When Does IT Matter?

The S and Z curves can help technology vendors make wise investment decisions.

Youre probably familiar with the S curve. Thats the famous line, in the shape of an elongated S, that plots the adoption of a valuable new technology.

As the curve indicates, the uptake begins slowly. When first introduced, the technology is unproved, expensive and difficult to use. Standards havent been established, and the best practices have yet to emerge. Just a handful of technically adept first movers experiment with the technology in this stage. But once its value becomes clear, the adoption curve shoots upward as vendors and users rush to invest in the technology, standards emerge and prices fall. Soon, the technology is ubiquitous. The S is complete.

The S curve illustrates the adoption of popular consumer technologies such as TVs and DVD players. But the pattern also applies to business technologies, including computers. Early adoption of advanced technology can give a company a competitive edge.

However, the things that push a new technology up the S curve toward ubiquity—heavy investment, standardization, homogenization, price deflation, best-practice diffusion, consolidation of the vendor base—also erode the ability to distinguish one company from another. As ubiquity grows, strategic potential shrinks.

The Z curve in the same diagram plots a technologys potential for providing competitive advantage.

In the initial proprietary advantages stage, the technology can be used by a company as a proprietary resource and can thus be the basis for a lasting advantage. The high cost, risk and difficulty of using the technology during this stage provide strong barriers against competitive replication. It can take years for rivals to catch up.

But as the pace of adoption picks up in the second stage, diminishing advantages, the technologys potential for providing a durable competitive edge declines precipitously. Innovations in the technology diffuse rapidly throughout industry. Finally, once the technology reaches ubiquity, in the weak advantages stage, its strategic potential is largely spent. It becomes a cost of doing business that all must pay but that provides distinction to none.

/zimages/7/28571.gifTo read a response to Nicholas Carrs article "IT Doesnt Matter," click here.

By thinking about where IT lies along the S and Z curves, you can make wiser choices about the timing of investments. If IT is relatively early in its rollout, being a pioneer can make sense because it can give you a lasting edge. But if its fairly far along the curves, youll rarely be able to recoup the high costs of being an innovator—competitors will be able to catch up too quickly. The better strategy is to hold back, waiting for standards to solidify, costs to fall and best practices to emerge. Let your competitors assume the big risks of being first movers.

Find out where you are on the Z curve. It may be later than you think.

Nicholas G. Carr is the author of the new book "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage." Free Spectrum is a forum for the IT community. Send submissions to free_spectrum@ziffdavis.com.

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