Commodity IT, Or Lipstick On A Pig

January 16, 2009

Andrew McAfee,  Associate Professor, Harvard Business School has an excellent January 08, 2009 article titled; It’s Like This… regarding IT as an enabler of competitive differentiation.

In an interview by Charlie Rose with himself and SAP co-CEO Leo Apotheker, Mr. Rose asked the question of how you can generate competitive advantage from software (such as SAP) if everybody can buy it.

Mr. McAfee answered with the analogy that;

So even if you and I buy the same basic factory from [Leo], we`re going to do very different things with it.

I think it is a fine analogy

This goes right back to Nicholas Carr’s IT Doesn’t Matter. That a commodity, (like a factory) in and of itself cannot generate competitive advantage.

It is how you manage it that can generate advantage. The people and processes, generate competitive advantage, not that factory.

In keeping with MR. McAfees analogy, I would even extend it further;

Mr. McAfee stated that even if you buy the same factory, you will do different things with it, I would argue that even if you were doing the same thing with that factory. (ie direct competitors making the same widget) The management and processes are the variables, not the factory.

For Example;

His sales reps outsell yours 5 to 1

His aged inventory is 1/3 of yours

His defect rate is almost zero while yours is 12%

His first time accurate and on time delivery is 97%, yours is 40

The factory is the commodity in this analogy – but how you manage that commodity is where competitive advantage lies

And ditto for technology.

The SMB Take away

You can invest whatever you like in a technology solution.

You can buy the exact same technology solution that your closest competitor uses.

But until you look at your internal processes, look at where the inefficiencies lie, it won’t do you any good.

Because like lipstick on a pig…..

Well, you know how that goes …..

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