They are the oscars of information technology: every year the Smithsonian Institution and Computerworld magazine award prizes to a handful of computer programs that, in the eyes of the judges, exemplify the most innovative applications of technology. In 1994, the prizes went to software that enables more natural use of artificial limbs, a computer simulation of the world’s oceans, the programs that created realistic dinosaurs for the movie Jurassic Park, NASDAQ’s networked financial markets, and the inventory control system at Mervyn’s, the well-known department store. Why Mervyn’s? Why inventory control?

Mervyn’s executives asked themselves the same questions as they mounted the stage to accept their award. The answer is not simply that their Planned Store Inventory system (PSI) is an interesting and useful piece of software, that adds tens of millions of dollars a year to the company’s profits. The real achievement is that Mervyn’s has worked out a new way to build systems that, by making the inevitable risks of innovation more manageable, can speed IT-led innovation throughout a business—any business.

The accomplishment of PSI

From its headquarters in Hayward, California, Mervyn’s manages a chain of nearly 300 department stores stretched across America, selling over $4...