Sunday 31 July 2011

IT dependent strategic competitive advantage

I promise this is my last page of theory for a while. Many writers and vendors use the term ‘IT value’ as a corollary for ‘competitive strategic advantage’ and assume that any benefit IT delivers an organisation is automatically strategic in nature. I thought I would dedicate this paper to defining the circumstances that give rise to ‘IT dependent strategic advantage’. The definition I like best is provided by Piccoli & Ives 2005* who define IT dependent strategic advantage as “identifiable competitive moves that depend on the use of IT to be enacted, and are designed to lead to sustained improvements in a firms competitive position”. A critical part of this definition is that the IT output must be the reason for the advantage not just an enabler (for example electricity may be critical to competitive advantage in manufacturing but it is not the source of the competitive advantage).

For a competitive advantage to be sustainable there must be barriers that make it hard for competitors to copy the company’s source of advantage. Barriers can be in a wide range of forms for example patents on designs or drug formulae’s or share options to critical staff members. The diagram below shows the relationship between competitive advantage and the barriers that develop and protect that advantage:


Response-lag drivers are features within a firm or its environment that makes it harder for a competitor to copy the strategic advantage. For example software developed in-house by a firm is much harder for competitors to copy than off the shelf software (hence Nick Carrs argument that competitive advantage is impossible to gain by using off the shelf software/IT components). Specific barriers (competitive advantage) that IT can provide are:


In summary, IT led sustainable competitive advantage is a very specialised and comparatively rare form of IT benefit. If IT is considered strategic by your organisation what barriers/advantage does it directly enable and how will you enhance and protect that advantage?  Of course IT can provide many other benefits to an organisation and these will be the focus of future posts.

* Piccoli & Ives 2005, “Review: IT-Dependent Strategic Initiatives and Sustained Competitive Advantage: A Review and Synthesis of the Literature, MIS Quarterly, Vol. 29, No. 4, p. 747-776

Sunday 24 July 2011

The business value of IT - bit of theory

What value does IT deliver to an organisation? This week I will look at the theoretical development in this area as it will provide useful background to later discussion and specific opportunities and challenges. This is a bit dry but stick with me. In March 2010 Saggi Nevo and Michael Wade* published the best explanation of how internal use of IT within an organisation provides value (or not) that I have ever read. In summary, they combine systems theory and the resource-based view of a firm to argue that IT assets when created/purchased have a potential to benefit the organisation. These IT assets are then combined with other IT and non IT organisational assets/resources and if the combination is effective they create a synergy that can provide benefits to the organisation including potentially operational improvements or strategic advantage. Note that these combinations of assets/resources can also fail to generate a synergy or even form a negative synergy that harms the organisation. The diagram below shows these relationships.



I particularly like this explanation because it shows that an IT asset does not automatically deliver any benefit. To deliver a benefit it must be used and often it needs to be used in combination with other IT assets and organisation resources such as people and processes. Also it only provides a benefit if the combined effect creates a positive synergy. The model also shows that a range of benefits are possible, strategic advantage being just one of them, it is also possible for the assets to generate nil or negative benefits to the firm.

* Nevo, S. & Wade, M, 2010, “The formation and value of IT-enabled resources: Antecedents and consequences of synergistic relationships” in MIS Quarterly, Vol. 34, No. 1, pp. 163-183

Tuesday 19 July 2011

The search for the business value of IT

A few years ago I was in an executive meeting with 7 of my peer managers, the gruff and aggressive CEO was screaming at me “David you are the CIO, prove to me what value your IT team deliver to the business, how many millions have you made for the organisation, where is the bang for my buck?” I gave a lame reply that was shouted down, the meeting did not go well. It set me on a quest to really understand the value that IT delivers to an organisation. As a part time researcher and lecturer in IT Management at the University of Technology Sydney, as a qualified accountant with a degree in economics and as a senior IT executive I have a great deal of insight into the value of IT. This weekly blog will cover a wide range of technology management issues focusing on IT value, IT benefits, IT strategic competitive advantage and the information revolution and social computing revolutions.