Using Technology for Competitive Advantage

Fierce competition marked Kansas City's mortician industry in the 1890s. Smith, the leader in the market, had a major competitive advantage in that his sister controlled the local telephone switchboard. Not surprisingly, she put through panic requests for an undertaker to her brother. Smith's competitor, a man named Strowger, saw an opportunity. He invented the automatic telephone exchange, and with its adoption, eliminated Smith's competitive edge. This story is an admittedly extreme example of using technology to change the competitive paradigm, but it illustrates the impact of technology which is every bit as profound today as it was in the late 19th century. One thing is very different as we approach the 21st century. Unlike the 1890s or even the 1950s, many of our technologically intense industries are mature. The role technology must play for strategic or competitive advantage is accordingly very different than was the case when cars, chemicals and communications were emerging businesses. (Mature industries have growth rates that approximate GNP growth. Embryonic and growth industries are expanding at multiples of GNP growth while aging industries are growing significantly less than GNP or declining.) To use technology for competitive advantage in any industry, but particularly in mature and aging industries, companies must be explicit about the role of technology in their strategies. Once technology's role is made explicit, then it is much easier to improve how technology is used, resourced and managed to achieve desired strategic objectives. Being explicit requires answers to four basic questions for any business. 1. What is the basis of competition? It must be clear whether technology is the critical determinant or just one of several important factors for success. 2. What technologies must you master to compete? Critical product, process, applications, and systems technologies must be identified. 3. How competitive are you in these technologies? Here's where good competitive intelligence and benchmarking pay dividends. 4. What is your technology strategy? A company must choose to be a pioneer, a fast follower, form an alliance or partnership, or a combination of the above. Every company or major division of a company has a technology strategy, but it is often implicit--not explicit--and must be deduced from management decisions and resource allocation priorities over time. The chief executive and each business and technology manager must reflect in his or her plan how technology is expected to contribute to competitive advantage, growth and profitability. The technology effort can then be resourced and measured against these goals. Achieving Competitive Impact As illustrated in Figure 1, technology has competitive impact in two primary ways: market advantage through differentiation or value added, and cost advantage through improved overall system economics. In both cases, the focus is on benefits for the customer. The Table on the next page provides a representative list of the performance parameters which technology can improve and the technological resources that can provide such benefits. Achieving differentiation or value-added for customers in embryonic and growth industries results primarily from pioneering new products that address critical needs. A typical example is a new pharmaceutical that alleviates or cures a disease. In contrast, achieving differentiation or value added in industries which are mature or even starting to age is a very different challenge. In embryonic and growth industries, technology frequently drives the strategy, while for maturing businesses technology must be an enabling resource for successful manufacturing, marketing and customer service. Success in using technology for competitive advantage requires a shift in the role of technology and the technology spending profile as the business matures (1). …