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August 11, 2005

Discovering and Defending Competitive Advantage with Technology

Bob Evans at InformationWeek posed a conference theme of "Business Process Innovation: Using Technology To Redefine and Reinvigorate Competitive Advantage." As Evans reflects, the current resurgence of business attention to managing business process improvement points to breakthrough champions such as Wal-Mart (and Dell), who present the prospect that IT-based superiority is the killer strategy of the day. By describing "what they do with IT" as business process, the call goes out to get business process innovation underway. Bob asks his readers for a reality check on this theme.

Taking him up on his offer, I wonder and ask might this theme be the right incentive pointing at the wrong problem?

Let's look at a company's business processes -- using the analogy that companies are like athletes. Speaking candidly, when we say "a company" we are talking about its leaders and managers. By analogy, leaders represent the athlete's knowledge of the possibilities of how to play the game, and managers are like the trained muscles of the athlete. Processes are simply ideas conceived and enacted in the heat of the moment of play, but rarely are they sustainably effective except when they originate in *both* the concept and the training of how to play. In other words, business processes are a company's "technique"... Yes, it can be memorized, rehearsed, reused and optimized, but technique is not automatically the same as advantage.

Actual competitive advantage originates in having the competency to exploit opportunities anticipated by the understanding of how the game can be played. Otherwise, advantage is just a theory.

Athletes who rely on competency win more often and longer than those who rely on something else. And competent athletes with a better understanding of the game realize that they have to keep refreshing and expanding their competency, to exploit the opportunity that can be envisioned in, and that can develop during, the game. By implication, at least, one's competitive advantage exists because your competitors have an inferior understanding of the game, an inferior preparation for the game's opportunities, or a mix of the two defects.

Unless your technique forces your opponent into those deficiencies, it is rather not likely that you have advantage simply because you have better technique. So, changing technique is not particularly useful unless there is already an expansion or shift in one's understanding of the game. (This understanding is what Brad Gilbert gives Nick Bolleteri's tennis geniuses to make them better than they already were.)

If all things other than technique were already equal between competitors, my claim about technique's limitation might be false. But since all other things are usually NOT equal, most companies do not have to rely on innovation of technique to establish or renew competitive advantage. Instead, technique for most companies is about survival, not advantage, and to get an advantage they need a privileged opportunity. The question for them is how to get that opportunity.

More likely, technique creates that opportunity when the opponent makes a mistake. But whenever it's too difficult to make the business opponent make a mistake, we need something else to "create" the opportunity -- such as vision or fitness. In this light, we want technology to increase our understanding of how the game can be played and/or increase our effectiveness in exploiting opportunities born of that understanding. But that is not business process innovation -- that's architecture.

So, to directly explain-- not by analogy -- this view of competitive advantage through technology , let's look at the details, beginning with the idea of "competitive".

By definition, the occasion of "competition" exists because there is a limitation on the availability of an opportunity. This still allows two different perspectives on the competition: one, who gets the greatest availability; and two, who gets the most out of the effort. This duality is why "agility" and "performance" are so strongly linked in the innovation of management itself, where formerly "strength" and performance were the focus. But let's assume that we're always talking about the condition of being competitive, not the results of the competition. Here, we'd want technology to support our new focus on agility.

Next let's work with the idea of "advantage". This idea has to mean "having the higher probability of gaining a decisive slice of the opportunity's availability." There are various ways that this might occur. And let's say that "a higher probability" is a relative position: then there are various interesting positions. Using technology to approach them makes sense mainly to the extent that those ways have already been identified. But the additional question is, how might technology help us to discover positions that give us an advantage?

Next there is the understanding of the "opportunity" itself and what it depends on. For example:

- If the opportunity originates in being "the timeliest provider of the most urgent value",

- and if the hold on that opportunity is sustained by being the most capable renovator of the value provision,

- and if technology is the dominant critical success factor in both cases,

then a company's key assumption about the technology is that it "actualizes" the business opportunity by enabling dynamic functional alignment with the opportunity.

In sum, this shows technology contributing to "realizing" the availability of business opportunity (i.e., getting competitive advantage) in four ways or levels, which logically progress (from bottom to top) as:

- persistence
- alignment
- enablement
- discovery
These levels, which are objectives of technology utilization, respectively reflect (bottom up) a company's options, capabilities, relevance and presence in the game.

Any given company may be weaker or stronger at particular levels in this setup, but without significant episodes wherein current-state accomplishment is satisfactory at all levels simultaneously, there is little reason to expect that competitive advantage will materialize long enough to take advantage of it. The secret to the success of the Wal-Marts and the Dells is not the use of technology per se but the awareness of the competency needed to make the difference.

Posted by Malcolm Ryder at August 11, 2005 9:18 AM

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