The Sustainable Advantage of Information System Technology

Technology can be easy to copy, and technology alone rarely offers sustainable advantage.

Firms that leverage technology for strategic positioning use technology to create competitive assets or ways of doing business that are difficult for others to copy.

True sustainable advantage comes from assets and business models that are simultaneously valuable, rare, difficult to imitate, and for which there are no substitutes.

Technology can play a key role in creating and reinforcing assets for sustainable advantage by enabling an imitation resistant value chain; strengthening a firm’s brand; collecting useful data and establishing switching costs; creating a network effect; creating or enhancing a firm’s scale advantage; enabling product or service differentiation; and offering an opportunity to leverage unique distribution channels.

Patents are not necessarily a sure-fire path to exploiting an innovation. Many technologies and business methods can be copied, so managers should think about creating assets like the ones defined above if they wish to create truly sustainable advantage

Nothing lasts forever, and shifting technologies and market conditions can render once strong assets as obsolete.

It doesn’t matter if it’s easy for new firms to enter a market if these newcomers can’t create and leverage the assets needed to challenge incumbents.

Beware those who say “IT doesn’t matter” or refer to the “myth” of the first mover. This thinking is overly simplistic. It’s not a time or technology lead that provides sustainable competitive advantage; it’s what a firm does with its time and technology lead. If a firm can use a time and technology lead to create valuable assets that others cannot match, it may be able to sustain its advantage. But if the work done in this time and technology lead can be easily matched, then no advantage can be achieved, and a firm may be threatened by new entrants.

Industry competition and attractiveness can be described by considering the following five forces:

1. the intensity of rivalry among existing competitors,
2. the potential for new entrants to challenge incumbents,
3. the threat posed by substitute products or services
4. the power of buyers, and
5. the power of suppliers.

In markets where commodity products are sold, the Internet can increase buyer power by increasing price transparency.

The more differentiated and valuable an offering, the more the Internet shifts bargaining power to sellers. Highly differentiated sellers that can advertise their products to a wider customer base can demand higher prices.

A strategist must constantly refer to models that describe events impacting their industry, particularly as new technologies emerge.

The value chain can be used to map a firm’s efficiency and to benchmark it against rivals, revealing opportunities to use technology to improve processes and procedures. When these firms are resistant to imitation, a firm’s value chain may yield sustainable competitive advantage.

Firms may consider adopting packaged software or outsourcing value chain tasks that are not critical to a firm’s competitive advantage.

Firms should be wary of adopting software packages or outsourcing portions of its value chain that are proprietary and a source of competitive advantage.

Gallaugher, John. Information Systems: A Manager’s Guide To Harnessing Technology. 1969 . Flat World Knowledge. 18 Jan, 2010. .