Finding Competitive Advantage

Hope springs eternal - in life and in software. Many of the corporations I have worked with over the years expect software to provide the answer to many problems. New applications and new software systems are intended to help create competitive advantage , improve productivity, and transform a mediocre marketing organization into a marketing powerhouse. The irony is that software alone is powerless to solve any of these problems. This statement may sound like heresy coming from someone who makes a living from the software industry. But organizations must understand the true dynamics of software - what it can provide in terms of competitive advantage and return on investment, and what it cannot do.

Take a typical scenario: You are the CIO of a manufacturing company, and you're finding it harder and harder to make money. Armed with more money and greater market share, your competitors are making your life difficult. One day, Frank, a salesperson fro m a prominent software company, pays a call. He predicts that if you purchase a key piece of manufacturing software, your company will be better able to monitor the usage of raw materials, create products to spec, improve the tracking of measurements, an d create a consistently perfect product. The new packaged software solution he is pushing sounds wonderful.

Luckily for you, this new product is only in beta test, and the beta customer isn't even a competitor! After a careful evaluation of the features and functions of the product and discussions with the beta customer, you begin to think that this is the sof tware product that's going to do big things for your career as well as your company. Frank turns out to be a wonderful source of information. He becomes a nearly indispensable part of the company. Over time, he has learned a lot about how you do business and what is important to you. So even though the product is expensive, much more than you ever expected to spend, you bite the bullet and cut the purchase order.

The next six months are hard. The customization of the packaged product takes longer and is more costly than you expected. But eventually it is complete and, just as Frank predicted, the company's product quality improves, and there's a reduction in the amount of raw materials being wasted.

Is this the end of the story? Unfortunately not. What happens next takes place in almost every industry. Remember how Frank and the customization team were able to learn so much about your company? Well, what do you think happened to that information onc e your project was finished? Frank, armed with substantial knowledge about your segment of the manufacturing industry, began to visit all of your competitors. His message to the other CIOs was simple: The competition is implementing this software and gai ning competitive advantage at your expense. Can you afford to not implement this software in your company, too? It was a compelling argument. And, sure enough, one by one, all of your key competitors implemented the same software that you bought.

Although your investment in Frank's new software product is still valuable, it no longer provides the promised hedge against the competition. Now you need the same software solution for your company just to stand still. Even if you hadn't paved the way f or your competitors by being the first to jump at this opportunity, at this point you'd have no choice but to get on the bandwagon with everyone else.

Was there an alternative to this all-too-common scenario? I suppose you could have forced the software company to not sell to any other competitor in your market segment. However, what software company worth its salt would have agreed to such an expensiv e proposition? Only one that charged you a huge premium. You could hire a team to write a similar application from scratch, but such a project could be very costly, and there is no guarantee that this team would not sell its knowledge to a competitor aft er the fact. You could leverage in-house developers -another costly proposition. But unless your developers have been working on new products and projects, they may not have the skills or expertise to create such a complex application.

The bottom line is that you simply cannot rely on the newest software techniques or technology to gain a competitive advantage. Software innovation, when it's well implemented, will help you stay even with your competitors -but software will not make you or your company an instant success. What can you do, then, to improve your company's competitive stance within the marketplace? The following steps might be the silver bullets that solve many of the most troublesome problems within an increasingly compe titive arena:

• Work on your internal processes. Make sure you aren't doing things a certain way just because they have always been done that way. Can you be more productive by applying common sense to problems? Listen to the people on the front lines of your business. They have to listen to your customers every day; they know what will help and what won't.
• Get politics out of technology decision-making. Remember, software will keep you on par with competitors, but it will not let you leapfrog them. Nor will it make you a hero. Figure out what problem you are trying to solve and pick something th at works.
• Apply low-tech solutions whenever possible. A timely telephone call or a personal visit to a valued client is worth more than the best customer service database in the world.
• Channel all of the effort that traditionally focuses on searching for the perfect technology and gaining political advantage into improving the quality of communications and business understanding. Some of the enhancements you make should be r adical. At other times, you should look for small, incremental improvements that will make you a better partner to your customers.

You may need to change your perspective from one focused on exciting technologies to one that concentrates on what business problems your constituents or your internal customers need to solve. If those problems can be solved pragmatically with sophistica ted, advanced technology, then you should move forward aggressively. But if you believe you will achieve long-term strategic advantage with a piece of software alone, you will be disappointed.