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How Can E-business Provide a Competitive Advantage?"
When Michael Porter wrote Competitive Advantage in 1985, there was no commercial Internet. But today, if you do a Yahoo! search for the phrase "competitive advantage and the Internet," you'll turn up a list of more than 1.2 million entries.
Talk to senior IT strategists about how they're defining (or, often, redefining) competitive advantage from their e-business initiatives, and you can probably boil it down to four words: Speed, cost, customers and process.
Speed: "In e-business, there are two currencies: money and time," says Henry Chesbrough, executive director of the Center for Technology Strategy and Management at the University of California, Berkeley. "Time is the biggest leverage point today when it comes to getting ahead and staying ahead of the competition, because getting to your cash more quickly allows you to make more money off the same margin."
One CIO who had a front-row seat a few years ago in Cisco Systems Inc.'s renowned e-business program is John Bruno, head of Cisco's global IT infrastructure organization and now SVP for business development and CIO at Symbol Technologies Inc. in Holtsville, N.Y. "At Cisco, time was currency," he says. "We could waste nothing but time. We would have [aggressively embraced e-business] even if it had cost us more, because it allowed us to be faster than our competitors."
"As CIOs, we need to support the business units in helping customers and partners get in and out quickly with what they need," notes Mark Sklenar, senior vice president and CIO of Underwriters Laboratories Inc. in Northbrook, Ill. "Speed, speed, speedit's everything."
Cost: When it comes to getting out in front of the competition, reducing costs at a time when consumers and businesses alike are increasingly sophisticated and demanding about prices is an essential ingredient in gaining competitive advantage. Says Berkeley's Chesbrough: "Today, the top priority of the CIO is to take cost out of the current business processes via e-business. That creates credibility for CIOs and smoothes the way for them to take the lead on projects that drive revenue and take market share."
"In an industry like ours, it's still about selling a lot of stuff at low margins," says Guy Abramo, executive vice president and chief strategy and information officer of computer-product distributor Ingram Micro Inc., in Santa Ana, Calif. "You need to find cost-effective ways to serve the 'micro needs' of your customers, and do so better than your competitors."
Customers: Companies in all industries need to become more customer-centric, and most companies' e-business initiatives put that at or near the top of their list of goals. Many senior IT execs are accomplishing that goal by letting their customers do more of the work. "Customer self-service is really on the top of every company's e-business wish list," says Gary Marich, manager of applications development for paint manufacturer Sherwin-Williams Co. in Cleveland. "More and more often, customers want to be able to walk into a store, go to a kiosk, place the order and have a guy walk out with their paint. It's nice to know the guy behind the counter is there if you need him, but if there's a way to use technology to get you in and out of the store faster with what you want, why not?"
Ingram Micro's Abramo says an important element of keeping the company ahead of its competitors in an intensely competitive market segment like his is understanding what part of Ingram's value chain could actually be disaggregated and made available to customers.
"When you make available Web-based services to your customers, like order management or logistics, you completely transform your relationship from a buy/sell one to a service-based relationship," Abramo says.
"Competitive advantage could really be defined as customer entanglement," says U.L.'s Sklenar.
Process: Does a company's business process define what kind of e-business architecture is deployed, or do e-business systems redefine how companies conduct their business processes?
"A lot of CIOs, particularly since many of them have come to their jobs from the e-business world, have built far more agile architectures to take advantage of e-business and integrate it much more closely into a company's core business processes," says Ellen Kitzis, group vice president for Gartner Inc. "The smart CIOs are the ones who understand how to tightly link their e-business initiatives with their companies' business processes to get ahead."
"With e-business, you're trying to unlock process innovation," Symbol's Bruno points out. "Can we modify the business processes in order to better match the system's capabilities? If so, you can get more out of your existing infrastructure without having to reinvent the wheel.
"Otherwise," Bruno adds, "it's like putting lipstick on a pig. If all you're doing is putting Web-based GUIs on antiquated business processes, what's the point?"