Information Technology in Context

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One of my pet peeves is to go to a conference and hear how the group’s functional area is what makes a business run. I’ve heard various professions make the statement when, in fact, it is the careful blending of people, technology and processes that create an exceptional organization. IT is no different. The bottom line is that firms do not exist in order to maximize IT investments. They exist to maximize returns on equity.

Technology is not a long-term differentiator from a direct product or service side. It is not about who has the latest technology, but rather about who has the most efficient solutions. IT is a process-enabling function whose impacts must be considered within the context of a larger system.

By “process enabling,” I specifically refer to the use of information technology to streamline communications, enforce business rules, manage knowledge, etc. IT can either make existing processes more efficient or enable processes that hitherto were impossible if attempted manually or with archaic technology. The scope of enablement includes internal functional areas as well as the external value chain comprised of vendors and customers.

When it comes to competitive advantage, IT’s process-enabling capabilities have a limited life. Yes, we are seeing attempts at patenting processes, but in general, IT-enabled process improvements are short-lived because other groups see the success of an idea and then either wholesale copy the idea or improve upon it during the adoption process. The following model provides a framework relating adoption and competitive advantage over time:

(See graphic at bottom of column.)

1. Competitive Disadvantage

When a new and successful technology-enabled process exists in the market that is giving competitors an advantage and the firm has not yet adopted it, then the organization is at a competitive disadvantage. It is very important to note that adoption of a technology does not automatically guarantee success. Unless there are adequate processes, training, support and so on, a new technology can create a disadvantage.

Bear in mind that when a system implementation fails, it typically is for reasons other than the technology or functionality. Furthermore, just because a new enabler exists, one must question the total costs and total value that it brings to the organization.

2. Competitive Advantage

If an organization is the creator of a new technology-enabled process that creates positive differentiation in the eyes of customers and/or vendors, then it has an advantage.

For that matter, relatively early adoption allows for an advantage with lower costs but a shorter differentiator life as more and more competitors begin to adopt the technology. Firms routinely decide whether to incur the costs of development in order to be first-movers or to instead be technology followers.

Regardless, for a period of time, technology-enabled processes can create an advantage. The most important point is that the advantage will be temporary and that leads us to the next area.

3. Competitive Parity

Over time, as more competitors adopt a technology-enabled process, the advantage enjoyed by the early movers dissipates. Unless there are artificial barriers, such as patents or other limiting mechanisms, technology moves through this life cycle.

The greater a positive differentiator is, the greater the desire to mimic, or adopt, the same technology will be among competitive organizations. This adoption will shift the differentiator from being an advantage to being one of parity.

In other words, in order to compete and be on the same level, competitors must adopt the technology. The technology is no longer a differentiator as everyone has it. The technology has become a necessity to adequately compete — a cost of doing business. Next, another process comes along and the cycle begins again.

Long-term Competitive Advantage

What does give long-term competitive advantage? In the long run, the abilities to continuously learn and evolve are the key elements. Technology is a means of accomplishing objectives, not an end in of itself. We don’t “win” by having the best computer systems or the best whatever, we win by providing the most efficient solutions to our customers that both meet their expectations while maximizing the organization’s return on equity over time.

Again, let me stress that much of the time, it isn’t the technology that matters. It’s how the technology is used, and this is the important point. The question isn’t, “Do we use the latest technology?” but one of “What’s the right tool to create a solution bearing in mind the current architecture, support, training and so on?”

All technology must be balanced with having the correct processes and people in order to succeed. Over time, the benefits of a given technology-enabled process will fade as competitors develop, or adopt, similar process enablers. Thus, firms that wish to use technology as a competitive weapon must be prepared to continuously invest, both time and resources, in order to maintain a leadership position.

George Spafford is a project management consultant and instructor who lives in Saint Joseph, Mich. He has more than 10 years of experience in the fields of information technology and project management. Spafford is an IT director with a $100 million printing company and previously was with KPMG Consulting and Lionbridge, a globalization services firm. His areas of personal interest include project management, software engineering, and organizational learning. He can be reached at gspaff@hotmail.com.