Nothing But Value

Nothing But Value

To what extent can a CIO make a company more competitive, and hence more attractive to a shareholder, analyst, customer or suitor? Beverley Head seeks some answers

Corporations grapple with the shifting nature of competition on a daily basis. Once competitive advantage could be held in your hands - it was a better mousetrap, a richer mine, a faster car.

But today, at least in developed economies, "the whole fundamental basis of competition has shifted from tangible assets, which are easily managed on a balance sheet, to intangible assets, which are human resources and information technology and knowledge", according to Professor Mark Dodgson, director of the technology and innovations management centre at the University of Queensland. "The fundamentals of success today are about the speed of access to quality information and knowledge."

Dodgson teaches the Master of Technology Management program, which aims to demonstrate how to "harness the power of innovation" because "today's successful managers are those who can best leverage innovation and technology within their organisations". It makes for a nice marketing slogan for the course, but the fact is that a great deal of technology spending today will not deliver competitive advantage. Instead it is a competitive imperative; a better breed of ATM will not deliver a bank a competitive edge, but having the ATMs is necessary for it to compete at all.

However, there are technologies - strategic technologies - which, when meshed tightly with the business strategy and delivered effectively, can deliver competitive edge. They can make a business more attractive to shareholders, to analysts, to customers and to potential suitors.

Ultimately they can affect the competitive position of nations; but to do that the technologies cannot be purely tactical, they have to be strategic.

A report published in late 2002 by the Canada-based InfoTech Research Group found that 65 per cent of all companies with a strategic IT plan felt they were more competitive because of it. Fifteen per cent said their organisation was significantly more competitive thanks to technology.

The report, which surveyed 149 IT professionals (just 53 per cent of whom had strategic IT plans in place) in medium-sized companies in the US, Canada and the UK, found 30 per cent of US companies considered IT to be a key strategic weapon, compared to 17 per cent of UK companies and just 6 per cent of Canadians. Sadly, the report did not explore other international markets, however, it reflects some of the findings of the World Economic Forum (WEF) regarding the broad spectrum of competitiveness experienced around the world.

In a study released earlier this year, the WEF found that nations with an innovation edge, thanks to a historical clustering of technology-based industries, were more competitive than their less technological peers. It is therefore not surprising that US companies in the InfoTech study were more aware of the competitive edge offered by technology than were Canadian or British businesses.

And ultimately it is the corporations that are any nation's engines of competition. Although the WEF tracks national prosperity and competitiveness, it acknowledges that national "wealth is actually created in the microeconomic level of the economy, rooted in the sophistication of company strategies and operating practices as well as in the quality of the microeconomic business environment in which a nation's firms compete". To that end, it also produces a Microeconomic Competitiveness Index, which gives greater insight as to corporate competitiveness in different countries.

The Global Competitiveness Report for 2002-2003 rated Australia as an overachiever in regard to its GDP per capita relative to microeconomic competitiveness; but found that was largely due to a favourable business climate rather than the savviness of its corporations. Australia ranked 14th overall in the microeconomic competitiveness index; but its company operations and strategy ranking was only 19th. It managed to haul itself up to 14th position thanks to Australia's business environment being ranked as 11th best in the world.

In a report for the WEF, Harvard University's Professor Michael Porter notes that the Australian business environment ranks ahead of current company sophistication. "In some countries, such as Australia, part of the problem stems from rapid improvements in the business environment that have not yet been taken advantage of by companies who remain focused on traditional ways of competing. Efforts to improve entrepreneurship, strategic thinking, managerial practice and business education are high priorities in these countries."

Fundamental to that is technology. As the WEF notes: "Without technological progress, countries may achieve a higher standard of living for example through a higher rate of capital accumulation, but they will not be able to enjoy continuously high economic growth".

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