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Written by Cecilia Chee, Singapore   
Tuesday, 04 October 2011 13:50

 

 

AdvantageofStrategic  Business Weapons (SBW)

 

Having seen information technology from both sides—business and IT—I have often wondered whether IT offers any competitive advantage by itself and if it is truly a strategic weapon. Normally, CIOs and IT heads would like to believe that IT is a strategic weapon and offers competitive advantage, but I hesitate to say this emphatically.

During initial developments of IT in India, it was primarily used for computerizing payrolls and financial accounting functions. It was looked more as a weapon to reduce manpower. Latter developments resulted in the creation of printed invoices but it really offered no advantage to organizations in the marketplace. Development of ERP and its implementation in organizations offered some ‘aura’ to the IT department. However, more often than not, it added problems to the organizations, instead of providing solutions. Top management grumbling about the white elephant called ERP and CFOs questioning about the cost benefit analysis of ERP, was a normal phenomenon in organizations. Today, we have come a long way and almost every organization has their basic organizational functions completely computerized.

The business scenario has changed dramatically during the past 15 years in India. Global pressures and FII entry in stock markets in the last five years has changed it further. Manufacturing license or manufacturing ability is no longer a competitive advantage. National boundaries have melted. Free flow of funds and almost instantaneous flow of information has resulted in opportunities as well as problems. It is the ability of the management to provide for the ever-changing needs of diverse customers in the marketplace and the innovations that give a competitive advantage. In my opinion, it is the ability and willingness of the management to take advantage of the information from ERP and business intelligence systems and their agility in doing so that offers competitive advantage.

While in theory, we would all like to believe that the IT budget should be spent for developing software which will help in creating business value, help in innovation, in new business developments, in reality, for most businesses, the IT budget is largely spent on ‘keeping the lights on’ i.e. for infrastructure—for transaction processing, and for some MIS. Often only a minuscule budget is available for new developments or innovation. Therefore IT offering competitive advantage for innovativeness is a myth.

I have often found that top management takes its strategic decisions based on information, which is not available within the ERP or BIW or legacy systems of the company. Substantially large portion of the information, which is useful for top management for decision making is unfortunately still out of the bounds of ERP and BIW. I have been involved in a few acquisitions (prior to my taking up the mantle of a CIO), and in all these cases, markets, customers, raw material advantages and financial positions, were the factors for decision-making. Strength or weakness of IT systems was not even considered as an important element for acquisition. One would argue that are financial position, status of customers, product positions not important information? Of course, this is information, but does the CIO provide this information? Probably not, I am therefore hesitant to call IT, by itself as a strategic weapon.

Everything is not negative. There are many cases in retail, insurance, banking, where the basic survival of the organization would depend upon strength of information technology systems. In these industries, IT definitely offers competitive advantage.

In addition to commercial networks, let us look at political networks, social networks, and now very importantly, religious networks. These networks are often transnational and the strength of these networks is dependent on perceived threats, as well as emotional bondage between the constituents. In many cases, the free flow of genuine or doctored information and even the restriction of information results into flow of funds. Undoubtedly, information is used as a strategic weapon, providing competitive advantage to achieve the ulterior motives of the leaders of these networks. Information gathered through photographic images of crop conditions by satellites is often used by nations to gain competitive advantage on pricing policies.

Use of information technology in micro-financing to transform the social fabric in Bangladesh by Nobel laureate Professor Yunus is well-known. Similar applications in India by Hindustan Unilever (Project Shakti) or by ITC or fertilizer companies such as Nagarjuna and Tata Chemicals, exploit information technology to gain competitive advantage in rural India.

The phenomenal expansion of mobile telephony in India and its convergence with information technology has opened new frontiers for organizations. Internet availability on mobile phones has helped corporates reach customers, far and wide, at low cost points and information technology is offering a competitive edge to companies which are making investments in these areas.

I would like to end this by stating—it is not the extent of information technology systems in the organization, nor it is the ability of the information technology team but it is the aptitude, agility of the top management to exploit the information that determines the competitive advantage of IT to the organization.

 

Last Updated on Wednesday, 05 October 2011 13:36
 
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