Creating Business Advantage with IT

Models for Analysis Strategic Grid Analysis Industry and Competitive Analysis

Competitive Forces Industry Competitors--Rivalry Potential new entrants Threat of substitute products/services Bargaining power of suppliers Bargaining power of buyers

Using IT to Combat Competitive Forces Can IT be used to reengineer core value activities and change the basis of competition? Can IT change the nature of relationships and the balance of power among buyers and suppliers? Can IT build or reduce barriers to entry? Can IT increase or decrease switching costs? Can IT add value to existing products and services or create new ones?

Strategies for Achieving Advantage Cost Leadership Product/Service Differentiation Innovation Growth Strategies Alliance Strategies

Sustainable Competitive Advantage

Traditional Sources of Competitive Advantage Market features (e.g., focus on niches) Product features (e.g., quality, differentiation) Cost leadership better access to physical resources cheaper capital economies of scale efficiency of operations etc. Legal protection (e.g., tariffs, patents)

Competing Today Sustainable competitive advantage is based on what competitors cannot easily copy. The source of strategy must shift from the firm’s products and markets to the firm’s “invisible assets.” Source: H. Itami, Mobilizing Invisible Assets, HBS, 1987.

Invisible Assets People skills motivated, expert workers transformational leaders Soft Infrastructure management practices corporate culture Performance History brand image product reputation

Invisible Assets (continued) Organizational Capabilities core competencies renewal mechanisms External Relationships customer loyalty alliances with suppliers

“When every firm in an industry has access to the same technology, yet some firms make more effective use of it, ... the evidence increasingly suggests that differences in management establish competitive advantage.” [Keen & Cummins, 1994]