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PKF Texas – The Entrepreneur’s Playbook: Proof of IT Value

by | Apr 11, 2008 | PKF Texas - The Entrepreneur's Playbook®

Note: Running Fridays in FromGregsHead.comis a continuing series of tips brought to you by Greg Price. These run Saturday mornings during the BusinessMaker’s Radio Show on KPRC 950AM. Audio files can be found on the Entrepreneur’s Playbook page of the PKF Texas website.

A major research study by Harvard Business School professor Marco Iansiti and Keystone Strategy Inc., proves that information technology can confer a competitive advantage. Companies in the top quartile of Iansiti’s study reported average compound annual revenue growth rates almost seven percentage points higher than the growth rates of peer companies in the bottom quartile.

Iansiti based his conclusion on data from 161 large manufacturing enterprises in the U.S., Europe and Japan. The companies were rated on the effectiveness of their use of IT in 40 business processes within five key functional areas, including finance and operations, sales and marketing, and partner and supplier management. The rankings were based on the breadth and depth of their IT use in each area.

The study’s conclusion:  there is a direct correlation between an organization’s IT capability and its financial performance.

Iansiti’s study does more than document the superior performance of organizations with more advanced IT capabilities. It goes a long way toward explaining why they outperform. “IT enables managers to handle more complexity,” he says. “And when managers can handle more complexity, they can scale up their organization.” In short, IT doesn’t just make growth possible—it makes it manageable.

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