Competitive Advantage

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Presentation transcript:

Competitive Advantage Competitive Advantage (CA) requires the following characteristics: Rare Valuable Inimitable Grounded in the “Resource Based View” RBV of the Firm CA depends on the context

Competitive Advantage Firm Resources can only provide a CA for a limited time. CA can only be sustainable for a certain period of time Firms need to capitalize on the window of opportunity The degree of sustainability defines the extent to which a CA exists

Some Carr Comments “Best practices are built into software and replicated” “IT-transformations have all happened” “IT’s power is outstripping most of the business needs it fulfills” Ubiquity makes IT irrelevant Comparison between electricity and IT “There is no consistent correlation with IT spending and Firm Performance” Does this assertion support Carr’s basic argument or contradict it?

Retort from McFarlan & Nolan (regarding Carr) No idea what he doesn’t know Pretended to know what he didn’t Made up fuzzy logic

Generating Premium Returns on IT Investments (Weill and Aral) Portfolio Approach Successful IT portfolio techniques change the conversation from technical to strategic considerations by applying a commercial lens to IT investments The result is an allocation of IT assets that is appropriate for the company's circumstances. Underscores the importance of how organizations use technology (rather than focusing on the technology)

Generating Premium Returns on IT Investments (Weill and Aral) 4 Asset Classes Infrastructure hardware (often shared by multiple applications) Transactional cut costs and increase throughput (brokerage firm’s trading system Informational accounting, reporting, business intelligence Strategic designed for competitive advantage (enter new markets or develop, services, processes)

Generating Premium Returns on IT Investments (Weill and Aral) 4 Asset Classes Informational (17%) / Strategic (11%) Transactional (26%) Infrastructure (46%) Each Asset Class is linked to different types of Business Value Differences in specific industries are striking Financial Services: IT is mature Infrastructure/Transaction IT boosts innovation via improved efficiency Retail and Transport Industries Portfolios weight more heavily on informational assets Advantage resides in the effective use of information

IT Investments as a Portfolio (Weill and Aral)

Generating Premium Returns on IT Investments (Weill and Aral) IT Savvy Practices (Use) IT for Internal and External Communication Internet Use Digital Transactions Competencies Companywide IT Skills Top Management Involvement