Leveraging IT for Competitive Advantage – Myth or Reality?

I have recently been researching the realm of competitive advantage and whether IT can still assist in creating or sustaining it. During my research, I came across an article published in 2003 by Nicholas Carr in the Harvard Business Review entitled “IT Doesn’t Matter“. This was subsequently printed as a book as, “Does IT Matter?”. This book sparked quite a debate as even Bill Gates, at Microsoft’s CEO Summit on May 21 2003, said, “And so when somebody says, to take the extreme quote from the Harvard Business Review article, they say IT doesn’t matter, they must be saying that with all this information flow, we’ve either achieved a limit where it’s just perfect, everybody sees exactly what they want, or we’ve gotten to a point where it simply can’t be improved – and that’s where we’d object very strenuously.

As this article and book has made so many think about whether IT can create competitive advantage or not, it seemed apt that I take the main argument of his book and add to it. The main point of the book is that IT is now a commodity, akin to energy —a commonly available infrastructure at the end of the S-curve of adoption. All firms have access to IT and any system can be instantly replicated. Therefore companies should treat IT like electrical power—make sure it works, but spend as little as possible on it. I then came across, two articles by Don Tapscott that took this debate further. To read, these articles, please click on the links – Rethinking Information Technology in Competitive Advantage – Part I: The Debate and Rethinking Information Technology and Competitive Advantage – Part II: Strategy in the Age of Collaboration

I am firmly in the camp that believes that IT can, currently, provide competitive advantage. Organisations just need to know/learn how to do it. I believe that competitive advantage through IT can be applied by utilising the following approach:

  1. Leadership and its structure
  2. Know your business
  3. Create a culture of innovation
  4. Leverage existing systems
  5. Create a tipping point for your product (Non IT)
  6. Utilising business partnerships
  7. Ubiquitous acceptance of technology

1. Leadership and its structure

To create competitive advantage, requires two leaders within an organisation to believe in the transformational capability of IT. Firstly, it requires a visionary CEO and board. This board MUST already have or appoint a board level Chief Information Officer (CIO). This is a pre-requisite as without direct board level representation, firstly, IT is not taken seriously enough and secondly, the Head of IT only receives information from the board, second hand. Secondly, a visionary CIO is required who believes that IT can create competitive advantage and is encouraged and supported by the board to make that happen.

2. Know your business

Once appointed, the CIO has to learn how the business operates and MUST proceed to spend a reasonable amount of time working within the various functions that will allow the CIO to formulate a complete understanding of the business. This MUST entail a period of working in the field and interacting with customers.

3. Create a culture of Innovation

Once an understanding of the business has been achieved, ideally the board will go about creating a culture of Innovation within the business or at least the CIO can create a culture of innovation within the IT team. Tesco and 3M have done this very successfully and have created competitive advantage not just through technology but its people as well.

4. Leverage existing systems

Sometimes, existing systems are overlooked because they have never been tapped fully for their potential. It pays dividends to look at your existing investments to ascertain whether there is something of value that could be tapped for competitive advantage. Argos, within the UK has continued to leverage existing systems for competitive advantage and in 2008 done it again. The gambling industry continues to look at their existing systems for competitive advantage, as this interview with Dr Martin Smith of GameAccount Global proves.

5.         Create a tipping point for your product (Non IT)

The tipping point for a product is that moment when an idea or social behaviour has reached a level where it “tips” and spreads like crazy. In 2004, after 18 months of loyal service, the battery in Casey Neistat’s first generation iPod died for good. At the time Apple did not have a battery replacement program, so its customer service representative explained the disappointing news that Casey’s only recourse was to purchase a new iPod. Casey and his older brother Van chose to respond in guerilla fashion to Apple’s non-solution to this obvious problem. The rest, as they say is history. Apple was eventually forced to issue replacement batteries. Another example is that of hush puppies. They became very successful selling items as a result of young people using them as fashion items and the word of mouth then spread the rest and tipped the balance in their favour. Many successful companies now employ scouts to see how they can leverage any potential, “tipping points”.

6.         Utilising business partnerships

Successful businesses leverage their IT systems through effective business partnerships with its suppliers. Both Tesco and Argos are prime examples of utilising these business partnerships that have been cultivated into very successful relationships

7.         Ubiquitous acceptance of technology

Leveraging IT for competitive advantage also requires universal acceptance by its users to succeed. Very often, users are not engaged in product development that often leads to products that are not what users want. Typical of that in recent years are products by Nokia and their telephones. Nokia have lost huge market to share to iphones, not because iphones are technically superior but because the iphones are what consumers want and need. The Nintendo Wii is another example of being in touch with people and ubiquitous acceptance of a product. Businesses need to make their technology easy to use by their end users, so acceptance happens. If we look back at all of my examples used in this article, all of them made technology easy to use for their intended markets from Tesco’s self serve tills to Argos online reservation systems allowing customers to collect at their nearest store.

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About mubbisherahmed
I am passionate about IT and its ability to deliver cost effective, value for money solutions that can enhance performance and in many cases provide competitive advantage by using a range of solutions and approaches in innovative ways.

10 Responses to Leveraging IT for Competitive Advantage – Myth or Reality?

  1. Lucy Read says:

    I have just completed an 18,000 word dissertation on Cloud computing as a source of competitive Advantage to organisations and drew upon many of the points you mentioned. So it was great to read your views.

  2. mubbisherahmed says:

    Lucy, it’s a mutual feeling and I am glad that the same points have been raised by you as well and I am also glad that you have done a complete dissertation on the subject. It will put you in good stead with employers. Keep up the good work.

  3. mubbisherahmed says:

    On a social media site, Craig M. Blad CIO / CTO / VP / Director / CISO / CSO / Information Technology Services Executive responded:

    You may want to read the Harvard Business Review article from several years ago, “Does IT Matter?” and the follow-up article (the name of which escapes me).

    The conclusion was that technology and related methods provide short-term advantage, due to the ability of competitors to instantaneously mimic / copy these innovations. True competitive advantage was found to be rooted in the strength of “the management.”

    Wayne Sadin Transformational CIO — If your business has outgrown your IT department, I can help added:

    As a long-time CIO I believe IT can create competitive advantage.

    When I was CIO of a Bank we built “the world’s first biometric ATM.” And we won an award from an Investment Bank for our e-commerce site. And we created a high-touch supermarket strategy that drew customers. And we did many other things in IT that were designed to raise our profile with investors and customers. As part of a larger strategy our IT innovations raised our profile and we sold the bank for a big gain.

    As CIO of a mortgage company we innovated around contact centers, expert systems and b2b/b2c e-business capabilities. We lowered our costs and enabled rapid, profitable growth and acquisitions. That the industry tanked doesn’t change what we accomplished.

    Even in infrastructure IT can offer advantages. A firm that adopts a modern architecture (call it blade/virtual/cloud/open source/.Net/etc.) can POTENTIALLY reduce costs and improve agility enough to undercut AND outmaneuver rivals that stuck with older architectures.

    In theory a competitor can copy anything you build. In practice, differences in organizational dynamics and the competitors’ technology platform/architecture render many theoretically-possible strategies uneconomical or unwieldy.

    Wlodek Sobczyk BIS Director at KP added further:

    Definitely IT still does matter where it drives core business activities – in banking, telecoms and the like. But it’s less obvious i.e. in FMCG. You can hardly gain the market share just thanks to technology, but you can be quite successful if you sensibly use the information available only with assistance of IT toolset – not only technology, but process oriented disciplined approach, lateral thinking etc.

    I replied to the above:

    Thank you everyone for your comments, I have found them very useful.

    Craig, I do intend to read the book, Does IT matter? and its on my wish list now.

    Wayne, I found your comments encouraging and insightful as here is someone who has been there, done it and enabled competitive advantage.

    Wlodek, interesting insight into the FMCG market, I wander if someone else could probably come forward from the FMCG sector to shed further light as well. it would be appreciated.

  4. Jay Hammer says:

    Well said Mubbisher.

    I think the underlying theme here is effective communication. The effort of driving innovation in the business by way of IT is all for naught if the functional users/managers/executives don’t really get how an IT investment will benefit their respective role.

    End user- Makes my job easier, process more simultaneous tasks in less time
    Manager- Fewer resources needed to do the same task = scale the business
    Executives- Scale the business = more revenue, market share

    It has been my experience over the last ten years (and I believe this generally applies to experts in any field) , that what may seem like common sense amongst peers in the technology space is still very foreign to the end user. It doesn’t make them incapable of understanding or embracing technology, but rather, that technology in and of itself is irrelevant [to the end user]. How they interact with it, and its value-add to their role, is what ultimately drives adoption and evangelism.

    When faced with a decision for which someone can not reasonably predict an outcome, it is human nature to revert back to what we do understand as a baseline for making a decision. In the business world, this most often translates to risk mitigation by way of cost – the board gets it, your CEO gets it, your CFO definitely gets it. Cost may be the path of least resistance for a CIO in the near term, but long-term, you’ve simply mitigating the bulk of the risk onto your organization. From this point forward [in most cases], ROI is first quantified by how little money you can spend on development/deployment, and second, how soon can you have it ready; with consideration for user acceptance and adoption taken into account only after an investment has been made; and more often than not, after a point where major revisions are not a viable option. As one CIO put it: “that’s when you realize you’re 3 years in to an SAP deployment with no end in sight, because you need a lot more money to complete the rollout, so you can mine the data and validate the ROI.”

    So, “does IT matter?” The answer is subjective to whom you are asking the question.

    IT does matter to the business, it is absolutely critical to the success of an organization in some way shape or form. IT does not matter in terms of what technology is used to derive value for/from the functional user – only that the result of the technology resolves a business problem. Most people who take a train to work do so because it’s cheaper than driving and they don’t have to sit in traffic, not because it’s the latest Shinkansen rail car with regenerative braking.

    Being able to translate IT initiatives into relevant business value beyond cost (i.e. effective communication) is the single biggest barrier between a CIO and responsibilities commensurate to the title. I have two rules of thumb when it comes to technology –

    1. If a 14 year old can’t grasp the value, most people won’t grasp the value. Present ideas in a way that get the user interacting with the concept mentally or physically (visualization, working mock-up, etc.). If you leave things subject to interpretation, people will interpret what they know, and assume much of what they don’t.

    2. Don’t eat the elephant in one bite. Scope creep will kill any project. Starting with small groups of power users, a very limited release of 1 or 2 features to resolve a specific business challenge. Not only will you gain first hand knowledge of what works and what doesn’t, if they like it, they will evangelize it virally across the enterprise, both bolstering your ROI case, and in the long run – launching the shift in perception of IT from being a cost center, to something that matters.

    • mubbisherahmed says:

      Well, Jay, thanks for the comprehensive well made points and your two rules of thumb. I really enjoyed your reply and its replies such as yours that make blogging so enjoyable for me. Thanks.

  5. Pingback: Steve Jobs (Chairman Apple) and Tim Cook’s (CEO Apple) management style and CIOs « Engaged IT for the CIO

  6. mubbisherahmed says:

    Reblogged this on Engaged IT for the CIO.

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