In 2004, Andrew McAfee, an associate professor at Harvard Business School, wrote a case study about a Japanese taxi company that used Japan's i-mode technology to bypass the dispatch center and immediately put customers in touch with the closest cab. That case study led McAfee to search for other tools that allowed for similar interaction. Meanwhile, a student introduced McAfee to Web 2.0 tools, such as blogs and wikis, which had just started to become popular. Further research led McAfee to become a proponent of Web 2.0 tools, which he calls Enterprise 2.0. As a result, he developed a technology paradigm that companies can use to buy or build digital platforms for enabling their employees and other constituents to collaborate more freely. Each letter in his SLATES paradigm stands for the first letter in one of the six components -- search, links, authoring, tags, extension, and signals. In fact, McAfee, who is also a visiting professor at MIT's Center for Digital business, has chronicled his findings in his forthcoming book, Enterprise 2.0 - New Collaborative Tools for Your Organization's Toughest Challenge (Harvard Business School Press).

At the MIT Sloan 2009 CIO Symposium, Enterpriseleadership.org sat down with McAfee to discuss the challenges CIOs face in making technology investments, especially in Enterprise 2.0. Here is what he had to say:

EL. Is there a correlation between a company's profitability and the amount of money it allocates annually for IT and the maturity of its IT investment process?

AMA. Those correlations tend to be very weak. Much of the research shows that the amount of money a company spends on technology is a bad indicator of how much benefit it gets out of technology, and what its profitability is like. As far as we can determine, that raw investment number is not a good predictor of things we care amount.

EL. Is the maturity of a company's investment process an indicator of anything significant?

AMA. Most executive teams look at capital IT investments the same way as any other capital investment. The amount of attention everyone in the company -- ranging from the executive team to business unit managers -- pay to technology issues determines the success of these investments.

EL. If technology decisions are driven from the top, is there a better chance these investments will have a high success rate?

AMA. Yes, especially if the technology investments are intended to change the business. The business side of the company doesn't get involved in things such as upgrading routers or swapping out databases. If the purpose of the technology project is to bring about change to the business, then you need to involve business people.

EL. What industry sectors have increased their technology investments and what payoffs do they expect to them.

AMA. My research shows that companies in IT-intensive industries, such as finance have experienced turbulence and higher rates of growth concentration than non IT-intensive counterparts. You, however, have to put things into perspective. These days finance is such a strange place to do business. It is very hard to predict what is going to happen going forward. On the other hand, companies in IT intensive industries can't switch horses in midstream and slow down their rate of investments. It might take longer, but they will realize a payoff.

EL. Are there any other companies that stand out in your mind that really exploit technology?

AMA. I did a case study about the Spanish clothing company Inditex, Europe's largest clothing retailer. Zara is this retailer's most popular brand. It is an inexpensive but fashion-forward retail chain. This company is a brilliant user of technology because it does not throw too much technology at the business. It has developed great insight into the kind of customers it wants to go after -- 20-something forward people. Trends for this market segment are hard to predict, As a result, Inditex does not do much forecasting or looking into the future with technology. Its technology enables store managers all around the world to articulate what products will sell in the next couple of weeks. The company can then design the clothes, make them, and then get them to the stores quickly thanks to a fast replenishment cycle. Inditex can take advantage of trends while they are still hot, instead of trying to predict what 20 year olds are going to wear 18 months from now. That is impossible to do.

EL. If a company has immature technology processes, what steps can it take to catch up and move forward?

AMA. You don't begin by throwing buckets of money at the problem. The company has to make the commitment that it can catch up, especially if the company has not historically had technology as a strength.  The company has to understand the needs of the business, and then look at the technology landscape to see what it needs to adopt.

EL. How does your approach to technology differ from some other approaches?

AMA. Many of the approaches have a great deal in common. We all focus on people, process, and technology. Keep in mind that enterprise deployments can vary widely. You can run into different kinds of problems or pitfalls depending on what kind of implementation you are doing. If you just do finance and human resources, you won't run into many problem. On the other hand, because technology deployments for distribution, sales, logistics, and manufacturing are more complex, you will incur more risk. As a result, you need to plan these deployments carefully.

EL. What guidelines would you give CIOs about measuring the success of technology investments?

AMA.  I try to help companies understand that cost and time are not the most important criteria for measuring progress and success with technology initiatives. You need to keep our eyes on those things, but more importantly, you need to look at the business impact of IT. That is hard to measure. You need to keep you eye on achieving the objectives of the project. Is the project doing what we need it to do? If not, how can we turn it around? Is it giving us the capabilities we are after?

EL. What are some of the shortcomings of the tools and techniques large companies use to guide the capital IT investment process?

AMA. When I look around, especially at larger organizations, I see too much decentralization of decisions about technology. The governance process revolves around letting each division or business unit make a set of technology decisions. The corporate level winds up stitching all of these technology decisions together. That's hard to do. You wind up with a fragmented technology environment riddled with inconsistent business processes, and inconsistent data. You can't drive the enterprise, never mind see what is going on. I tend to advocate more centralized governance around the enterprise decision-making approach. It doesn't mean that headquarters makes all of the business decisions. You just try to layer and place some consistent technology across the company.

EL. Many companies use an ROI approach for measuring technology investments. Is that a good metric for technology projects?

AMA. It is tempting to try to turn a predicted ROI number into a business case in advance for a technology project. These numbers are extraordinarily speculative. At the start, people come up with whatever number they want. I don't advocate that companies spend much time on that. Whenever I have a chance to talk to companies that do technology well, I ask them about creating a business case and coming up with an ROI. Many of these companies say they don't focus their energy on these things. Instead, they focus their energy on making sure they select the right technologies. They watch their budgets carefully so they don't spend more than they anticipated.

EL. Your forthcoming book, Enterprise 2.0, outlines your concept, called SLATES. Can you give examples of organizations that are moving in that direction?

AMA. The 16 agencies of the U.S. intelligence community, including the FBI and the CIA, really surprised me. They have deployed a consistence suite of 2.0 tools that have all of the SLATES elements. This toolset has started to change how some of the analysts go about their work. This is good news. Perhaps the federal intelligence agencies could have prevented the September 11 disaster if they would have been able to connect the dots among all of the people and all of the pieces of information throughout the community. The intelligence community's Enterprise 2.0 platform, called Intellipedia, provides a very consistent internal blogging environment. It has something for tagging, such as an internal del.icio.us. It comes pretty close to comprising the entire SLATES complement.

EL. What companies are embracing Enterprise 2.0?

AMA. Many of the high-tech companies are doing many aspects of Enterprise 2.0.Sony is a big user of these tools.  You also see unusual industry sectors, such as insurance, embracing Enterprise 2.0. In fact, Northwestern Mutual Life is a big Enterprise 2.0 user. Other heavy uses of Enterprise 2.0 include Procter & Gamble and Pfizer.

EL. What must proactive CIOs need to be thinking about in order to move in the direction of Enterprise 2.0? What challenges do they face in that area?

AMA. The main challenge is for CIOs to get out of the way. If you want to control events and control outcomes, you have to give up control of people and trust them. Enterprise 2.0 technologies put that philosophy to the test. If CIOs want to be successful with Enterprise 2.0, the need to trust that people will use the tools appropriately and encourage them to lead by example. CIOs need to stop trying to be interventionist managers. CIOs should deploy the tools, model the correct behaviors, and have some faith that good things will happen as a result.

EL. Can you summarize what C-level executives will learn from your book.

AMA. They will learn what is new under the sun. The 2.0 suffix is not hype. There really is a new set of tools out there. They will learn what those tools are, what characteristics they have in common, and how organizations are deploying them and distilling lessons about how to profit from this new opportunity going forward.

EL. Can you describe some of these tools?

AMA. All of these tools have SLATES elements, such as blogs and virtualization. They tend to very social or community-based. Overall, they tend not to tell your role in the workflow. They do not impose a business process. For example, wikis and Wikipedia are good examples here. We used to think that if you wanted a high quality encyclopedia article, you needed to assign people into roles and walk them through a very specific workflow for generating a good article. Wikipedia comes along and shows you don't need to do any of that. Instead, you can tap into a huge amount of energy out there to write articles, share knowledge, and just be helpful. You can generate the world's largest encyclopedia. By some measures, Wikipedia is a good encyclopedia developed by not dictating terms to people.

Whenever I do seminars on Enterprise 2.0, I ask audience members how many regularly use used Wikipedia. Almost every hand in the room goes up I then ask if it is the first place they click on to start learning about new topics. Again, almost every hand in the room goes up. I ask people to think about how remarkable that is because this it has no formal editors staff. Any one of us can make changes to almost any article. The lack of formal ground lines is bazaar. My point stresses that this experience is not an accident --it is what is key to what is going on right now. The new technology toolkit is a great assistant and a great help for open innovation.

EL. What are some of the benefits organizations will get from SLATES?

AMA.  They can come away with a better product than would have otherwise had. For example, they can take advantage of new ideas that did not expect, such as a customer who offers an idea for how to improve the product. This process gets built into the way the company does business. It can help to generate revenues.

EL. Does SLATES change the organizational culture?

AMA. It does not have to change the formal organizational structure. I keep stressing that the results of Enterprise 2.0 capabilities are an alternative to the formal organization, i.e. having a formal organization chart, a boss, and a hierarchy. Call it a complement, if you will because it is in addition to all the formal business processes and the hierarchy of the organization. As you deploy these tools over time, they will start to change the culture a little bit, and people will start to think in a more democratic way about many issues. It is not this deep threat to the existing organization and the existing hierarchy.

EL. Some companies have devised their own internal version of LinkedIn or Facebook. Doesn't those social media projects cut across organizational boundaries?

AMA. Absolutely! These technologies inherently do not respect organizational boundaries. They do not care what business unit, division, or geography you are part of. As a result, these technologies enable you to bring a globally disbursed workforce together to look at problems and to contribute knowledge to share what they know. It cuts across organization boundaries, but let us be clear. We already have technologies, like telephone and email, which are equally indifferent to those kinds of things.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.