Why IT gives business a competitive edge

When Nicholas G. Carr wrote IT's obituary in his famous 2003 article, "IT Doesn't Matter," few thought IT would soon be returning from the dead. Carr's argument -- that IT was becoming commoditized and could no longer provide a competitive advantage -- struck a nerve and was parroted faithfully throughout the corporate world.

Fast-forward to the predawn of 2006, and even Mr. Carr is starting to change his tune. Nobody's partying like its 1999 again, but across many industries companies are demonstrating that IT can be a key ingredient in a winning business formula. Here, we highlight three such companies -- JetBlue Airways, Netflix, and BNSF Railway -- as market leaders that make aggressive, innovative use of IT.

Management gurus are also turning more bullish on IT as a source of competitive advantage. But they note that the game has changed, that IT alone cannot create sustainable advantage in a competitive global marketplace.

Nick Carr was half right," says Tom Davenport, Babson College professor and management guru. "You've got to combine IT with smart people and good business processes that are supportive of a distinctive capability the organization has."

Davenport rattles off a roster of companies -- Wal-Mart, Harrah's, Capitol One, Amazon, and Marriott -- that have "focused IT on what really matters to their business" to become tops in their categories. And he claims it may take a decade for their competitors to catch up.

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John Hagel, a high-profile consultant and co-author of The Only Sustainable Edge, goes one step further, claiming that emerging IT capabilities such as SOA and virtualization are enabling more cost-effective, incremental innovation than legacy hardwired systems ever allowed.

"None of the individual improvements will be sustainable; people will over time try to copy," Hagel says. "But if you keep moving forward, they'll never catch up. It's all about getting better [and] faster than others."

JetBlue: IT with a human touch

With several large U.S. airlines either in bankruptcy or on the brink, the airline business is reeling. Fuel costs are high, employees are grumbling, and discount carriers such as Southwest prevent competitors from raising prices.

Against this backdrop, New York-based JetBlue has soared from zero to more than a billion dollars in annual revenue in just less than six years. And IT has been a decisive factor in that growth, according to Tim Claydon, senior vice president of sales and marketing. "We were the first airline to be born in the Internet age," Claydon says, describing how the company uses IT to enable everything from home-based service reps, to seat-back satellite TVs, to paperless cockpits and all-electronic flight booking.