Michael Schrage is co-director of the MIT Media Lab's E-Markets Initiative and a senior advisor to MIT's Security Studies Program. He advises several fortune 1000 organizations on the economics of innovation through rapid experimentation, simulation, and digital design, and also performs non-classified work for the National Security Council, DARPA and the Pentagon's Office of Net Assessment.  He teaches and runs workshops on "innovation economics" and new product development at MIT executive education programs and frequently moderates panels and programs on these themes. He is also a columnist for CIO Magazine, serves on the editorial advisory board of the Sloan Management Review, and has written several books on innovation related topics.
Michael believes that Information

Technology can be used for competitive advantage, and Michael points out that mastering technology is not a given for all firms.

"Just like hiring talent, deploying capital, employing advertising, and managing inventory, some firms are simply more capable in managing IT.  I reject the notion that IT is a commodity that is interchangeable between organizations. The idea that one SAP implementation is the same as another, or that Amazon's interface and shopping experience is the same as eBay's or Interactive Corp's is simply ridiculous.  It is possible that the investment in IT as a differentiator is over weighted, but the real question is 'What aspect of our lack of return in infrastructure investment is a function of the IT itself, rather than the quality of our processes and people to get the return?"

The concept of alignment is critical in Michael's view. IT investment is most powerful as a competitive tool when applied in conjunction with a firm's other capabilities.

"To may organizations don't understand the congruence between innovation in the business model and innovation in the technical infrastructure that supports the business model. Investment in capacity and investment in capabilities are different. Often times, unfortunately, neither aligns with how the company competes and makes money. 

Management needs to decide what implementations they are willing to organize themselves around.  Once you decide what kind of business you want to be - leader, low cost provider, innovator, fast follower and so on, then you can build you infrastructure accordingly.

For example: Wal-Mart obviously wants to be the EDLP/low cost firm, so an initiative like RFID that lowers supply chain costs makes sense for them to aggressively pursue.  Clearly if you are Wal-Mart, your economies and insights come from the use of data to support low pricing. If you are another retailer, though, you better be using the information differently, because you cannot 'out Wal-Mart' Wal-Mart."

Michael emphasizes that this notion seems to sidetrack many firms, which simply look at what others are doing without sufficient sensitivity to what their organizations are capable of, or a clear notion of how they compete and make money.

"Business value is created by translating technical capacity into business capabilities. Too many leaders simply want to do what every one else is doing, and leave it to middle management to ex-post figure out how to derive value from technology. In attempting to compete on technology, you need to decide how rigorous and serious you are about efficiency, effectiveness, and alignment in your organization. We all can't dunk like Michael Jordan, Sumo wrestlers can't be pole-vaulters, and American Airlines can't be Jet Blue.  

 The essence of operation research is optimization, but you need to know what to optimize.  Airlines using hub and spoke business architecture optimize different factors than Jet Blue or Southwest, which optimize point to point.  The difference is in the business models, rather than who has the better yield management software."

An often overlooked bright spot that Michael identifies in the digital transformation of many businesses is the potential for flexible organizations to experiment, gain experience, and more rapidly react to innovation.    

"The line in the VC community is that the earliest Christian got the best lion. With IT, it can be more dangerous to be too early than too late. That's why so many organizations have adopted a policy of fast followership.

But the cost of experimenting with innovation is extraordinarily low, if you manage it properly. The interesting question is how do you do more experimentation better faster cheaper? The Internet is a fantastic tool to get usable knowledge cheap -- it is easier and less expensive to be both experimental and a fast follower. Organizations that can realign the economics of innovation with the disruptive influence of digital media can both learn more and move from experimentation to production more quickly." 

From Hunter or Hunted - Chapter 8