Discussion: Competitive Advantages

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Discussion: Competitive Advantages

Discussion: Competitive Advantages

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So, should a firm focus attention on building barriers to the competition, or should it just give up on the established competitive advantage and focus on seeking the next revolution? Given that some technologies can be copied quickly, or even just purchased from the same well‐known vendor who supplied it to the leader, it seems prudent to spend some time to explore each technological option in the Piccoli and Ives’ framework and determine where the firm can increase sustainability. If the project is rather small, then the firm should focus on the other three barriers. If the firm can build loyalty with customers who appreciate innovation, a two‐month competitive advantage might turn into a two‐year or longer advantage (thus building a preemption barrier). If a firm can capture valuable data right at the beginning, a copycat firm may fall further behind. Also, building partnerships or securing exclusive rights to some of the technologies can further slow down a competitor.

It would not be wise to stop there, however. The firm should continue to seek ways in which IT can improve offerings or service to customers. And the firm should go beyond those steps, focusing on how it might change its entire industry. One example is the way in which Netflix continued to speed its DVD delivery service while focusing on movie streaming, a technology that will someday make the delivery service obsolete. Netflix was more than aware that its revenue was falling every quarter, but it expected and embraced the shortfall with its strategic move into streaming.9 Given that other services such as Amazon and many cable companies had begun streaming, Netflix has created original series offerings such as House of Cards and Orange Is the New Black.

Therefore, a firm might (1) seek ways to build sustainability by looking into each of the four potential barriers to identify promising ways to block the competition and at the same time (2) continue to innovate and change the industry. Netflix has done both by building a dependable and efficient mailing business and creating new business models such as streaming and series production. Focusing only on building sustainability has the potential effect of fighting a losing battle, and focusing only on new business models might be too risky as the sole source of growth. The last strategic framework, resource‐based view, is more general and emphasizes ways in which to exploit its many potential resources. The framework, described next, can be helpful for sustaining and creating competitive advantage.

FIGURE 2.8 Barriers to competition and building sustainability.

 

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