Type: Process Essays
Sample donated: Stacey Little
Last updated: September 26, 2019
The first person who pronounces the words “ITdoesn’t matter” is Nicolas Carr and there were many attacks later for hisaction. In his article of Harvard Business Review he denies InformationTechnology as a competitive advantage for the business. Nicolas Carr statesthat the Information Technology strategic importance has decreased. Accordingto him all company functions depend on IT like the business operations andcustomer services. IT has become a basis of every business in order to operateand also a significant part of the human being today.
It is ascertainedmathematically that in 2016 people have spend 2.04 trillion dollars for ITwhich shows how important is that industry for the world. Thirty five years agoall the old machines like typewriters and calculators have been changed bycomputers. Can we say that IT gives a strategic value of the business to gaincompetitive edge? IT is ubiquitous technology almost used in every companywhich brings us to the conclusion that it brings excessive strategic value. Isit true? What can be the real reason certain resource to bring strategicimportance for a company and to be a basis for competitive advantage is not theubiquity of certain resource but its scarcity. If you have a business you cangain competitive advantage over your competitors on the market when you produceor have something that your rivals can’t do or they are unable to produce.Nowadays we are witnesses of the developing technologies and the basis for IToperations like data storage, data processing, and data transport areaccessible for every business at reasonable prices.
When all these factors arecompiled together respectively they bring to the transformation of IT from astrategic resource for competitive advantage to a commodity factor ofproduction in order our business to operate. All factors are becoming anunseparable cost for contemporary business and when they are paid from all theplayers in the business they do not contribute a distinction to any firm. Withsimple words in an early stages those companies who implemented IT, they couldget advantage but nowadays it cannot provide these advantages anymore.Example for justifying his proofNicolas Car gives in his article for inventions that were created in the pastlike the steam engine, the telegraph, the telephone and the electric generatorfor a certain period they have given its companies opportunities toforward-thinking that they can achieve competitive advantage. Due to theincreased usage and cost reduction all these inventions have become ubiquitousover the time which transformed them from advantage edge to commodity inputs.And the same transformation is appearing today with the information technologywhich is profound.
With those examples Nicolas Carr wants toexplain us that with the reduction of price of IT functionality has removedprobably the most important barrier to competitors. And the reaction of thatshould be great revision of the strategy in IT investment and management. Certainly Nicolas Carr was muchcriticized for his words and one of the first people who was against his theorywas Bill Gates who in a speech in front of American CEOs said that ‘Whensomebody says… IT doesn’t matter, they must be saying that with all thisinformation flow, we have either achieved a limit where it’s just perfect,everybody sees exactly what they want, or we’ve gotten to a point where it simplycan’t be improved – and that’s where we’d object very strenuously’ Sad, buttrue ‘IT doesn’t matter anymore’ John Naughton (May 30 2004) Another opponent of Carr is the web innovatorMarc Andersen who argues that ‘software is eating the world,’. A Mackinsey ViewOn..Joe Wainman (May 17, 2013) Vrio framework Can a company achieve competitiveadvantage due to usage of Information Technology? We will explain it throughthe VRIO framework which is a tool that is used to analyze firm’s internalresources and capabilities.
With that tool for appraisal we can identify if acertain resource can bring sustainable competitive advantage. Barney, J, B.(1995) is the author of the book ‘Looking Inside the Competitive Advantage’ inwhich he explains what should be the sources which firm must own to gainsustainable competitive advantage. In his book Barney, J, B (1995) hasdescribed that company resources must be: ‘Valuable? Rare? Costly to imitate?And is a firm organized to capture the value of the resources? If a companyowns a resource or capability which allows it to fulfill all these requirementsthis resource can bring sustainable competitive advantage.When we analyze InformationTechnology with VRIO analysis we find out that it cannot contribute for sustainablecompetitive advantage directly for an organization because this resource is notscarce but ubiquitous and it is not hard to be replicated. With the competitionnowadays among the big companies which drops the prices IT is not costly to beimitated.
Resource-based view The resource-based view is anotherapproach through which we can stipulate how to achieve competitive advantage.The defenders of the theory say that there is higher possibility to achievecompetitive advantage and higher organizational performance with theapplication of tangible and intangible resources when managing theorganization. If the organization wants to keep sustainable competitiveadvantage, the quality of the resources it should posses are Heterogeneous andImmobile.
Barney (1991) said that the resources which are valuable should behard to be copied or imitated. If all these requirements are fulfilled, theorganization may achieve competitive advantage. In their works Crook et al(2008) have confirmed with undisputed evidences which sustain the resourcebased theory. The resource-based theory is also utilized in information systemresearch according to a research of Wade and Hulland (2004). They aredifferentiated between resources which are separated into assets and capabilities.As capabilities we can define skillful abilities and processes oradministrative abilities like system evolution or consolidation while inopposition for assets we can specify all the tangible or intangible assetswhich can help to the organization to utilize in its operations for developing,creating or producing its particular products for the market. In theinvestigation of Wade and Hulland 2004 the resources are identified to servethe same way as the features which are used in the Information Systems.
Meta et al. talk about fourInformation Technology resources which are capital requirements, technical ITskill, proprietary technology and the last one is managerial IT skill. As aresult they come to a conclusion that only managerial IT skill the only waythrough which a firm can gain competitive advantage through the resource-basedtheory. Qi et al notice that firm should invest enormous efforts and time togain skills so as to get competitive IT resources. This can bring us to theconclusion that IT can become a resource of competitive advantage. These fourtheories we already counted in the paragraph bring significant and practicalvalue to explore how much the IT influence over competitive advantage.Unfortunately each theory is concentrated over one aspect connected to IT’srole and there is not enough studies which are clearly focused on the linkageamong the theories.
Soh’s process model offers a way how to create businessvalue and also a guidance how to achieve sustainable competitive advantage. Inthat model the important fact to mention is that IT capability is havingsignificant role in the ‘IT conversion process’ and ‘IT use process’.Significant role is having ITcapabilities because they are deployed into combination with other resources.They are tightly connected with the history , culture and experience of theorganisations and all these components are difficult to be duplicated andcopied by the rivals on the market and they are good fundament for organizationto obtain competitive advantage. The strong capabilities of IT owned by firmsdo not only increase the efficiency of the investments in IT but they turn intoIT resources. This helps firm’s resources to unify with its complementaryresources and brings to improved performance respectively to a sustainablecompetitive advantage.