Competitive Advantage Competitive Advantage CA requires the following

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 Mc. Farlan & 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)

IT Investments as a Portfolio Weill and Aral MIT Sloan Mgmt Rev

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

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