2018 was the year of tech, the year of a serious tech-backlash in the midst of continuing and ever-increasing tech dominance. 2018 was the year of data, a fountainhead of dual-use innovations, improving and diminishing our lives.
In 2018, Apple, Amazon, Microsoft, and Google led the stock market’s ups and downs as the four largest US public companies by market cap. Facebook, under a mushrooming cloud of privacy violations, went in and out of its previously solid number five position. Technology led the fastest growing job categories, proved that unicorns exist, threatened to some day get rid of humans, and “changed the world” for better or worse, if at all.
In 2018, tech solidified its reputation as the new competitive advantage, the new success factor for large, dominant companies. “The competitive advantage delivered by software means tech remains within the company,” argued Christopher Mims in the Wall Street Journal. Larger companies have larger and better IT departments and that makes them more competitive. Tech is the essence of the new business paradigm, the new way to create monopolies and crush the competition. No matter what industry you are in, you either become a tech-driven company or you die.
15 years ago, the Harvard Business Review published IT Doesn’t Matter by Nicholas Carr, famously arguing exactly the opposite: “By now, the core functions of IT—data storage, data processing, and data transport—have become available and affordable to all… They are becoming costs of doing business that must be paid by all but provide distinction to none.” Following other “infrastructural technologies” such as electricity, IT has reached the stage in its life where there are dwindling opportunities for gaining IT-based competitive advantages and “as for IT-spurred industry transformations, most of the ones that are going to happen have likely already happened or are in the process of happening.” The future belongs to large information utilities which, just like electrical utilities, will distribute the IT commodity to a stagnant market.
Hindsight is 20/20, but here’s what I wrote in response to Carr’s article 15 years ago: “Electricity… is simply a source of energy; it hasn’t changed much since we found a way to harness it… Unlike electricity, IT is very different from what it was 30 or even ten years ago. The technologies used for processing, storing, and transporting information continue to expand. Also growing is the demand for IT, with more businesses and types of organizations, more processes and activities, and more and more consumers at home and on the go in need of its productivity-enhancing functions.”
I wrote this before the invention of the smart phone in 2007 and the rapid adoption of cloud computing in recent years and my unreliable crystal ball could only hint at these developments. But I was confident in predicting an ever-expanding IT market and its increased importance because I already understood that IT’s big bang happened exactly ten years earlier, in April 1993, when CERN made the World Wide Web available to the world free of charge.
Tim Berners-Lee invention facilitated the flowering of numerous applications, each serving as a new data source, and all connected via (by then) a 24-year-old “infrastructure,” the Internet.
By 2003, IT became DT, for “Data Tsunami.” By 2003, IT became DT, for “Digital Transformation,” the evolution of data from a by-product of computer calculations to the foundation of business change.
According to IDC, the amount of data created in the world annually increased from 2005 to 2018 by…25,000% (!). What used to be called “data processing” until it was decided that “information technology” sounded better, shifted its focus in the late 1980s to data mining, keeping data longer, storing it in a database, and applying new tools to analyze it. But the Web has given rise to data monetization and to new type of companies using data as the core of their business model and the key source of their competitive advantage.
Three such companies – Amazon, Google, and Facebook – have been among the top 10 most valuable companies in the US for the last three years. Their market value is directly related to the value of their data and what they do with it. They take advantage of the special characteristics of data that are not present in electricity or any other “infrastructural technology”: Data creates more data and more value. Data elements can be linked, classified, combined, and re-organized to create more value. Innovative models, algorithms, and methods of analysis applied to the data further increase its value, leading to innovations in all aspects of our lives and to discoveries of what more can be done with the data.
Data creates data and leads to new business opportunities and new ways of using data. The “AI” that dominated technology and business news in 2018 has nothing to do with the 1950s visions of the people aspiring to play God that coined the term, and everything to do with applying new methods of sophisticated statistical analysis to very large pools of data.
Data allows entrepreneurs to blur previously solid distinctions between industries, enterprise vs. consumer, online as opposed to offline. Because of the “information wants to be free” mantra that dominated the early days of the Web, companies such as Google and Facebook have re-invented advertising to pursue what they understood to be the business meaning of this mantra, i.e., “and data wants to be mined and monetized.”
The new DT businesses that have not succumbed to the lure of becoming new advertising platforms are the ones that have avoided, to a large extent, the recent tech backlash. A shining example is Netflix which has always charged a subscription fee for its services, establishing a clear contract with its customers.
As I also wrote fifteen years ago: “IT never mattered. What matters are the people who invent information technologies and who deploy and use them.”