A Gartner survey in March 2011 found that 52% of board directors believe that maintaining competitive advantage is of "extremely high importance." This led immediately to a dilemma: What is the best way to connect the many new and emerging capabilities of IT to the highest priorities of board directors and senior executives, so that they can see the impact?
It became clear shortly thereafter that asking 10 different people to define "competitive advantage" led to 10 different definitions — a challenge that clients and their colleagues also face (see Note 1 for Gartner's definition). So the analysis of competitive advantage in this report starts with a definition:
As important for our clients is how to measure competitive advantage. It is one of the two key components of corporate profitability, the other being industry structure:
In the end, Gartner's view of competitive advantage is about leadership . How does a corporation best drive to gain a leadership position from the tools, capabilities and competencies at its disposal? Readers will not see in this collection of documents a statement saying: "You must do X to be competitive." Our focus is and will continue to be: "You must do this to be the leader."
In this report, we took seriously the charter to focus on leadership, and the different documents show this. Each document examines its specific area of expertise and nets out answers to the following questions:
The answers to these two questions will make the task of connecting this research to the business issues of your corporation an easier one.
We must make one additional point before discussing the documents in this series: The concept of competitive advantage as discussed in these documents is focused on the commercial, publicly traded corporation, in which corporate earnings are the focus of value. Commercial, privately owned corporations maintain a focus on corporate cash flow, and thus, competitive advantage may have an entirely different interpretation there. Finally, the public sector and the nonprofit sector are focused on two things: their mission and their funding. Thus, the idea of competition may be an emerging concept during a time when government funding in some regions is shrinking. In any event, Gartner analysts can help guide through these different viewpoints as needed.
Following are the categories covered in this report:
The search for competitive advantage is a never-ending endeavor, and leaders examine each and every approach to ensure they will not lose position in their industries. This collection of documents features some new ways of looking at the world to gain competitive advantage. "Strategic Information Management for Competitive Advantage" provides perspectives on managing information to outperform rivals. The emergence of new ways of sharing competencies is described in "Collective Competency: When Value Chains Attack Competitive Advantage," and it will change the way companies view their core competencies in the future, as it challenges the way companies think about their strategic partnerships.
In a different vein is the subject of changing the rules of competition for an industry. This is examined in "CIO Advisory: What It Means to Change the Rules of Industry Competition." Finally, a new way to look for leading indicators as well as risk is the subject of "Using Risk-Adjusted Value Management to Close the Strategy Gap and Gain Competitive Advantage." This method improves the way a company looks for threats and opportunities so it can set up the competitive response in a timely fashion.
One main finding of this report is that what some companies would call "soft" subjects — leadership, management and culture — is in fact very difficult to do. Another finding is that, once an organization figures out how to execute the "soft" things, it has built a barrier to entry to rivals that wish to do the same thing, thus extending the life span of its competitive advantage. An example would be the hard work that the U.S. auto industry has done to outperform Japanese firms in quality since the 1970s, yet a recent ranking of auto quality by brand saw the top nine slots dominated by firms from Japan. In an age where everything supposedly can be copied easily, it turns out that some things are not, and that is the subject of these documents.
Does culture matter to competitive advantage? The answer to that is a strong "yes," which is made emphatic with solid research in "How to Deal With Cultural Differences to Achieve and Maintain Competitive Advantage." Another document related to culture is "Coherent Action Is a Competitive Advantage: How CIOs Can Help." It discusses how strategy is best enacted when an organization is focused on "coherent action," in which the action of each member of the entire organization is understood by how it relates to the strategy of the organization. Of course, by "each member," we also include the IT organization.
Within a culture, making the case for a particular investment that will translate into a competitive advantage can be very challenging, and "Communicating How Technology Leads to Competitive Advantage and Innovation" will be indispensable. This is closely followed by the ability to articulate a competitive advantage through the use of ecosystems — that work is examined in "Connecting the Dots to Gain Competitive Advantage: Articulating a Technology Ecosystem Advantage to Your Board."
We look at the role of sustainability as an organizational capability in developing competitive advantage, and the role that sustainable business systems and IT can play in that capability in "Achieving Competitive Advantage Through the Pursuit of Sustainable Business."
There is also research that hits hard on leadership. After focusing on costs for the past few years, IT organizations can still think of how to reduce and restructure their costs to gain competitive advantage. In "Dropping the Cost Floor in IT Can Lead to Competitive Advantage," organizations will find new energy, as well as contrarian thinking — just the type that helps redesign the rules of industry competition. Another related area of competitive advantage is the focus on integrating IT with operational technologies, which is examined and laid out in "Align IT and OT Investments for Competitive Advantage."
If we look more at the management vein, innovation in the organization plays a crucial role in finding as well as maintaining competitive advantage. "Balancing Centralized and Distributed Approaches to Innovation for Competitive Advantage" examines the issues surrounding how companies organize their innovation efforts. Getting to a level that builds competitive advantage is also a cultural issue. "Executive Advisory: Working Through Conflicting Priorities of the Power Triangle to Gain Competitive Advantage" examines the conflicting interests within the "Triangle of Power," and recommends ways to navigate through them.
Any discussion of competitive advantage that ignores technology is likely headed in the wrong direction. The myriad sources of advantage — relationships, capabilities, knowledge and structures — all are built on a platform of technology in some fashion. This may be through communications, advanced tools and techniques, process software, databases, and so on, including even the ubiquitous iPad. In all of these, companies clearly avoided them at their peril. In these documents, we talk about how new capabilities ahead provide the ability to gain a competitive advantage in some fashion, because they enable large-scale capabilities in an enterprise that also require large-scale cultural changes. This is called "big culture technology." Culture once again plays a role in this realm of technology, as cultures that are not able to foresee the competitive advantages discussed below will be forced to follow the rules of the leaders.
We start this review of competitive advantage through technology with a group of documents that center on "big" changes that involve culture, information and technology that will also build a barrier to entry for rivals. "Gain Competitive Advantage Through Gartner's Information-Sharing Model" makes the case for the integration of data silos across a corporation that will also require cultural alignment.
Less culturally intense but still big is making moves in how the corporation manages storage systems — the case for this is laid out in "Apply Storage Innovations to Create a Competitive Advantage." A similar argument for IT infrastructure is presented in "How Agile and Integrated IT Operations Processes Yield Competitive Advantage."
Dramatic changes in the business environment brought about by social computing and Internet-enabled social interaction have undermined the basis of many existing business models. We identify the numerous aspects of the business model where business and IT leaders would be advised to focus attention in "Delivering Competitive Advantage Through Social Computing and Disruptive Digital Business Models."
Finally, in an example to provide insight to companies in all industries, we study how value-added services in the telecommunications industry will redefine the rules of competition in "Comprehensive Value-Added Services Offer a Long-Term Competitive Edge to Telecom Carriers."
Gartner defines "competitive advantage" as a difference between a company and its competitors that matters to customers. It is one of the two key components of corporate profitability:
The Gartner view of competitive advantage is about leadership . That is, how does an organization gain a leadership position from the tools, capabilities and competencies at its disposal? The focus is not on doing something merely to be competitive, but on taking action to be the leader.
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