Leg Zero: Porter´s model explained (Part IX). Industry Rivalry. Information Technology.
Bonjour a tous!!!
Today we will continue with the first competitive force of Porter´s Model. This day is the turn to understand the meaning of the next key determinant factor: Information Technology.
INFORMATION TECHNOLOGY
What is information?
Information, in general, is data processed for some purpose. The concept of Information has to fulfill the following criteria:
It must be communicated to a recipient
It must be in a language that is understood
It must be in a suitable form
It must be relevant for achieving some purpose
With the disruption of technology, no kid, no human being or company can escape from its consequences. As I see it right now, people communicate and transfer information through technology. More and more, we use technological tools to communicate and to produce or make a living with it. Obtaining information, processing it, making decisions and using it for manufacturing, marketing, distribution and selling products/services is so melted with technology. Almost everything is done with technology, or technology is utilized at some point in any production value chain. For me, Information is not separated of technology, and the term information technology is wider than a computer or a mobile or a software.
With the internet of things (IOT), we are going to change everything. I foresaw it coming a few years ago. The complexity of information through technology has changed, changes and will change everything we do. Information flows through technology, through social media tools. Through the internet, everyone inside the companies has to be directly involved in the management of technology, particularly with the digital new platforms. Many universities are offering degrees in “information management” and their courses syllabus are not about programming or creating software, but about data analytics, because it is difficult to manage information, particularly with the emergence of robotics, artificial intelligence, and other technological new trends.
The complexity of Information for some Industries.
The complexity of Information. Click here to download PDF File.
Michael Porter was introducing the concept of information technology as a key determinant driver for competitive advantage. Competitive advantage, therefore, is dependent upon superior access to information. Since several decades, industries or economic sectors have been transformed by information technology. Technology has changed the way companies operate, communicate and so on. It affects the whole process by which companies create through their value chain (I also will dedicate several weeks to explain what is the value chain from Porter). Technology has changed the value chain at every point, transforming the pace of advancing faster in every single activity we do. Automation and the use of artificial intelligence will change even more our activities.
The new technologies have substituted the human efforts in information processing, playing with data scenarios and provide solutions with algorithms. If our leaders continue to communicate with Twitter, this will probably be a cause of terrible misunderstandings and threats of a new atomic war which the United Nations has to stop through diplomatic negotiation. “Technology is a poor substitute for personal interaction”. Also, “real time” flow of data has replaced the paper ledgers and paper archives in almost every single company, industry, and country on earth. In addition, Information technology makes more data available which was not at one´s disposal before. We live in an era of excessive information, and we don´t even know how to manage it and filter it. Some CEOs are hiring specialists in big data analytics and data protection, simply because the information available is vast and complex, and lacks consistency.
This context of zillions of information flows makes the industry rivalry of the company complicated. It is complex to understand and filter the right information for our beautiful business. Each industry has the right to choose the strategic role and scope of information technology in their processes. Banking and insurance, for example, have always been information intensive. Of course, these industries are among the first and most enthusiastic users of data processing. On the other hand, industries as petroleum refinery have a high use of information in the refining process but a relatively low information content in the product dimension.
Vaghely, I. & Julien, P.A. Information transformation: Some missing links. Research Gate, 2007
Right now every single industry seems to be moving toward a higher information content in every single piece of their value chain. And technology will not stop to improve. The competitive industry rivalry will be different for those who use information technology as the backbone of their content and product processing, in comparison to those who don´t use it. Or at least that is how we see it. However, natural disasters such as Irma Hurricane in the Caribbean and Florida, have proven that without electricity or WiFi, there is no capacity to use the information technology in case of terrible emergencies… and our vulnerability is worst than before. Think about it: All our knowledge is stored in a CPU which operates with electricity and Wi-Fi, and without them, we simply don´t know what to do. Ironic!
Let´s talk about advantages of using Information Technology: It has been proven that companies which have used information technology for their operations and strategic decision-making are much better positioned in competitive advantage than the ones who do not use technology: Also information revolution is spawning new businesses which were not available a decade ago. But let´s see the disadvantages: even though good things happen through technology, the excessive use of it without limits can also kill our humanity. I believe the use of technology should stop when we lose the control of it. If Artificial Intelligence will kill us, it is still time to rethink about it and learn about it with caution. Maybe even stop it before it is too late. We can´t create our own auto-destruction.
In summary: The complexity of information through technology has altered each of the five competitive forces of Porter´s model, and in the case of industry rivalry it has altered the relationships between competitors, among scale, automation, flexibility and as a result, it has potentially changed all. Information technology has a powerful effect for good if used well and under certain limits. If used badly, some industries have proven to be disappearing or are almost at the risk of disappearing.
Source References:
https://hbr.org/1985/07/how-information-gives-you-competitive-advantage
Eleonora Escalante Strategy 