Introduction

Over the last twenty years, the world has seen astounding changes and productivity gains as a result of the increasingly close integration of information systems with organizations’ core business activities.

Companies started using computers as electronic record books for accounting and inventory, automating existing processes without fundamentally changing them. But as automation increased, progressive companies realized that the speed of electronic processing could be used to change the way they did business, allowing them to monitor revenue and inventory in “real time” rather than having to wait weeks after a quarter ended before being able to make business decisions. The firms who recognized this potential, and acted on it, gained a significant competitive advantage – lowered risk, faster decision making, increased productivity and reduced cost– over those who did not. Even at this point, however, most systems still operated more or less in departmental “silos,” with little interaction among them.

Companies next realized that great potential lay in making these information systems act together, coordinated towards achieving organizational goals rather than simply automating departmental tasks. The most successful of these companies, such as Dell Computer and Wal-Mart, not only gained a competitive advantage but completely transformed their markets. The rise of the Internet, which provided a ubiquitous means of communication among partners, suppliers and customers, was readily taken advantage of by those companies who had already directed their various information systems towards a common business goal.

These exceptional gains in flexibility, efficiency and productivity came primarily through the rational application of information management to a company’s business processes. These gains are most evident in industries where the inputs are tangible, standard and easily traded commodities, and where the products are also relatively standard, with a limited number of options. Under these circumstances, information management can realize economies of scale which provide an exponential return on investment.

But - the magnitude of the gains which can be derived from better information management is beginning to level off, and, as other organizations catch up, so is the competitive advantage. The more difficult, but hugely rewarding process of better management of organizational knowledge is now starting in earnest, focused on achieving the next round of gains and efficiencies in business.