Whence Competitive Advantage? Resource Based Theory of the Firm

1
Whence Competitive Advantage? Resource Based
Theory of the Firm

• Prior Theories Porters Competitive Forces,
  Value Chain, Customer Resource Life Cycle models,
  et.
• Problem Sustained competitive advantage only
  comes from assets that cant be duplicated, not
  homogeneous and not mobile.
• Computer Technology, if not homogeneous, is
  certainly mobile.
• Strategic Resources are
• Valuable, Rare, Inimitable,Without Available
  Substitutes

2
IT and Competitive Advantage

• Spectacular Examples ASAP SABRE
• Porter and Millar -- Five competitive forces
• Vitale -- non-sustainability
• Clemons and Row -- Competitive necessity
• Perhaps IT cannot provide sustained competitive
  advantage!

3
Research Questions

• How can IT managers contribute to business value?
• What are impacts of new IT management practices
  on
• business value?
• How do new practices create value over time?

4
Research Design Selecting Cases
And Entering the Field
Interviews with 50 CIOs
new management practices
1-day of interviews in 12 firms
3 more days of interviews over
18 additional months in 7 firms
Generalization to Theory
5
What We Expected to Find
New IT
Management
Practices
Production
Business
Process

Value
6
What We Found
New IT
Management
Practices
Production
Business
Asset
Process

Value
Feedback Additions or Subtractions to Asset Base
7
What Makes an Asset Tough to Imitate? (ala
Dierickx and Cool)

• requiring long time to develop, or
• dependent upon unique historical conditions, or
• link to advantage not understood, or
• socially complex

8
Mgmt Practices Only Slowly
Increase Such Assets
Policies that
increase the level
of the asset
IS / User Relationship
Policies leading to
asset decay, attrition
9
Three Key IS Assets
IS Human Res.
IS Technology
IS / User

Relationship
10
IT Processes
IT Assets
Strategically Aligned Planning
Leveraging
Building
Leveraging
Fast, Low Cost Delivery
Business Value
IS Technology
IS Human Res.
Building
IS / User
Relationship

Cost Effective Operations and Support (Of
Systems That Fit Strategy)
Leveraging
Building
11
Synergies Heighten Inimitability of 3 Asset
Bundle (Interconnnectedness of asset stocks, ala
Dierickx and Cool)

• Need history of fast, cost effective, delivered
  benefits for strong relationship
• Need good infrastructure and good business
  knowledge for fast, cost effective systems
• Need strong relationship to obtain investment
  dollars to build strong infrastr.
• Need good relationship to build bus knowl.

12
Conclusions

• A new way of thinking about managing IS
• for short run value, leverage existing asset base
• for long run value, build appropriate asset base
• Potential management actions should considered in
  light of the impacts on the asset base
• Puts management of IT infrastructure in
  theoretical context.