When can an Information System deliver (sustained) competitive advantage to organisations?

14 Nov

There are countless benefits associated with IT. However most of these benefits are also available to a firm’s competitors. Therefore how can IT give you competitive advantage is a burning question for most CIO’s. This is also a topic that has been covered very well thus far by blogger ah88rockybay.

The main advantage of information systems is that they can improve efficiency and reduce costs. However Strategy guru Michael Porter states that this is not a strategy in his 1996 article “What is Strategy”. He gives examples of firms that had no clear strategy but reduced costs, and when other firms ultimately copied their low cost model these firms they could no longer compete. Many Japanese companies in the 1980’s and 1990’s were guilty of this. Porter states “without a distinctive strategic direction, speed and flexibility lead nowhere” So what is strategy, and how can this give you competitive advantage?

Porter states “Strategy is about the creation of a unique and valuable position”. Once you have a position that your competitors cannot copy, you will have competitive advantage. Joan Rickart echoes this, “Strategy focuses on building competitive advantage by defending a unique position”.

So how does IS help a firm get this position? Firstly it is worth mentioning that when using IT and IS in strategic terms, it is higher level, customised business applications that are being used. Lower level IS systems such as technical and administrative applications will not provide competitive advantage. Using the higher level applications, firms need to innovate. This can be thier products or services, or innovate the way these products or services are deliverd to the customer.According to John Huang and Simon Liu, “new technologies present enterprises with opportunities to adapt new business models”. They go further saying “creating business advantages through customised business applications is business orientated and innovation focused”. Simply put, a firm must use IS, specific to their firm and use IS as a catalyst for innovation.

To sustain this competitive advantage, firms must continue to innovate. This is highlighted by John Seely Brown and john Hagel, who wrote in the Harvard business review about the term “Sustained Initiatives”. Over time, through continuous innovation firms can create brand loyalty and brand recognition. An example of such innovation is Apple, whose brand name is known for its innovative tablets and technology, and has enjoyed periods of supernormal profits for the last number of years.

To conclude and put the blog together, a firm must have a position on the market which its competitors cannot copy. This position is achieved through continuous innovation, which can be achieved through the clever use of IS in line with creative business practices and processes.

What do you think? Perhaps operational excellence alone is enough to gain competitive advantage?

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4 Responses to “When can an Information System deliver (sustained) competitive advantage to organisations?”

  1. thestrategicblogger November 19, 2012 at 12:37 pm #

    The “sustained initiatives” you discuss remind me a lot of “virtous cycles” duscussed by Casadesus-Mansell and Ricart (2011) especially for a firm like Apple where success breeds success thus reinforcing sustained competitive advantage. Do you believe something similar can be applied to the I.T. industry? Whereby continous investment in I.T. can breed continous competitive advantage?

    The case of fast food chain Gregg’s in the U.K. who contstantly tweak and refine their market research tools suggests that it does.
    http://businesscasestudies.co.uk/greggs/consumer-focused-product-development/introduction.html#axzz2CfgsC3Hd

  2. ah88rockybay November 19, 2012 at 7:48 pm #

    You make an excellent point agblogail with regard to innovation. It is something that I over looked when writing my previous blog. In this day and age it is very hard for organisations to come up with new ideas especially in relation to information systems in order to stay ahead of their competitors.

  3. agblogail November 20, 2012 at 10:28 am #

    Thank for your interest thestrategicblogger, I would agree with you in saying that success breeds success. I feel the entire culture of an organization has to be focused around innovation in order for continuous innovation to occur. I refer you to my most recent blog where I do a case study on WalMart, a firm renowned for it’s innovation.

  4. ADOMATI RONALD January 20, 2015 at 10:11 pm #

    Can You Help Me Give The Applications Of Competitive Advantages In Relation To Information System.

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