3. Identify and rank the ways in which information technology might create competitive advantage. The starting assumption must be that the technology is likely to affect every activity in the value chain. Equally important is the possibility that new linkages among activities are being made possible. By taking a careful look, managers can identify the value activities that are likely to be most affected in terms of cost and differentiation. Obviously, activities that represent a large proportion of cost or that are critical to differentiation bear closest scrutiny, particularly if they have a significant information-processing component. Activities with important links to other activities inside and outside the company are also critical. Executives must examine such activities for ways in which information technology can create sustainable competitive advantage.
In addition to taking a hard look at its value chain, a company should consider how information technology might allow a change in competitive scope. Can information technology help the company serve new segments? Will the flexibility of information technology allow broad-line competitors to invade areas that were once the province of niche competitors? Will information technology provide the leverage to expand the business globally? Can managers harness information technology to exploit interrelationships with other industries? Or, can the technology help a company create competitive advantage by narrowing its scope?
A fresh look at the company’s product may also be in order:
Can the company bundle more information with the product?
Can the company embed information technology in it?