Carlos Leyva

Silicon Stories

Chapter 2: Competitive Advantage

Michael (Porter) Is Still ?Da Man

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Competitive Advantage is an activity-based theory of the firm. To compete in any industry, companies must perform a wide array of discrete activities, such as processing orders, calling on customers, assembling products, and training employees. Activities, narrower than traditional functions, such as marketing or R&D, are what generate cost and create value for the buyer; they are the basic units of competitive advantage.

I will attempt to highlight how information technologies can impact these activities in a manner resulting in distinct advantages. Porter’s concept of activities is virtually synonymous with Michael Hammer’s concept of process, as brilliantly put forth in Reengineering the Corporation . This booked rocked the business world when it was first released in 1994. It kicked off one of the largest monetary windfalls that the consulting industry has known in recent history.

Many would argue that the revolution failed. Certainly there were more than a few high profile failed projects to point to. But the same could be said about the Quality Movement, SAP, CRM, the Web, etc. The reason for most of these failures has more to do with our inability, from an organizational perspective, to adequately handle complexity and chaos than with the soundness of the underlying ideas and business premises.

The Usual Suspects Revisited

Another reason why these quasi-religious movements fail is because the usual suspects (and their poorer first and second cousins) pitch the “idea du jour” as if it were the Holy Grail. The search for the Holy Grail, and the implementation of the wisdom derived from it, always costs millions of dollars, involves a small army of people, requires a program, and is strategic to the survival of your enterprise. Nothing short of a complete overhaul will do. Talk about making mechanics and lawyers appear charitable.

However distasteful the results, we should be careful not to throw out the baby with the bath water. Much of what the business press subsequently labels as fads, are actually important pieces of the puzzle. Put together enough pieces and perhaps you will gain some insights into the big picture.

The danger lies in simplistic thinking. There are no silver bullets. Implement every one, or any one of these programs, and the results are almost guaranteed to produce anything but competitive advantage. Why is that? Because it seems obvious to me, to the point of absurdity, that a sustainable competitive advantage cannot be derived from something that your competitors can readily implement.

That is not to say there aren’t good reasons to implement these solutions. If you had 30-year-old accounting systems, then a SAP implementation probably made sense. If your “customer facing” processes and systems are outdated, then by all means, develop an ROI for a CRM implementation. Just don’t be conned into believing that you are going to gain a competitive advantage. One could make a strong argument that these solutions are part of the cost of doing business, and nothing more. In order to derive a competitive advantage, you will need to add your own secret sauce, perhaps using these solutions as a launch pad.

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