Wednesday, July 30, 2014

What Creates an Advantage: Technology or Process?


Most companies succeed when they are successful at competing with others. Being successful in a competitive environment obviously requires developing competitive advantages. In an earlier post, we identified that there are only four aspects of competitive advantage: Cost, Time, Efficiency, and Quality. You can further combine the last two to finally have a more compact set of attributes of an advantage as, Cost (cheaper), Time (faster), and Process(better). Therefore, to answer the question on whether you have a competitive advantage or not, you simply have to answer these three questions.

Do you do things faster? Cheaper? Better? Than the next company, next guy, next business…if you do, you are competitive and will continue to survive and grow, if you don’t, start looking for a good exit strategy.

Underlying the competitive imperatives is the business process, and enabling the business process is the technology. When they align, good things happen and competitive advantages are created. When they are not aligned, you are basically throwing money away on processes that are inefficient and/or technology that is unable to enable them effectively. Let us spend a few minutes in understanding how business processes create value and the equation becomes clearer.


The first step that creates value is to create a process! This affords a consistent way of doing things, reduces errors, reduces the learning time for new users to be productive, and sets expectations clearly. Compare this with a situation where there is no process and everyone does things their own way! That would be a mess.

Companies can then become competitive by automating a process (ex. as an employee enters the building using their badge, the system enters the time-in automatically), integrating with other processes (ex. receiving inventory in a warehouse creates liability in the accounts payables), and optimizing (ex. transportation system creates shipments to reduce the total cost of freight). These are all examples from systems that we have and use extensively.

Next step? Measure your processes to ensure that they remain efficient. The trouble with the competitive advantages is that they expire. Your competitors tend to catch up and advantages simply disappear. So what can you do to extend their life? Measure the efficiency of your processes and improve upon them continuously. That is where the business intelligence and analytical applications come in. They allow you to establish a baseline and improve on it over time. For example, what are your fill-rates? Is your process for fulfilling customer orders working as desired? What can you do to improve it further? These are the kinds of questions that a good analytic system will answer for you. Analytics generally help spot problems early and root cause analysis helps you find what might be creating these problems enabling you to resolve them.

Next time you are looking to build competitive advantages, look closely at your processes. Then add technology for good measure and don’t forget to measure your process performance!

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© Vivek Sehgal, 2014, All Rights Reserved.

Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon.

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