Any business or company that uses Information Technology (IT) for its operation and is leveraging it for gaining competitive advantage also needs to think about other aspects of the technology. Technical advancement and innovations alone are not sufficient to make any business attractive. IT definitely plays a huge role in the highly competitive business world now than before because of the advancement in the area and various ways it can influence the rise or fall of the business.
Key IT Factors That Pose a Risk on Competitive Advantage
Any business leveraging the IT to gain competitive advantage for its business should be well equipped with proper infrastructure. IT takes part in every aspect of the business and for efficient functioning of the system, it is imperative that sufficient infrastructure is made available for the success of the organization. A company should consider embedding IT risk awareness and management in every business processes. Extensive research from the IT Policy Compliance Group has indicated that organizations reap significant rewards when they proactively address IT risks. These rewards include, on average, 17 percent higher revenue, 14 percent higher profit, and 22 percent better customer retention than competitors (csoonline.com, 2011). Businesses need to map IT risks, procedures, standards, controls and policies for IT capabilities and explore areas that need improvement.
According to Michael Porter, author of Competitive Advantage, “cyber security is something that should be on the top priority of any company that is leveraging IT to shape up its competitive advantage. Should confidential information about a business’ customers or finances or new product line fall into the hands of a competitor, such a breach of security could lead to negative consequences. Protecting confidential information is a business requirement, and in many cases also an ethical and legal requirement” (Porter, 1998). There are certain basic etiquettes that need to be followed to ensure maximum security for the data and to prevent it from falling into the wrong hands of the competitor. Restricted access, efficient disaster recovery systems, checking for vulnerabilities of the system, etc. are a few of the IT security measures that need to be followed. Additionally, implementing “reasonable” infosec processes and systems can prevent up to 88 percent of all security breaches, according to a research study conducted by the IT Compliance Group (eweek.com, 2008).
Proactive Business Leadership Support
The entire management team should be well aware of the various corporate risks and the measures required to circumvent them. Most extensive IT risk does not arise from poor technical performance or from technical personnel’s mistakes. Instead, IT risk most often arises from the failure of the business leadership to assist with oversight of IT in some logical governance framework. The internal risks of an ineffective IT department (which include risks such as overspending, failed projects, unhappy business users, low morale, poorly performing applications, downtime, and careless use of company resources) are adequate points to take a more dedicated approach to managing and empowering IT. Implementing a governance framework allows corporate leadership to ensure that IT is performing correctly the first time (Murphy, 2011).
Competitive Risk and Advantage
A dedicated IT risk management produces three competitive advantages. One, less time spent putting out fires and more time spent focusing on more productive and strategic work. Two, freeing up resources, personnel and money to focus on more important projects can be accomplished with a properly structured foundation. Three, the business is in a stronger position to evaluate risk and take on more risky or costly opportunities. Overall, implementing a well laid out plan to address various risks and threats by external factors, such as competitors, provides a great advantage for the organization (Ganesh, et al., 2010).
According to the article, How to Successfully Implement a Disaster Recovery Plan on ameinfo.com, “most major organizations are running critical enterprise applications such as Enterprise Resource Planning (ERP), Supply Chain Management (SCM), and Customer Relationship Management (CRM). These applications are integrated across the enterprise to such an extent that they touch everyone from employees and customers to suppliers and partners, and they are the backbone and life-blood of the organization” (ameinfo.com, 2003). Implementing a good disaster recovery plan is highly imperative to ensure business continuity. However, one of the biggest challenges is convincing business leaders to recognize the need and fund the change.
An organization should be prepared for all forms of disasters and catastrophes and have a disaster recovery plan in place that will allow the system should function normally under any of these circumstances. This alone will provide a huge competitive advantage and allow the organization to remain functional during potential down times. Natural or any other form of disaster is something that cannot be predicted and the company should be well prepared to deal with any untoward incidents. Any business utilizing IT systems should have proper backup and restoration methods to reset the system in case of emergencies.
Key IT Factors That Support Competitive Advantage
Easy Availability of Information
There are three reasons technology has a profound impact on business research, particularly on marketing: First, technology changes the way marketing managers do their job. Second, these changes lead to major adjustments in the areas that are important to study. And third, technology provides new ways of doing research. The most important result of technological advance is the growing impact of IT and the increasing importance of service and relationships in the economy. Future improvements in marketing are likely to build from developments in technology and relating advancements in communicating, storing, and processing information about customers (sciencedirect.com).
Advancements in IT make it possible for any business to easily access information about various aspects of the company. Moreover, access to the internet has made it possible for any information to be easily accessible to anyone sitting even halfway across the globe. Information about different suppliers, target audience for the business, competitors in the market, public opinions are easily accessed through the World Wide Web and, if properly researched and utilized, provide a competitive advantage for the company.
Knowledge About the Competitor
It is imperative for the success of any business to be knowledgeable about their competitors. Technology allows a company to gain access to competitor information easily thus providing the company a competitive advantage. An important contribution to a company’s success is to have as much knowledge about the competitor, their products and how they do business. Having this knowledge and securing their own trade secrets will allow a business to maintain the advantage over their competitors and be able to adapt to the changes in the market while being well prepared to address them.
IT has made it possible to increase the horizon of the business. Even a local business has the possibility of expanding its horizon to national or international levels with the proper IT tools. Online communication and social networking make it possible for a business to expand to a global level thus allowing them to tap in to a wider customer and supplier bases while giving them the advantage over competitors who have not yet expanded internationally.
Every company has risk. This should be considered a good thing because no risk equals no reward. It is not the fact that the business has risk or even how the organization manages the risk that matters. It is how the company turns risk into opportunity and competitive advantage that makes the difference. How quickly a business can identify current and future risk points and how they respond to them contributes greatly to their success. In fact, risk management is becoming a crucial aspect of how well a company executes, and business that excel at it have found a newfound competitive advantage.
Porter, Michael. 1998. “Competitive Advantage: Creating and Sustaining Superior Performance.” 26 Dec, 2011. Free Press, 1998.
Ganesh Bhatt, et. al. 2010. “Building and Leveraging Information in Dynamic Environments.” Research v.47 n.7-8, p.341-349. 29 Dec, 2011.
Ameinfo.com. 2003. “How to Successfully Implement a Disaster Recovery Plan.” 29 Dec, 2011. .
Eweek.com. 2008. “How to Translate IT Risk Management into Competitive Advantage.” 31 Dec, 2011. .
Csoonline.com. 2011. “5 Ways to Address IT Risk for Competitive Advantage.” 30 Dec, 2011. .
Sciencedirect.com. 2006. “How Technology Advances Influence Business Research and Marketing Strategy.” 31 Dec, 2011. .