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