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2.8: The Danger of Relying on Technology

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    94872
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    According to Porter, the reason many firms suffer aggressive, margin-eroding competition is because they have defined themselves according to operational effectiveness rather than strategic positioning. Operational effectiveness refers to performing the same tasks better than rivals perform them. Everyone wants to be better, but the danger in operational effectiveness is “sameness.” This risk is particularly acute in firms that rely on technology for competitiveness. After all, technology can be easily acquired. Buy the same materials as your rivals, copy competitor websites, reverse engineer their products, and you can match them. The fast follower problem exists when savvy rivals watch a pioneer’s efforts, learn from their successes and missteps, then enter the market quickly with a comparable or superior product at a lower cost. When technology can be copied so quickly, it is rarely a source of competitive advantage.

    Operational effectiveness is critical. Firms must invest in techniques to improve quality, lower cost, and generate customer experiences, but for the most part, these efforts can be matched. Operational effectiveness is usually not sufficient enough to yield sustainable dominance over the competition. In contrast to operational effectiveness, strategic positioning refers to performing different activities from those of rivals, or the same activities in a different way. While technology itself is often very easy to replicate, technology is essential to creating and enabling novel approaches to business that are defensibly different from those of rivals and can be quite difficult for others to copy.

    How do you know when your differences are special enough – an approach known as the resource-based view of competitive advantage. If a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that have four critical characteristics. These resources must be:

    1. valuable
    2. rare
    3. imperfectly imitable (tough to imitate), and
    4. non-substitutable.

    Having all four characteristics is key. Miss value and no one cares what you’ve got. Without rareness, you don’t have something unique. If others can copy what you have, or others can replace it with a substitute, then any seemingly advantageous differences will be undercut. Strategy isn’t just about recognizing opportunity and meeting demand. Resource-based thinking can help you avoid the trap of carelessly entering markets simply because growth is spotted.

    Sustainable competitive advantage is also not guaranteed when you are the first to bring a new technology to market. Timing and technology can be enablers for competitive advantage, but it’s what a firm does with its time lead and technology. True strategic positioning means that a firm has created differences that cannot be easily matched by rivals. Moving first pays off when the time lead is used to create critical resources that are valuable, rare, tough to imitate, and lack substitutes. Anything less risks the arms race of operational effectiveness.

    Just purchasing and installing the latest technology will not by itself make a company more successful. Instead, the combination of the right technologies and good management will give a company the best chance for a positive result.


    2.8: The Danger of Relying on Technology is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.

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