That was a brilliant article -- fun to read and resulted in a real "ah-ha" moment.
I am frankly surprised to see the size impact. I wonder what would happen if you "took out" the IT industry itself from this data which has probably had exceptionally high returns relative to older industries and probably also has exceptionally high IT spend.
It would be cool to see a similar study on marketing spend as a percentage of all this stuff and whether this was correlated with increased performance or whether a lot of those dollars were inefficiently spent.
Joel Halse
· 1 year ago
Andrew - great post. I'm with Feng Zhu in terms of interest in baseball. That said, Gould's methodology and your posted results are fascinating.
My initial reaction was similar to Brian's. David Meerman Scott titled his most recent book 'The New Rules of Marketing' despite the obvious risk of losing the crowd of marketers who continue to believe that the rules have, and will not, change.
Regardless of whether or not you agree with Seth Godin and Meerman this methodology might be a way to provide insight as to the impact of all the user generated content that has exploded across the net. For the record, I suspect that Meerman is correct and that the impact of giving every consumer online a voice has drastically changed the rules of marketing. It would be interesting to have some evidence to help support or dismiss the theory.
Agatha
· 1 year ago
Professor Andrew.
Thank you for your article.
I think the fundamental causes of those cases is the changing of cross elasticity of demand (And this kind of demand is mutual )happens every minute.
In the information age, IT has already become a basic need for not only companies but also their clients. And with the extensive use of computer, this kind of demand is becoming more and more significant, it changes the mode of production and lifestyle of the present world considerably.
Since I'm not familiar with baseball, so I wanna give another example: In China, teenagers always been compared to "cageling", no "freedom". Cos our parents always take care of everything concerning as a job for us when we wanna deal with something or just do something our own, but, we never had a chance to try, cos they need to take care everything for us, that's just a need, after they do what they "have to do", they'll feel better. And, as time goes by, we have lost some abilities of certain aspects. This is a "phenomenon", like the "phenomenon of IT" but who can say where the problem really is, our parents? No, for what they did were not harm us at all. Ourselves? No, we just follow our parents, trying to be a good kid. So..
The problem is demands, as what I stated above, I think cross elasticity of demand is the most important and, if we can hold the precise needs of customers, we can hold the whole market.
Luke Naismith
· 1 year ago
Andrew, very interesting post and I am wondering if it is the impact of IT as such or rather the impact of the Internet and its inherent network effects. I remember when in Australia's National Office for the Information Economy (RIP), that we wrote papers talking about the network effects of the Internet with the result that the industry structure becomes more differentiated between those fewer larger organisations that are able harness these network effects to capture the bulk of the market and the smaller niche players. I guess much of that debate depends on how you have defined high vs low IT industries, and if there is any difference in variation between say IT hardware/software suppliers (IBM/HP/Dell) versus pure service providers (eBay/Google, etc).
Oliver Young
· 1 year ago
Hi Andrew, I believe you and I started some of this dialogue in the comments of your blog about a year ago when you put out the last major article, but I'm curious if your thoughts have changed given this analysis.
The big question in my mind is if this "rule change" -- which I think is an apt metaphor -- is a one time shot, with an eventual return to a decreasing standard deviation over time -- like MLB -- or if IT investment is more volatile, never allowing IT intensive industries to settle down due to seemingly constant rule changes -- like the NHL in recent years.
My inclination is to think that process automation in the 1990's was a major rule change, eCommerce another, and most other IT investment something more akin to the DH rule, but your data seem to point otherwise. What is your take? Does the current trend of increasing spread continue?
Jonathan Grudin
· 1 year ago
"the triumph of ideology over evidence" (whose phrase is this, does anyone know?).
I don't know the origin of that phrase, but an early and eloquent (if longer) account of the idea is here:
The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it. And though there be a greater number and weight of instances to be found on the other side, yet these it either neglects and despises, or else by some distinction sets aside and rejects; in order that by this great and pernicious predetermination the authority of its former conclusions may remain inviolate. And therefore it was a good answer that was made by one who when they showed him hanging in a temple a picture of those who had paid their vows as having escaped shipwreck, and would have him say whether he did not now acknowledge the power of the gods, “Aye,” asked he again, “but where are they painted that were drowned, after their vows?” And such is the way of all superstition, whether in astrology, dreams, omens, divine judgments, or the like; wherein men, having a delight in such vanities, mark the events where they are fulfilled, but where they fail, though this happen much oftener, neglect and pass them by. But with far more subtlety does this mischief insinuate itself into philosophy and the sciences; in which the first conclusion colours and brings into conformity with itself all that come after, though far sounder and better. Besides, independently of that delight and vanity which I have described, it is the peculiar and perpetual error of human intellect to be more moved and excited by affirmatives than by negatives; whereas it ought properly to hold itself indifferently disposed towards both alike. Indeed in the establishment of any true axiom, the negative instance is the more forcible of the two.
-- Francis Bacon, First Book of Aphorisms (1625)
Pete
· 1 year ago
Very invigorating article. Thank you for sharing with us. It helps to see the different between high and low IT industries graphed out. Adds extra relevance.
Jake Kaldenbaugh
· 1 year ago
Thank you for posting this Andrew. This is a thought-provoking analysis that really starts to put the debate into hard numbers. But another round of analysis is required to truly link it to corporate strategy. You've illuminated the link of sector performance and IT, but it still remains to be proven that individual corporate advantage can be driven by IT spend. As IT has been a secular trend over the last 20 years, the idea that they would have outsized profits and growth leading to higher valuations is not unexpected. An analysis that goes a level deeper and drills into certain industries you identified as being "IT lite", identifies variations even within this group based on technology spend or utilization and links it to similar performance spreads would be definitive. However, this task would be much more archaeological in nature and I'm not sure that the data sets are easily obtainable. But this will help answer the question of whether you can gain a technology advantage as a firm, not just by industry. Once that question is settled, the next question that naturally pops up for any current or would-be CEO is: What are the characteristics of the firms that leverage IT effectively and are there implications for my organizational design and development? In other words, if I believe in 'if', then I want 'how'. Regardless, thank you for presenting a great lens to view this debate with and putting together such thought-provoking data.
OPSEC
· 1 year ago
I appreciate this well thought out and well organized information. The graphs alone will really help me "make the case" with management.
I would think that one of the most important IT expenditures, however, would be security and training. It's a sad state when a teen in his mom's basement can "out-IT" many network admins.
Bunster B
· 1 year ago
The graph do help me read this article more well, moreover this article is well written about the IT industries.
I also appreciate the content of the article.
Regards, Bunster B
essay writing
· 1 year ago
Is this the kind of research that could really put IT in the focus of all managers in all industries? Is there a similar trend visible in the Finnish corporate “ecosystem”? How about the the impact of web technologies – are they giving the phenomenon an added boost or levelling the playing field?
Eric
· 1 year ago
Nice insightful quantitative analysis Andrew.
Can you share any additional information on what industries are included in "high IT" and "low IT?" It would be very useful to get an industry by industry breakdown of this analysis and see if the same trends occur in specific industries. The data should be readily available, I'd imagine.
Either way, very useful insights.
Julie Harris
· 5 months ago
Nice charts! I just discovered this blog and I wished I had used this in my references to show that graphs do help the reader understand the facts.
allergy symptoms
· 5 months ago
Nice post. Very informative. Profit & revenue margin chart helped me a lot to understand the current sceneio.
chinesedemocracy
· 5 months ago
Andrew.
That was a very interesting article -- fun to read and resulted in a real 'eye opening' moment. The charts make it even more easier to understand the points you have made in the IT industry, cheers
Thank you for your article. That was a very interesting article. Charts make it even more easier to understand current scenario. Also appreciate the content of the article. Thanks Again.
All Comments
That was a brilliant article -- fun to read and resulted in a real "ah-ha" moment.
I am frankly surprised to see the size impact. I wonder what would happen if you "took out" the IT industry itself from this data which has probably had exceptionally high returns relative to older industries and probably also has exceptionally high IT spend.
It would be cool to see a similar study on marketing spend as a percentage of all this stuff and whether this was correlated with increased performance or whether a lot of those dollars were inefficiently spent.
My initial reaction was similar to Brian's. David Meerman Scott titled his most recent book 'The New Rules of Marketing' despite the obvious risk of losing the crowd of marketers who continue to believe that the rules have, and will not, change.
Regardless of whether or not you agree with Seth Godin and Meerman this methodology might be a way to provide insight as to the impact of all the user generated content that has exploded across the net. For the record, I suspect that Meerman is correct and that the impact of giving every consumer online a voice has drastically changed the rules of marketing. It would be interesting to have some evidence to help support or dismiss the theory.
Thank you for your article.
I think the fundamental causes of those cases is the changing of cross elasticity of demand (And this kind of demand is mutual )happens every minute.
In the information age, IT has already become a basic need for not only companies but also their clients. And with the extensive use of computer, this kind of demand is becoming more and more significant, it changes the mode of production and lifestyle of the present world considerably.
Since I'm not familiar with baseball, so I wanna give another example: In China, teenagers always been compared to "cageling", no "freedom". Cos our parents always take care of everything concerning as a job for us when we wanna deal with something or just do something our own, but, we never had a chance to try, cos they need to take care everything for us, that's just a need, after they do what they "have to do", they'll feel better. And, as time goes by, we have lost some abilities of certain aspects. This is a "phenomenon", like the "phenomenon of IT" but who can say where the problem really is, our parents? No, for what they did were not harm us at all. Ourselves? No, we just follow our parents, trying to be a good kid. So..
The problem is demands, as what I stated above, I think cross elasticity of demand is the most important and, if we can hold the precise needs of customers, we can hold the whole market.
I guess much of that debate depends on how you have defined high vs low IT industries, and if there is any difference in variation between say IT hardware/software suppliers (IBM/HP/Dell) versus pure service providers (eBay/Google, etc).
The big question in my mind is if this "rule change" -- which I think is an apt metaphor -- is a one time shot, with an eventual return to a decreasing standard deviation over time -- like MLB -- or if IT investment is more volatile, never allowing IT intensive industries to settle down due to seemingly constant rule changes -- like the NHL in recent years.
My inclination is to think that process automation in the 1990's was a major rule change, eCommerce another, and most other IT investment something more akin to the DH rule, but your data seem to point otherwise. What is your take? Does the current trend of increasing spread continue?
I don't know the origin of that phrase, but an early and eloquent (if longer) account of the idea is here:
The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it. And though there be a greater number and weight of instances to be found on the other side, yet these it either neglects and despises, or else by some distinction sets aside and rejects; in order that by this great and pernicious predetermination the authority of its former conclusions may remain inviolate. And therefore it was a good answer that was made by one who when they showed him hanging in a temple a picture of those who had paid their vows as having escaped shipwreck, and would have him say whether he did not now acknowledge the power of the gods, “Aye,” asked he again, “but where are they painted that were drowned, after their vows?” And such is the way of all superstition, whether in astrology, dreams, omens, divine judgments, or the like; wherein men, having a delight in such vanities, mark the events where they are fulfilled, but where they fail, though this happen much oftener, neglect and pass them by. But with far more subtlety does this mischief insinuate itself into philosophy and the sciences; in which the first conclusion colours and brings into conformity with itself all that come after, though far sounder and better. Besides, independently of that delight and vanity which I have described, it is the peculiar and perpetual error of human intellect to be more moved and excited by affirmatives than by negatives; whereas it ought properly to hold itself indifferently disposed towards both alike. Indeed in the establishment of any true axiom, the negative instance is the more forcible of the two.
-- Francis Bacon, First Book of Aphorisms (1625)
An analysis that goes a level deeper and drills into certain industries you identified as being "IT lite", identifies variations even within this group based on technology spend or utilization and links it to similar performance spreads would be definitive. However, this task would be much more archaeological in nature and I'm not sure that the data sets are easily obtainable. But this will help answer the question of whether you can gain a technology advantage as a firm, not just by industry.
Once that question is settled, the next question that naturally pops up for any current or would-be CEO is: What are the characteristics of the firms that leverage IT effectively and are there implications for my organizational design and development? In other words, if I believe in 'if', then I want 'how'.
Regardless, thank you for presenting a great lens to view this debate with and putting together such thought-provoking data.
I would think that one of the most important IT expenditures, however, would be security and training. It's a sad state when a teen in his mom's basement can "out-IT" many network admins.
I also appreciate the content of the article.
Regards,
Bunster B
Can you share any additional information on what industries are included in "high IT" and "low IT?" It would be very useful to get an industry by industry breakdown of this analysis and see if the same trends occur in specific industries. The data should be readily available, I'd imagine.
Either way, very useful insights.
That was a very interesting article -- fun to read and resulted in a real 'eye opening' moment.
The charts make it even more easier to understand the points you have made in the IT industry,
cheers
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