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7.5: Investing in IT for Competitive Advantage

  • Page ID
    9791
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    In 2008, Brynjolfsson and McAfee published a study in the Harvard Business Review on IT's role in competitive advantage, titled “Investing in the IT That Makes a Competitive Difference.” Their study confirmed that IT could play a role in competitive advantage if deployed wisely. In their study, they draw three conclusions:

    • First, the data show that IT has sharpened differences among companies instead of reducing them. This reflects that while companies have always varied widely in their ability to select, adapt, and exploit innovations, technology has accelerated and amplified these differences.
    • Second, good management matters: Highly qualified vendors, consultants, and IT departments might be necessary for the successful implementation of enterprise technologies themselves, but the real value comes from the process innovations that can now be delivered on those platforms. Fostering the right innovations and propagating them widely are executive responsibilities that can’t be delegated.
    • Finally, the competitive shakeup brought on by IT is not nearly complete, even in the IT-intensive US economy. We expect to see these altered competitive dynamics in other countries, as well, as their IT investments grow.

    Artificial Intelligence (AI)

    Let's watch this short video by The Royal Society, What is Artificial Intelligence? that explains what AI is and its role and impact in society.

    Figure \(\PageIndex{1}\): Technology with AI at its heart has the power to change the world, but what exactly is Artificial Intelligence? (The Royal Society; The Royal Society via https://youtu.be/nASDYRkbQIY)

    In the tech-driven and ever-changing business landscape, successful leveraging and implementing IT has become the solution for maintaining competitive advantage and growth. One such solution is artificial intelligence (AI). AI (or machine intelligence) is intelligence demonstrated by machines - machines' ability to operate like a human brain - to learn patterns, provide insights and even predict future occurrences based on inputted data/information. For example, AI can give companies a competitive edge in marketing by providing insights into how to market, who to market to, when, and how to market. AI offers insights that are objective and data-driven. Amazon uses AI to follow user’s behavior on their website - what type of products they buy, how long they spend on a product page, etc. The AI system quickly learns to generate tailored recommendations to each user's taste and preference based on their activity. Another advantage of AI is in cybersecurity and fraud protection. AI technologies can use user behavior data to identify and flag any activity that is out of the ordinary for any user (such as credit card use outside your home state). AI systems are very versatile in that they can handle all three types of decisions - structured, semi-structured, and unstructured.

    Global Competition

    Many companies today are operating in a global environment. In addition to multinational corporations, many companies now export or import and face competition from products created in countries where labor and other costs are low or where natural resources are abundant. Electronic commerce facilitates global trading by enabling even small companies to buy from or sell to businesses in other countries. Amazon, Netflix, Apple, Samsung, LG, and many more have customers and suppliers worldwide.

    References

    McAfee, A. and Brynjolfsson, E. 2008). Investing in the IT That Makes a Competitive Difference. Harvard Business Review. Retrieved August 16, 2020, from https://hbr.org/2008/07/investing-in-the-it-that-makes-a-competitive-difference

    The Royal Society. (2018). What is Artificial Intelligence? YouTube. [video file: 2:31 minutes] Closed Captioned.


    7.5: Investing in IT for Competitive Advantage is shared under a CC BY-NC-SA 3.0 license and was authored, remixed, and/or curated by Ly-Huong T. Pham, Tejal Desai-Naik, Laurie Hammond, & Wael Abdeljabbar.