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Section 2.4.6

Consulting Reports

The consulting report provides expertise on technical problems for audiences that are not expertin the field of interest. Consulting reports are written by outside experts for groups ororganizations that do not have the time or the expertise to treat the subject or problem. Hence, aconsulting report may present experimental work on a problem defined by a client. Onecommon variation on the consulting report is the white paper, which examines a general problemfrom an expert's perspective. White papers do not present experimental inquiries but, rather,cover a series of findings or generalizations based on expert insights into a problem or class ofproblems and a set of issues. These findings constitute the body of the consulting report. Inother respects, the consulting report follows the general structure of the formal report: front matter, body, and back matter.

The following white paper examines a class of problems from an expert's point of view. It isaddressed, however, to the nonexpert who stands to benefit from this information.


The New Strategy of Integrated Systems:

Why Technology Doesn't Always Mean

Competitive Advantage

May 15, 1984

M. B. Packer

Executive Vice President

Technology Systems and Operations

Simon and Schuster

Upper Saddle River, NJ


Introduction

Many executives now devote substantial portions of their day to worrying about new technology:how to develop it, how to market it, how to use it, and not least how to pay for it. Yet, becausethe new wave of technology sweeping through corporations is fundamentally different fromprevious technologies, new kinds of strategies must be devised to gain competitive advantage.

The new wave of technology has been building ever since the advent of computers. Betweeninformation technology (e.g., database management systems, office automation, and personalcomputers) and design and manufacturing technology (e.g., computer-aided design, robotics,automated storage/retrieval systems), few industries have remained untouched bycomputerization. Any firm that wishes to remain in business must ride this wave of technology,both in its product line and in its own operations.

How New Technology Can Build Competitive Position

There are only three ways to gain advantage using technology: keep your competitor fromobtaining it, develop or adopt each new technology faster than your rivals do, or implement itbetter than the opposition.

The first of these avenues--keeping competitors from obtaining technology--is impossible if thetechnology was developed in another industry. For instance, Aetna Insurance cannot stopLiberty Mutual from buying the latest IBM computer. Even proprietary technology developedfor a firm's own products is not always safe: "reverse engineering" can reveal technologicaladvances to competitors. A strategy based on trying to keep the competition from obtainingtechnology over the long term seems to work only in industries with large financial barriers toentry (e.g., the chemical process industry) or for firms with unusually strong patent positions.

The second avenue, to develop or adopt new technology faster than the competition, can work intwo situations: extremely agile companies willing to commit their resources to speculative ideas,and large firms that dominate by virtue of their sheer financial and technological power. However, firms that try to stay ahead of their competitors by continually marketingtechnologically more advanced products are vulnerable to later market entrants, who learn fromearlier mistakes while avoiding heavy R&D investments. Similarly, attempts to outflank rivals byadopting new technology for one's own operations may simply lock a company into expensive andobsolescent systems.

The third approach, to surpass competitors by implementing technology better in your ownproducts and operations, has been largely neglected by corporate strategists in the U.S. YetJapanese firms have captured whole markets by stressing the implementation of manufacturingand product technology. These firms lavish attention on vital components of implementation:quick changes in manufacturing set-ups, detailed quality control, low inventories, and highlytrained workers. Using systems and technology, these Japanese firms have made implementationthe core of their strategy of quality and responsiveness to customer demand.

In contrast, American strategists focus on broad considerations of market growth rates, marketshare, and the competitive structure of the industry. Executives concentrate on quick, dramaticmoves (such as acquisitions and divestitures) that they can directly control. Unfortunately,implementing new technology is harder to accomplish. It often requires a change in corporatestructure and culture, and demands detailed knowledge of the technology and operations of bothone's own business and that of one's customers. As Robert H. Hayes and William J. Abernathyhave pointed out, relatively few American executives have this kind of knowledge (Robert H.Hayes and William J. Abernathy, "Managing Our Way Toward Economic Decline," HarvardBusiness Review). As a result, implementation is viewed as anobstacle rather than an opportunity, as something that needs tobe "managed" and overcome.

Yet implementing technology better than competitors can be thekey to long-term success: the "how" is more important than the"what." The ability of a firm to use implementation as acompetitive weapon hinges upon its appreciation of the basiccharacteristics of these new technologies and of their strategicimplications.

The Rise of Integrated Systems

Most new technologies share not only a common dependence uponcomputers but also two crucial, basic characteristics: they holdthe potential to integrate business functions and to improve theflexibility with which an organization can respond to a changingenvironment and change its direction. Three examples willillustrate this point.

The new wave of participative management methods and workredesign efforts is also characterized by its emphasis onintegrating business functions and increasing flexibility. Forexample, the quality control concepts espoused by Deming, Juran,and others combine the functions of production work, qualityassurance, and often maintenance or process development, as well. Since workers have broader skills, management can deploy themmore flexibly. Similarly, new transaction processing systems insome banks give one clerical worker control over an entirecustomer transaction, improving both job satisfaction andresponsiveness to customer requests.

All of these new technologies and management methods arefundamentally different on a strategic level from oldertechnologies. Older technologies such as transfer lines in massmanufacturing or early financial transaction processing systemstargeted two strategic goals: achieving economies of scale andtightening management control. These technologies and methodsassumed strategies of minimization: to minimize cost and tominimize variances. The result was systems that divided tasksinto small pieces and repeated each task efficiently. Unfortunately, as world-wide competition becomes more importantand as manufacturers stress quicker response to customer demands,these strategies are no longer adequate.

Implications for Corporate Strategy

How can a firm use new technology to maximize the effectivenessof its operations and of its products? The key is not to look atnew technologies and management methods in isolation. Eachrepresents a possibility of competitive advantage by integratingbusiness functions and enhancing flexibility. The implicationsof this idea range from new product development to customerservice and from manufacturing to finance. Four brief examplesshow the advantages of this type of strategic approach.

Technology and Strategy Formulation

Strategic planners traditionally study the structure of themarket in great detail: market segmentation, industry structure,and product positioning are ubiquitous phrases in theirvocabulary. Technology often appears only in comparisons withcompetitors: does the firm lead or trail its rivals in productline X? Does it have lower manufacturing costs in Division Y?

Yet technology and its implementation can play a more centralrole in strategy formulation. Planners should considertechnology not just as something in which the firm is strong orweak, but rather as something with its own inherent strategiccharacteristics. Implementation of technology can be viewed asan opportunity to gain competitive advantage, not just as achallenge thrown in the path of strategic planners. Specifically, strategic planners should:

Without modern technology, firms will not survive. Yetparadoxically, technology by itself often gains a company littlebeyond parity with its strongest rivals. It is in theimplementation of technology to coordinate and integrate businessfunctions that a firm can win a new kind of competitiveadvantage.


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