Does technology encourage or inhibit business innovation? At first blush, the question seems naïve and the answer obvious: It is clear that information technology is an enormous spur to innovation. New technological capabilities enable companies to perform activities of which they had previously only dreamed. Modern data management facilities, for example, allow organizations to conduct customer analyses that they always had desired but previously had been unable to do and thereby develop customized offerings and marketing messages. In some cases, new technology even allows companies to solve problems of which they had previously been unaware. A classic example is the invention of the xerographic copier. Prior to its arrival in the marketplace, people did not have an expressed need for such a device. They used carbon paper and similar technologies to make extra copies of a document while it was being produced and resigned themselves to living in a world where one could not make copies thereafter. Indeed, early market research studies showed no demand for a convenience copier. Only later, as people started to appreciate the capability that the new technology offered them did they recognize the opportunity that it represented.

At times, however, technology can have the opposite effect and inhibit business innovation. In particular, investments in expensive technology platforms represent a “sunk cost” for most organizations, a cost that they are reluctant to reincur.