Executive Thought Leadership

I’m pleased to share with you this month a study on Internet culture within the Internet organization and its effect on productivity.

In this issue of the Executive Thought Leadership Quarterly, you’ll hear from Brad Boston, Senior Vice President and CIO of Cisco Systems. He discusses the preliminary results of an MIT study of Internet organization, culture, and productivity. Among the key findings of the research: Firms that have made substantial investments in both organizational capital and IT capital have seen a two to threefold increase in their return on investment (ROI). Conducted by the Center for eBusiness at MIT, the research was funded by a grant from the National Science Foundation, the Center for eBusiness at MIT, and Cisco.

In the Guru Q&A section, you’ll hear from Erik Brynjolfsson, professor at MIT Sloan School of Management. Professor Brynjolfsson discusses the key findings of the research and the impact on productivity. Brynjolfsson outlines the specific set of practices or policies that make up a "digital organization." The companies that adopt these policies, especially in combination with increased investments in Internet and related technologies, are significantly more productive than their industry competitors and score higher on various measures of innovation. Interestingly, employees of these companies seem to benefit as well, earning higher wages on average.

Thought Leadership

Not surprisingly, the behaviors of Digital Organizations are the same behaviors that characterize the current generation of successful, Internet-based businesses as well as older businesses that have put the Internet at the heart of their business operations. The top three:

• Open information access and communication such as unrestricted Internet access and the use of technology to support multi-directional communication
• Distributed decision-making and empowerment of employees at all levels
• Strong, performance-based incentives linking pay and stock options to individual performance

Cisco’s Brad Boston discusses the correlations, cites examples, and describes the benefits of Digital Organizations. Read more about this in this article.

Guru Q&A

Professor Erik Brynjolfsson has researched hundreds of Fortune 1000 companies over the years to discover and understand how intangible assets, such as supply-chain management or inventory-management systems can leverage IT investments to increase productivity.

Cisco: Why did you conduct this study on Internet culture and what is the single most significant finding from your research?

Brynjolfsson: We began this research with the goal of understanding what differentiates successful users of the Internet and related technologies from the laggards. Based on executive interviews and case studies that we completed, we hypothesized that a certain way of organizing work, including specific business practices and an Internet-friendly culture, might make a big difference.

We were able to identify the nature of such an organization and culture that correlated with successful Internet use. Companies that combine information technology investments with the right “digital organization” are significantly more productive than firms that only make the technology investments. They also have higher levels of innovation and stock market value.

More of McClean's reflections can be found in From the Experts section of the Business Industries and Solutions Web site.

I hope you enjoy this issue of the Executive Thought Leadership Quarterly .