BUILDING DIFFERENTIATION VIA IT
“.. IT is perceived as valuable by CEOs when it increases speed to market, fosters innovation, provides real-time information, improves productivity and uses information as a competitive weapon. But CEOs are also concerned about IT inhibiting change: IT leaders who can make only incremental changes seem to be creating inertia.” - The Gartner Scenario 2006- The Current State and Future Direction of IT
Michael Porter identified two key sources of competitive advantage
· Cost leadership
· Differentiation
Traditionally businesses have chosen to adopt one or the other strategy to achieve competitive advantage; While Information Technology (IT) is positioned to enable an organization to effectively pursue both a) cost leadership and b) differentiation IT must ultimately be aligned with the core strategy of the firm
The case for cost leadership via IT is has been better understood than differentiation. IT has been able to directly support cost leadership. To date organizations have been more successful at achieving cost leadership via IT – e.g. back end process automation, process optimization, strategic sourcing and other similar strategies than;
The case for building competitive advantage with IT via ‘differentiation’ requires IT organizations innovate themselves and work closely with new product / service innovation groups. Ultimately it is information that allows a firm to create a defensible position for itself against the five forces. The extent to which IT organization can provide competitive advantage via IT depends on the organization’s ability to drive value from “Information” component of the ultimate product / service.
A number of external and internal factors (forces) enable organizations to drive value from information - among them are
1) Adoption of enabling technologies (RFID, SOA) – Process innovation using these technologies
2) Increasing digital conversion
3) Smarter end consumers
4) Integration within the business partners in the ecosystem (M&A activity)
5) Innovation within the ecosystem
The next series of blogs will develop Points of Views regarding - How can organizations achieve differentiation based competitive advantage via IT?
