Carlos Leyva

Silicon Stories

Chapter 2: Competitive Advantage

Simply Profound

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The beautiful thing about Michael Porter’s analysis is that it is both profound and easy to understand at the same time. There are only two sources of competitive advantage:

That’s it. There is another interesting variation, however. Do one or the other within a specific industry segment.

So, which activities within the value chain should you focus your scarce information technology resources on? Focus on a limited set of activities that you believe will produce the desired advantage. You don’t have the money or the time to focus on anything else. This is basic b-school stuff, although you wouldn’t have known it by the craziness that went on during the dot-com implosion. Information technologies have the bewitching quality, when well executed, to allow the pursuit of both (i.e. low cost provider and differentiation) simultaneously, yielding advantages that have been rare to non-existent heretofore.

I will make a concerted effort to link strategy with implementation (the “what” and the “how”). This disconnect is a root cause of catastrophic information technology failures. Almost always, the players on both sides of the equation are disparate functional organizations and, like the U.K. and the U.S., are separated by a common language.

The dichotomy results in the Blame Game process pattern (see next chapter). Often the resolution of this dichotomy is referred to as aligning the business strategy with the technology strategy. Although this phrase sounds profound, it is much too broad and vague to be useful. The alignment must happen at a more granular level (i.e. the activity or process) to be actionable.

Again to borrow from ‘da man (M.P.):

Activities provide the bridge between strategy and implementation. When strategy was defined in terms of broad positioning concepts, a clear separation between strategy and structure was meaningful and useful. “What” and “how” were comparatively distinct. Armed with the recognition that the firm is a collection of discrete activities, however, previously common distinctions between strategy, tactics, and organization blur. Strategy becomes the particular array of activities aligned to deliver a particular mix of value to a chosen array of customers.

Specific activities within the value chain must become the targets of our information technology efforts.

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