How to Find Your Competitive Advantage

If a product or process allows you to differentiate from your competitors, it's "core". For Domino's Pizza, delivery is core .

As global competition invades more and more markets, established companies are fighting tougher and tougher battles against commoditization. Whether their niche is business-process outsourcing, consumer electronics or air travel, management teams are asking themselves: How can our company continue to differentiate itself from our competitors?

The short answer is, either with customer service or radically lower cost. In today's economy, both paths demand innovating with IT systems in ways the competition will find difficult to copy.

Despite the seeming obviousness of this idea, however, relatively few companies are making it happen. There is a persistent problem in the relationship between the IT department and the rest of the corporation that blocks the effective use of IT capabilities when it comes to differentiating core products and services. Allow me to suggest an approach to breaking through this barrier.

The challenge, in essence, is to align IT investment with business priorities. The problem is that businesses are remarkably foggy on what their priorities are. Ask any consultant. When consultants interview the executive team individually and ask each person what the corporation's overall strategy is, they receive many thoughtful answers. Unfortunately, these answers rarely converge. The dirty secret is that most corporations do not have a unified corporate strategy. So, in effect, we are asking IT to align with something that does not exist, and we should not be surprised when the results are poor.

Obviously, the long-term fix for this is to align the corporation around a single strategy. But that's not in IT's power to accomplish. What IT must do instead is determine the pecking order of power among the various competing corporate strategies and align itself with the most powerful first, then the second most powerful and so on. There won't be enough resources to fund everyone's strategy, so it is important to get to the most important ones first. Of course, if you are lucky enough to work for a corporation that does have a unified strategy, you can probably stop right there.

But let's say you are not so lucky. Now what? The first step is to sit down with the executive in charge of the highest-priority operation or P&L and have a heart-to-heart about the following questions: When you look at our corporation's performance in the marketplace, what companies represent our stiffest competition? (List two or three. Then answer the following questions for each competitor.)

1. What are they so good at?

2. Is our goal to equal or beat them at that?

3. Is there some other thing that we do, or could do, that they in turn would find hard to compete with?

4. Is it our plan to commit significant resources to such an activity?

Once you get those answers, find out how the executive would define:

1. your company's primary competitive differentiator today;

2. its best chance for equal or greater differentiation tomorrow; and

3. the most important business initiatives under way to create that future competitive differentiation.

Stop there. Once you have this input, thank the executive for his time and explain that you would like to think about the IT implications of this strategy and come back with a plan to maximize the value from IT investments going forward. Back in your office, gather your best and brightest around you for the following exercise, which we will call core/context analysis.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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