The corrosion of IT advantage: strategy makes a comeback

When a valuable new technology emerges, it provides forward‐looking companies with opportunities for gaining a strong and durable edge over the competition. But as the technology matures and standardizes, it loses its power to provide competitive advantage. What it doesn’t lose is its power to destroy advantage. The rail system, for example, neutralized many of the traditional locational advantages held by companies situated near ports, mine heads, and population centers. With information technology, this neutralizing effect promises to be particularly strong – and thus poses particularly difficult challenges for business executives. Because IT is so flexible in its application and so deeply entwined with business processes, it can corrode advantages across many aspects of a company’s business. Any traditional advantage in prosecuting a particular activity or process, from setting type to designing components to providing customer service, will tend to dissipate as that activity or process is automated. The fact that competitive advantage has become more difficult to sustain doesn’t make it less important, as some have argued; it makes it more important. As business processes and systems become more homogeneous, only the strategically astute companies will be able to rise above the competitive free‐for‐all. Today’s smart managers will seek to combine sustainable advantages (those built on distinctive and defensible positionings) with leverageable advantages (transitory advantages that provide stepping stones to future advantages). In the information age, competitive advantage needs to be viewed as both an end and a means.