Competitive advantage may be defined as a condition which enables a company to operate in a more efficient or otherwise higher quality manner than the companies it competes with, and which results in benefits accruing to that company. In today`s market, IT is largely regarded as the panacea that has the ability to confer competitive advantage to companies, while also having the potential to transform entire societies and economies.
But there are those who disagree.
In his controversial article, "IT Doesn`t Matter" (published in the Harvard Business Review in May 2003), Nicholas Carr states: "Information technology is best understood as the latest in a series of broadly adopted technologies that have reshaped industry over the past two centuries - from the railroad to the telegraph to the electric generator."
He observes that the evolution of IT in business follows a pattern remarkably similar to that of earlier technologies such as railroads and electric power: as they are being built into the infrastructure of commerce, these "infrastructural technologies" make it possible for early adopters and forward-looking companies to gain strong competitive advantages. But as their availability increases and their cost decreases, they become commoditised.
Carr`s point here is that IT, much like preceding technologies, conferred competitive advantage to companies only when it was special and unusual. Once it became ubiquitous, however, it became a mere commodity, a cost to be managed rather than an opportunity for strategic competitive advantage.
From a strategic standpoint, he says, IT has become invisible. While the infrastructure it provides is essential, it no longer enables companies to distinguish themselves in a meaningful way from their competitors. "Essential to competitiveness but inconsequential to strategic advantage: that`s why IT is best viewed (and managed) as a commodity," Carr says.
The parity cycle
The past decade at least has proved to us that what is leading-edge today is commoditised tomorrow.
Victoria Vaksman, MD, Tilos Business Solutions
The past decade at least has proved to us that what is leading-edge today is commoditised tomorrow. This level of commoditisation cannot be sustained. What results is what is known as the competitive advantage parity cycle. Over time, as more competitors adopt a technology - a necessity to adequately compete - the advantage benefiting the early adopters dissipates. More and more competing companies implement the technology, which thus ceases to be a differentiator, and becomes merely one of the costs of doing business.
What this shows us is that competitive advantage cannot be achieved by IT alone; rather, companies can only truly achieve this by continually reinventing themselves.
Solutions as a differentiator
Exceptional organisations are typically built on a combination of people, processes and technology. To presuppose that technology is a differentiator is a grave mistake. It is not about who has the latest technology, but rather about who has the most efficient solutions.
Business process management, for example, aligns processes with an organisation`s strategic goals, incorporates the design and implementation of process architectures, establishes process measurement systems that align with organisational goals, and educates and organises managers so that they will manage processes effectively.
True competitive advantage is the consequence of the ability to react to change faster than your competitor, and then to respond better to business demands and challenges. It is a consequence of the combination of the following factors:
* Speed - companies must have the flexibility to respond rapidly to new business opportunities. An ERP system that takes up to three years to implement is thus unable to confer any kind of competitive advantage.
* Better processes - IT has the ability to streamline communications, enforce business rules, manage knowledge and provide a single view of the business. The effect of more efficient, best-practice processes impacts not only an organisation`s internal functional areas, but also its entire external value chain, comprised of vendors, partners and customers.
* Lower cost - many CIOs will attest to the fact that much of their multimillion-rand ERP investment has been rendered shelfware. The huge costs of implementing these solutions - and customising them to meet an organisation`s particular requirements - often results in failed implementations and no return on investment.
* Modularity - AMR research shows that between 1999 and Q2 2001, companies bought $55 billion in ERP and B2B software; less than half of that software was up and running in 2001. The research also shows that of the top 10 analytical software packages, 39% to 62% remains on shelves uninstalled. What companies require is the option to implement the functionality they actually need, rather than having to buy a "complete" solution that may not take their business needs into account at all.
In the long-term, competitive advantage is provided by efficient solutions that enable your organisation to meet customer demands, and not by technology alone. The capacity your organisation has to learn and evolve is key, as is the implementation of solutions that can be rapidly delivered, are modular and infinitely customisable, and implemented by people with in-depth domain expertise - people who understand your business rather than merely the technology they are selling.
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