Case Study Editorial

In a recent conversation about IT strategy, a business executive threatened immediate death if any mention was made of IT providing sustainable competitive advantage. A slow and painful death was promised if the error was compounded by attempting to justify the view by using worn out examples of ‘first movers’ from US industries such as hospital supplies, airline reservations, cash management or drug store supply! The executive had been quoted the same old examples (and only these examples) so often that he had concluded that sustainable competitive advantage could not be delivered by IT.

The executive’s scepticism reflects technology’s widespread loss of credibility as a generally applicable competitive weapon in its own right. The first case study develops this viewby high- lighting the combination of factors (in addition to technology) involved in achieving sustained competitive advantage. The case study describes how the ASB Bank has, over 25 years, become the technological leader and subsequently the market leading bank in New Zealand.

ASB clearly made some very good decisions relating to its use of IT. For example, the development of systems and data architectures, the emphasis on modularization and reusability and the focus on the customer (rather than the account) all benefited the business. So why was A& able to make such good decisions about technology? The case study suggests that right from the early use of computing in the 1960s ASB’s technology strategy was driven by the most senior business executives in partnership with business-focused IT specialists.

ASB’s technology strategy enabled the bank to operate at a lower cost than its competitors. With the advent of deregulation, ASB was able to exploit the technology strategy by launching an innovative product which transformed the business. ASB believes the competitive advantage provided by this particular IT-based product can be sustained for 2-6 years.

The bank had recognized that its distinctive competence or unique strength was its techno- logical leadership. This enabled ASB to sustain a cost structure lower than its competitors and introduce innovative technology-based products. This leadership position was to some extent based on the specific technologies used and also on other elements of the IT infrastructure such as the systems and data architectures. However, the other key elements which contributed to technological leadership were the IT specialists skilled in both business and IT, and the visionary business managers who recognized the integral role of IT in the bank’s products and services.

While the competitive advantage from its innovative product could be sustained for 2-6 years, an on-going advantage from its technological leadership could be sustained through the continuous introduction of new technology-based products. ASB is attempting to exploit its technological leadership by pursuing several technology-based business initiatives. A number of ASB’s competitors have attempted to gain competitive advantage by being ‘first movers’ in the application of particular technologies. ASB has been able to use its business position as technological leader to crush these threats and to ensure that any advantage gained by its competitors has been short-lived.

The business executive at the start of this editorial was right to be sceptical about the ability of IT to provide sustainable competitive advantage. He might, however, have been more convinced of the benefits of differentiation through technological leadership, based on a combination of internal strengths including IT, which provided ASB with its low cost structure and stream of innovative products.

The second, shorter case study consists of a new Managing Director’s view of the trans- formation of his company from an internal IT department into a self-supporting company.

A number of state-owned organizations were sold to the private sector (privatized) in the UK during the 1980s. In addition, some of these newly privatized companies subsequently floated off their IT departments as independent subsidiaries. Having started my career in IT working for a pre-privatized utility company, I can appreciate the impact of this double culture shock on the IT department.

IT Southern developed a corporate plan, restructured the organization and established a new management team. The new team focused on four areas - pricing, customer service, customer oriented culture and new business generation. It could be argued that any internal IT department striving for quality of service should consider implementing the changes to at least the first three areas outlined in the case study.

Both case studies have made me consider a number of questions. How could the companies I advise benefit from considering the changes implemented at IT Southern or the approaches, such as reuse, followed by ASB? Why has ASB managed to make the right strategic choices

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consistently over 25 years, when so many other companies fail? Is a business strategy of differentiation through technological leadership feasible for a client, or is the client at risk from a competitor aiming at technological leadership? I hope that consideration of these and other questions is fruitful for your own or your clients’ organizations.

Julian Watts, Case Study Editor

If you would like to submit a case study for publication, please send three copies of your case study to Julian Watts, Manager, Strategy Services, James Martin and Co (UK) Ltd, 11 Windsor Street, Chertsey, Surrey, KT16 8AY, UK

Journal of Strategic Information Systems