1.3: Competitive Advantage
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Can Information Systems Bring Competitive Advantage?
It has always been the assumption that the implementation of information systems will, in and of itself, bring a business competitive advantage. After all, if installing one computer to manage inventory can make a company more efficient, won’t installing several computers to handle even more of the business continue to improve it?
In 2003, Nicholas Carr wrote an article in the Harvard Business Review that questioned this assumption. The article, entitled “IT Doesn’t Matter,” raised the idea that information technology has become just a commodity. Instead of viewing technology as an investment that will make a company stand out, it should be seen as something like electricity: It should be managed to reduce costs, ensure that it is always running, and be as risk-free as possible.
As you might imagine, this article was both hailed and scorned. Can IT bring a competitive advantage? It sure did for Walmart (see sidebar). We will discuss this topic further in chapter 7.
Sidebar: Walmart Uses Information Systems to Become the World’s Leading Retailer
Walmart is the world’s largest retailer, earning $15.2 billion on sales of $443.9 billion in the fiscal year that ended on January 31, 2012. Walmart currently serves over 200 million customers every week, worldwide. Walmart’s rise to prominence is due in no small part to their use of information systems.
One of the keys to this success was the implementation of Retail Link, a supply-chain management system. This system, unique when initially implemented in the mid-1980s, allowed Walmart’s suppliers to directly access the inventory levels and sales information of their products at any of Walmart’s more than ten thousand stores. Using Retail Link, suppliers can analyze how well their products are selling at one or more Walmart stores, with a range of reporting options. Further, Walmart requires the suppliers to use Retail Link to manage their own inventory levels. If a supplier feels that their products are selling out too quickly, they can use Retail Link to petition Walmart to raise the levels of inventory for their products. This has essentially allowed Walmart to “hire” thousands of product managers, all of whom have a vested interest in the products they are managing. This revolutionary approach to managing inventory has allowed Walmart to continue to drive prices down and respond to market forces quickly.
Today, Walmart continues to innovate with information technology. Using its tremendous market presence, any technology that Walmart requires its suppliers to implement immediately becomes a business standard.