Strategy & Information Technology

Three waves of IT-driven competition have radically reshaped competition in the past 50 years. The first wave of IT, during the 1960s and 1970s, automated individual activities in the value chain, ranging from order processing and bill paying to computer-aided design and manufacturing resource planning.  See below for “How Information Gives You Competitive Advantage.” The rise of the internet unleashed the second wave of IT-driven transformation in the 1980s and 1990s. The internet enabled coordination and integration across individual activities; with outside suppliers, channels, and customers; and across geography. It allowed firms, for example, to closely integrate globally distributed supply chains. See below for “Strategy and the Internet.” These first two waves gave rise to huge productivity gains and growth across the economy. While the value chain was transformed, products themselves were largely unaffected.

Now, in the third wave, IT is becoming an integral part of the product itself. “Smart, connected products” - made possible by vast improvements in processing power, device miniaturization and ubiquitous wireless connectivity - are expanding and transcending industry boundaries, disrupting value chains, altering industry structure, and raising a new set of strategic choices for competitors. This transformation will unleash a new and even greater wave of innovation, productivity gains and economic growth.