Enhancing differentiation. The impact of information technology on differentiation strategies is equally dramatic. As noted earlier, the role of a company and its product in the buyer’s value chain is the key determinant of differentiation. The new information technology makes it possible to customize products. Using automation, for instance, Sulzer Brothers has increased from five to eight the number of cylinder bore sizes of new low-speed marine diesel engines. Ship-owners now choose an engine that is more precisely suited to their needs and thereby recoup significant fuel savings. Similarly, Digital Equipment’s artificial intelligence system, XCON, uses decision rules to develop custom computer configurations. This dramatically reduces the time required to fill orders and increases accuracy—which enhances Digital’s image as a quality provider.
By bundling more information with the physical product package sold to the buyer, the new technology affects a company’s ability to differentiate itself. For example, a magazine distributor offers retailers processing credits for unsold items more efficiently than its competitors. Similarly, the embedding of information systems in the physical product itself is an increasingly powerful way to distinguish it from competing goods.