Form Follows Function, IT Follows Form

If businesses have evolved from hierarchy to network and from network to networked, what does it mean for IT? The nature of IT is changing because the nature of business is changing, and these changes are aligned with the inherent characteristics of the cloud.

If the corporation is now a distributed entity, what of its IT? A single company that is the dominant center of its universe, such as Toyota is with its suppliers, could certainly mandate use of a private IT infrastructure. Even major global corporations are willing to support the IT standards of their major customers, the way Walmart suppliers use Walmart Connect.

But for everyone else, the strategic architecture of the firm as a networked entity must be recapitulated by its IT: a distributed, ownerless architecture that can be embodied only by the cloud. Whether the network is a mesh of participants, such as the way that Hollywood producers, directors, actors, and agents come together to make a film, or a linear chain existing as a supply chain network, such a dynamic multi-enterprise organizational architecture must be reflected in a flexible multi-enterprise information architecture.

If the Internet was the enabler of Tapscott’s b-webs, the cloud is the next step. More than just leveraging connectivity to reduce transaction costs—search, contracting, and coordination—the cloud, and its evolution to the Intercloud43, is the IT parallel. In a world where the enterprise was a closed system, its IT could be closed as well. But when the enterprise becomes a fungible entity and its relationships with players across the value chain are ephemeral, its IT must reflect this new organizational architecture and ecosystem.

Moreover, in today’s environment, the boundaries among IT, the networked corporation, the product or service, and even the customer are fading. As the late C. K. Prahalad, the iconic University of Michigan professor, said, “In contrast to developing stand-alone products, innovators are drawing together networks that deliver a personalized co-created experience to the customer.”44 He used Build-A-Bear Workshop, where kids design and then construct their own teddy bears as one example and also argued that General Motors’ OnStar or a wireless pacemaker that is linked to doctors and hospitals is an example of the new “product.” Prahalad drew this critical distinction: “[A] pacemaker is not just a product. It is the nexus of a network.”45 Prahalad, the cofounder of the theory of core competencies with Gary Hamel, argued that the original theory, formerly applicable at the firm level, must now be extended to networks of firms.