Andrew McAfee is a professor at the Harvard Business School, and he writes some interesting things in his blog about his research and thoughts on the new dynamics of the enterprise. In his latest blog entry, he talked about some of the research behind a new paper he co-authored about how IT is a driver of competition among companies in the same industry. That blog entry and that paper are what got my thoughts going.

You are most likely familiar with Nicholas Carr's It Doesn't Matter, and this article is a good one to read with that in mind. Like Carr, McAfee and Brynjolfsson say that competitive advantage through IT has a short lifespan until competitors either duplicate it or surpass it. However McAfee and Brynjolfsson hypothesize that the industry leader cycles through competitors as each has an innovation that gives them competitive advantage for a time until another competitor overtakes them.

There are two parts for IT leaders to take away from McAfee and Brynjolfsson's paper in my mind. The first is that a solid IT infrastructure that can manage processes in detail is important to competitive advantage. The second part is that managers and employees need to be able to innovate within the context of the IT infrastructure. The infrastructure needs to be able to gather data and manage processes to the point that things can only be done in one approved way. At the same time, the infrastructure needs to be flexible enough that managers and employees can implement innovations the will propagate throughout the entire system so that all users of the system benefit.

An example they gave was CVS Pharmacy and how they checked insurance coverage for a customer's prescription. Previously, they would do the insurance checks after the customer had made the purchase since it could sometimes take a bit of time. This lead to annoyances as customers sometimes found out after they left that their old or invalid insurance information was on file. CVS altered their system to move the insurance checking to the front of the process so that the pharmacist or person taking the order could validate insurance information before the customer left the store. In that way, problems could be clarified quickly. Since the process was managed through the point of sale system, the order taker could not skip a part of the process and all necessary data was guaranteed to be collected. After testing out the new process in a few stores, CVS duplicated it throughout their stores via their ERP system.

The part that executives and managers need to understand though is that the competitive advantage gained is short-lived. Over time, another competitor will implement a new innovation that gives them a greater competitive advantage. So as time continues, an organization needs to continuously examine its processes at all levels to look for innovations that reduce costs or increase revenues.

While my current job is in an industry with little competition, our "customers" certainly are looking for competitive advantage. The idea of being able to offer some sort of infrastructure to go with the innovations we license is something I will have to spend more time considering in the context of this paper.