Today, it is common practice for companies to define their business as a set of internal core competencies and multiple outsourced partners. The role of IT has evolved as well, to focus on sustaining a best-in-class network of partners and suppliers, and maintaining the technical and operational flexibility to swap partners and suppliers as needed.
But there is a problem with this approach if taken too far. Many companies today value technical nimbleness over leveraging technology to enable a strategic foundation. When there is no foundation, technology becomes a commodity and cannot promote differentiation. And without differentiation, a company is offering little of real value to customers. A lack of underlying strategic differentiation is one reason why so we see so many companies appear and disappear so rapidly.
Strategic positioning is the creation of a unique value proposition and it requires defining several key aspects about a business:
While operational effectiveness is about performing the same activities better than rivals, strategy is about performing different activities, or similar activities in different ways, which together deliver a unique value to customers. What catapulted FedEx to phenomenal success was not its package-tracking technology, airline fleet or the fact that all packages went through a central processing center. It was that combined, these activities allowed FedEx to guarantee overnight delivery.
How strategic activities interrelate is also fundamental to a sustainable competitive advantage. First, it would be extremely difficult for a competitor to outperform a mix of interrelated activities. Second, bottlenecks in one activity of an interlocked set create real pressure to improve all activities in the chain. And third, it is expertise in delivering a mix of activities that creates real economic value and leads to industry dominance. Dell is the perfect example.
So, how can you leverage your own IT organization for optimal strategic advantage?
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