed there.
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Peter Lewin | 12 July 2011 at 10:46 am
A little dated now, but I recommend a little book by my colleague Stan Liebowitz – Re-thinking the Internet Economy. He has a nice analysis of what makes an internet business valuable – and what does not. On the real and bogus value-adding aspects of the internet. One aspect of the IT story.
http://www.amazon.com/gp/search/ref=sr_adv_b/?search-alias=stripbooks&unfiltered=1&field-keywords=rethinking+the+internet+economy&field-author=liebowitz&field-title=&field-isbn=&field-publisher=&node=&field-p_n_condition-type=&field-feature_browse-bin=&field-binding_browse-bin=&field-subject=&field-language=&field-dateop=&field-datemod=&field-dateyear=&sort=relevanceexprank&Adv-Srch-Books-Submit.x=0&Adv-Srch-Books-Submit.y=0
3. Blog Archive: Do the IT (r)evolution? - GOSt | 12 July 2011 at 11:58 am
[…] a long time after the initial innovation” (read the entire article and comments at the link https://organizationsandmarkets.com/2011/07/12/is-the-internet-transforming-business/ […]
4.
Michael E. Marotta | 14 July 2011 at 9:30 am
I agree with Peter Lewin: it may be an unbroken window. At our nearest crossroads, the smart sensors and computer controlled traffic signals keep cars flowing. The vehicles themselves are controlled by a complex array of processors. As a result, we consume less oil, rather than having run out, as was predicted so often in the past.
When I was a kid, our competing newspapers could put out five editions a day, each with an army of reporters, editors, typesetters, press operators, and vendors. Now, CNN is the homepage on this PC; and Reuters is the homepage on my Mac. How do you measure that?