The May 2006 CBR, "IT Innovation After a Recession: Where Do We Go From Here?,"¹ focused on innovation in IT shops. As I wrote then:

Is IT innovation important for your organization? If so, the time has come to find a way to create enough slack resources in your IT shop to buy time and brain-cycles for your employees to have the best chance to succeed at it.

Sure enough, IT innovation is again a hot topic in corporate boardrooms and IT shops, and we are working hard to do our part to help you navigate it. While this issue of CBR focuses on dynamic IT capabilities, our next issue will be on the emerging topic of open innovation. In short, open innovation is the orchestration of knowledge inflows and outflows designed to speed up and improve a firm's innovation cycle (but, be patient for now, a lot more next issue.)

This renewed focus and attention on innovation, however, is really a by-product, not a driver, of something bigger -- much bigger in fact. What has been steadily changing is the increasing turbulence of the competitive environment. Precisely time-stamping the emergence of turbulent environments is a difficult, and perhaps futile, exercise. Suffice it to say, though, that advanced IT and the Internet have been playing a major role in the increasing turbulence in most industries in the last 15 years. In fact, recent research shows that the IT intensity of an industry is directly related to its degree of sales turbulence.²

Consider an unlikely example: the hotel business. Hotels have been providing their basic service -- shelter on the road -- since before the ancient Roman legions created the first efficient interstate highway system in Europe. The industry has evolved substantially since then, but the basic service and the basic buying process were rarely, if ever, dramatically altered. That is until 1996 when a bunch of "software makers" from Redmond, Washington, USA, decided to enter the space (can you guess who they were?). Expedia sent jolts though the industry when it pioneered the merchant model and moved pricing decisions from the property to the intermediary. As the president of a large international hotel chain told me once: "We were asleep at the wheel, and smart people who understood the potential of the Internet took us for a ride." Today, thanks to the Internet and the many technologies that leverage it, the hotel industry is much more dynamic and, yes, turbulent. This is a boon for both savvy consumers as well as the best hotel companies that understand how to harness the power of IT to ride subsequent waves of opportunity.

So how do you manage in a turbulent environment? Yes, we know, you need to innovate, be agile, and be nimble, but how exactly do you do all that? How do you set yourself up for success in this environment? Academics interested in strategic information systems embraced this challenge more than a decade ago and have now accumulated quite a bit of knowledge under the label of dynamic IT capabilities.

Given the timing and relevance of this topic, we have decided to devote this issue of CBR to dynamic IT capabilities. Our objective is twofold: to benchmark the state-of-the-art and to allow our authors to introduce the notion of dynamic IT capabilities while also commenting on emerging trends from the survey data.

Our academic contribution is provided by Paul Pavlou, Assistant Professor of Information Systems at the A. Gary Anderson Graduate School of Management at the University of California, Riverside. Despite his young age, Paul is one of the foremost academic experts on dynamic IT capabilities and an emerging authority on strategic information systems. I am hoping to be able to coax Paul to write for CBR on many more occasions.

Providing our view from the field is another cast of characters well known to CBR readers: Bob Benson and Tom Bugnitz, Senior Consultants with Cutter's Business-IT Strategies practice and members of The Beta Group. Leading the effort for the Beta Group was Bob who captured insight from Beta's year of experience in helping IT organizations ready themselves to be more innovative, flexible, and able to respond to changing business conditions.

Paul begins his contribution by providing the frame of reference and definitional context for the issue. He defines and describes dynamic IT capabilities and then introduces, as a complement, the notion of improvisational IT capabilities. I think you will find his analysis to be very interesting and stimulating. For the more academically inclined, Paul provides many references to published work that delve deeper into the subject. But how can you foster dynamic and improvisational IT capabilities? Paul's contribution, using the survey data, focuses on this question. He concludes with tangible guidelines.

Bob and Tom bring their years of consulting, writing, and educational experience to bear in their commentary on the survey results. They begin with a short overview of results that drives many of the key points home. They then delve deeper and more systematically through the survey. Specifically, they map a portfolio of common IT management practices used by the respondents to indicators of turbulence, a need for IT flexibility, and IT innovation. For the more analytically inclined, Bob and Tom provide a number of different views of the data. I think you'll find their implications and guidelines sections particularly helpful.

It has been now almost three decades since IT was declared "a competitive weapon," but in my opinion such a claim has never been more true than today. The difference perhaps is that the "weapon" looks less like a big and heavy halberd and increasingly resembles a crossbow. What has held constant is that being able to skillfully wield the changing weapon is still critical to survival and success on the competitive battlefield.

NOTES

¹ See "IT Innovation After a Recession: Where Do We Go From Here?" (Vol. 6, No. 5).

² See Andrew McAfee and Erik Brynjolfsson's "Dog Eat Dog" (Wall Street Journal, 28 April 2007).