How information revolution impacts creation of competitive advantage?

Innovation and creativity are the key factors of the development of any organization in the market.

And in order to be creative, the issue will not be about creating new ideas only.

Those ideas has to be:

1. Based on real market information and records.

2. Trends of the market and technology.

3. Information about the other products which are in or intersects with the chain/loop of our product.

Accordingly, the information revolution became a mandatory tool to have the correct base before we start the correct innovation.

Information technology has a powerful effect on competitive advantage in either cost or differentiation. The technology affects value activities or allows companies to gain competitive advantage by exploiting changes in competitive scope.

Lowering cost

Historically, technology impacted cost in activities in which repetitive information processing played a large part. Now, even activities like assembly that mainly involve physical processing have a large information-processing component through, for example, automated parts-selection and materials-handling systems.

In addition to playing a direct role in cost, information technology often alters the cost drivers of activities in ways that can improve or erode a company's relative cost position. An example for this is replacing the traveling expenses for the salesforce by telemarketing

Enhancing differentiation

The role of a company and its product in the buyer's value chain is the key determinant of differentiation. Examples of how information technology enhances differentiation are:

·         Facilitating effective product customization.

·         Bundling more information with the physical product package sold to the buyer.

·         Altering the relationship between competitive scope and competitive advantage through increasing abilities to coordinate activities regionally, nationally, and globally.

·         Creating interrelationships among industries which were separated.

·         Segmenting offers in ways that were feasible only for focused companies such as tailoring the value chain to large national customers.

As information technology becomes more widespread, the opportunities to take advantage of a new competitive scope will only increase. The benefits of scope and the achievement of linkages, however, can accrue only when the information technology spread throughout the organization can communicate. Completely decentralized organizational design and application of information technology will thwart these possibilities, because the information technology introduced in various parts of a company will not be compatible.