Investing in IT for Competitive Advantage

Investing in IT for Competitive Advantage

Apr 11, 2012
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Resident Clarity expert Terri Sallaz shares her secrets for outperforming the competition. CompetitiveAdvantage 150x150As a SMB business leader, you are the coach of your team, managing and prioritizing assets that fortify your “unfair advantage”—the business asset that your competitors can’t match. Your unfair advantage might be a patent, distribution rights, access to resources, customer service, market share, or any number of factors that enable you to outmaneuver the other guy. For many businesses, that unfair advantage today is information technology. A study on business competitiveness reported in the Harvard Business Review demonstrates that IT investments leading to operational improvements have outperformed M&A and R&D in contributing to business competitive advantage since the mid-1990s.[i]   The mid-1990s shift occurred when IT business tools, including enterprise resource management (ERP), customer relationship management (CRM), and enterprise content management (ECM), were introduced at the enterprise level. These tools enabled businesses to gain more insight and control over operations, identify inefficiencies, and then efficiently deploy process improvements. Enterprise business productivity skyrocketed during this time.   The Harvard Business Review article, Investing in the IT That Makes a Competitive Difference, references CVS as an example of a company that utilized IT as a competitive advantage. CVS management became concerned when a 2002 customer survey demonstrated declining customer satisfaction in the highly competitive pharmaceuticals segment. Digging deeper, management discovered that 17 percent of prescription refills were being delayed due to problems with insurance processing. They determined the cause to be that the customer had often dropped off the prescriptions and left the store by the time the pharmacist attempted to process the insurance. Often, the customer had changed insurance companies, and this then had to be addressed when the customer returned to pick up their prescription. So, CVS management changed the process to address the question of current insurance up front while the customer was still in the store.   CVS employs IT to prompt and manage the customer interaction process in all its stores. Once this change in sequence was determined to alleviate the problem and improve customer satisfaction, it was immediately and uniformly deployed in all stores throughout the chain. Customer satisfaction immediately rose from 86 percent to 91 percent. This comprehensive shift could only have been achieved throughout a 4,000 chain system with an embedded CRM IT process that could be deployed immediately and that could mandate a behavior change consistently. Without IT, this change would have taken much longer, been less successful and had less impact on customer satisfaction and competitive advantage.   Small to mid-size businesses have had less access to these tools due to the high cost of acquisition until recently, with the advent of cloud computing. Now, the advantages that have historically been available only to the Fortune 1,000 are available to smaller businesses. SMBs may not have the large and disperse locations to impact, but by deploying ERP and CRM systems, they can gain better insight into operating inefficiencies, build and implement process improvements and gain unfair advantage. The operational improvements delivered through IT investments that were competitive game changers for enterprise level companies in the mid-1990s are now available to the SMB market, and those who take advantage of this new IT opportunity will reap big rewards.  

[i] Investing in the IT That Makes a Competitive Difference, Andrew McAfee and ErikBrynjolfsson, July 1, 2008