Professional Documents
Culture Documents
George Philip
THE QUEEN'S UNIVERSITYOF BELFAST
The past two decades have witnessed the emergence of two diJferent
schools of thought on competitiveness, the technology-driven and competency-driven approaches. This article examines the features of each approach and argues the case for a convergence of these opposing views if
organizations are to succeed in the 1990s and beyond. The technologydriven approach, stresses the importance of information technology. A
corresponding emphasis on rigorous planning and the use of generic
strategies separate this flom competency-driven routes to competitiveness.
Sixteen senior management figures from leading edge companies were
interviewed to establish which, if either, of these two very different approaches to competition was more apparent. Technology was found to be
a possible source of advantage against competitors, although the emphasis
was on its use in conjunction with other valuable, and unique, resources
within the company. The attitudes taken to customers and suppliers reflects
the need to take a much more flexible stance to strategy, as the companies
of the 2990s reinvent themselves to.face the challenges of the future in
a global environment, j susN eEs 1998. 41.29-40. @ 1998 Elsevier
Science Inc.
he search for competitiveness has become an increasingly important issue as organizations strive to come
to terms with an increasingly fast moving global environment; an environment where stakeholder demands for
profitability and stability must be balanced against the need
for ever more dynamic and creative strategies which are necessary for survival in this "brave new world" (Boynton and
Victor, 1991). Companies are bombarded with information
on how to increase their competitive potential, while intervention by government and government-sponsored bodies (DTI,
1995; NIGC, 1995; DED, 1994) highlight the important connection between individual company success and the economic welfare of the region at large (Porter, 1990). Conflicting
IT-based Approaches
to Competitiveness
This approach is rooted in the belief that IT can be isolated
as a factor in company success. Popularized by Michael Porter
(Porter, 1980, 1985; Porter and Millar, 1985), it is claimed
that IT will offer new and innovative ways to compete through
cost reduction and product differentiation, the key parts of
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Competencies, Capabilities,
and Multifaceted Strategies
Unlike the technology-driven approach, the competencydriven approach to competitiveness places emphasis on using
IT in conjunction with other (unique) skills which the organization has at its disposal (Clemons, 1991; Land, 1994). Competencies can be considered as an "experience-based, tacit
know-how which is acquired, developed and improved over
a period of time rather than explicit knowledge" (Doz, 1989,
p. 48). Nonaka (1991) reasons that it is this organizationwide, sometimes "tacit" knowledge which has enabled some
of the world's most successful companies to offer ever more
flexible responses to customers. They have been variously
described as "core competencies" (Doz, 1989; Pralahad and
Hamel, 1990), "invisible assets" (Itami, 1989), and "distinctive
capabilities" (Kay, 1993). All agree that it is the unique combination of factors within the firm, as well as its individual
character which impact on the competitive position. The individual character of the firm is expressed in terms of assets,
skills, and organizational knowledge, or "collective learning"
(Doz, 1989). The more unique and idiosyncratic the competencies, the stronger and more sustainable the advantage,
(McGrath, McMillan, and Venkataraman, 1995).
This view is presented in greatest detail in the work of
John Kay (1993). Kay's "Structure of Strategy" recognizes that
successful firms tend to gain advantage from a unique combination of "distinctive capabilities" which can be used to give
a firm an orientation for the strategic position to adopt. Four
such capabilities have been identified, namely architecture,
reputation, innovation, and strategic assets.
Kay's approach to competitiveness shares some similarities
with that of Porter in that both question overall sustainability
of advantage and recognize that any advantage must be unique
to the firm concerned. However, while Porter offers three
generic strategies, Kay reasons that there are no magic recipes
through which success can be achieved. Instead, he suggests
that firms will tend to focus on three main areas, depending on
which of the capabilities are strongest: pricing and positioning
initiatives; advertising and branding; as well as exploiting
relationships with other players in the supply chain.
The importance of business relationships is emphasized in
the literature on collaborative advantage (Gomes-Casseras,
1994; Kanter, 1994), while others suggest that closer ties
with suppliers can lead to shared cost reductions (Burnes
and Whittle, 1995; Coleman and Bhattacharya, 1995). For
Lamborghini (1989, p. 63) linkages with other players in the
supply chain are useful ways for companies to compete in an
era of change:
In today's conditions only a real synergistic relationship
between a company and its territory can provide an innovative and challenging support to the development of the
competitiveness of a company.
32
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Methodology
To establish which of the above views companies felt to be
most appropriate for the current competitive climate, it was
decided to interview a number of senior-level managers from
a range of leading edge companies; an equal number from
the manufacturing and service sector. Sixteen companies were
chosen from the "Top 100" companies in Northern Ireland as
published by the Belfast Telegraph (Simpson, 1995). A decision
was made to exclude those companies in the list that had not
made a profit in their last financial year. Company size ranged
from 300 to over 4000 employees, with many having plans
to expand further within the next few years. All the companies
had been established for more than 20 years, with two having
been established for almost a century. Despite restricting this
study in location, all but one of the companies involved operate on a global basis, and 11 are the European leaders in their
respective fields. The types of company involved are shown
in Table 1.
It was felt that a semistructured interview schedule should
be used as this method offers a high degree of flexibility-issues can be explored in detail if and when they arise (Babble,
1992). The chief executive (or equivalent) of each company
was approached with a request for interview. The chief executive was the preferred choice because of his or her level of
involvement in strategic issues (Dess and Davis, 1984). This
person did not prove to be always available; in those cases
another management figure was substituted. These included
a marketing manager, production director, human resource
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Results
Number in Study
3
1
1
2
1
1
1
3
1
1
1
34
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Relationships with customers are also undergoing redefinition, with all the interviewees claiming that today's customer
is a lot more demanding, and recognizing that strategies,
structures, and processes have to become a lot more flexible
in order to cope with their exacting demands. Speed of response, and overall flexibility and customization prove important in this new era of relations with customers. Whereas
Porter (1980) would have advocated "locking in" or beating
down the influence of the customer, their influence and input
is now actively sought out, through a range of feedback mechanisms. Increasingly, customers are being offered a tailored
response ("It depends on which customer"). As companies
strive to come to terms with a changing business environment,
fast and flexible responses become the main focus of attention,
with those responses being rearranged to suit the needs of
individual customers.
The changing relationship with the customer is associated
with a parallel change in organizational structure. One view
was that:
"Organizational structures are changing to allow organizations to respond a lot more quickly than in the old bureaucracies."
Three other companies also emphasized the importance of
more flexible organizational structures, with one claiming that
such changes were necessary in order to avoid becoming "like
supertankers which can't turn around quickly." Instead, this
representative attributed their organiration's success to this
ability to respond quickly and the adoption of a "constantlychanging fluid position." Within this company structural
changes were also apparent in the appointment of businessfocused teams and in the promulgation of cross-functional
management activities. These changes, coupled with the transfer of responsibility for making customer-related decisions to
those most directly involved in implementing them, facilitate
the delivery of a fluid and adaptable response as all important
customer demands change. All three of these companies were
involved in the manufacture of fast-moving consumer
goods--a vigorous environment where new products and entrants come into the marketplace with increasing regularity.
Allied to changes in organizational structure are changes
in the way processes and activities are performed. Again a
focus on increasing responsiveness was the main reason why
three companies have made some changes in their business
processes. It is widely recognized that Business Process Reengineering (BPR) offers companies a chance to renew and refresh themselves for new competitive challenges and the ability
to offer more customization (Hammer and Champy, 1993).
Direct references to BPR were not made, although they were
implied: one company has already been reengineered, although with a different name attached to the change.
Only two companies had changed their attitudes to direct
competitors, with one suggesting that "alliances are a secure
way to move forward." Others were only prepared to collaborate on issues where competitive interests did not overlap.
J Busn Res
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35
proved to be a competitive barrier for three companies. However, government-sponsored assistance has proved helpful for
many companies in Northern Ireland, including seven of those
involved in this study.
Kay (1993) claims that the most valuable advantages occur
when capabilities are applied to the most appropriate markets.
The study companies seemed to be in agreement, although
opinion was split between the manufacturing and service sector. Only one service company felt that it could transfer its
skills to another market area, while only one manufacturing
company dismissed the idea of moving into new business
areas.
Six representatives claimed that their skills would not be
appropriate for other types of business--two of these companies had already suffered business failures as a result of moving
into unrelated areas. Three said they would move into new
areas, but only those which were closely related to their current
activity. One of these stressed the need to emphasize core
management skills which the interviewee felt could only be
transferable to a similar service industry:
"I think it is very important to stay close to what your core
business is--the things that you understand."
Of those who believed they could move into other lines of
business, two stressed their belief in the strength of their
quality of service, with one interviewee claiming, "Good service is important in any industry." In this respect we see a
blurring of the traditional distinctions between manufacturing
and service industries, with service being provided to customers becoming a paramount source of strength, irrespective of
industry sector. Other skills felt to be transferable included
the vision and commitment of management.
36
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Number in Study
5
3
3
2
2
2
1
1
1
1
1
1
1
1
individual home-based customers. In such a "virtual" company (Davidow and Malone, 1992), IT enables changes to
occur in the whole process of buying and producing products--a link with BPR. Again, however, the interviewee was
keen to stress that IT would not be the only element in this
change, but would facilitate the logical extension of a TQMbased focus on customer satisfaction and supplier relationships.
Although the other companies did not view IT as a strategic
weapon, all stressed, with only one exception, that it was an
essential part of business life, simplifying many areas:
"We couldn't handle our customers on paper like we
used to."
Not only does IT enable companies to speed up processes, it
has become a vital tool with many subscribing to the view
expressed by one representative, "We couldn't do without it."
Despite this general approval of the technology, its potentially
negative impact was highlighted by four respondents, who
attributed decreasing sustainability to the availability of
cheaper, faster, and more flexible systems:
"IT is so transient that you can only expect to gain limited
advantage from it."
The importance placed on IT belies the fact that it was not
mentioned at all during the interviews by 13 companies l When
the issue was raised at the end of each interview, representatives did tend to praise the technology, and related how IT
had often played the role of competitive weapon in the past.
Five stressed the technology's importance to their continuing
success, "Our success going forward will be maintained
through IT." The general consensus, however, was that the
technology is proving to be more of a strategic necessity, as
opposed to a competitive weapon. This reflects the change in
attitude reflected within the literature as sustainability of ITbased advantages comes under the microscope.
Strategy Formulation
The actual procedures of formulating strategy would seem to
owe more to the technology-driven approach in this study.
However, great concern was expressed that strategies be flexible enough to cope with changing condition, reflecting a link
with the work of both Kay (1993) and Mintzberg (1994a,
1994b, 1994c).
Seven companies explicitly stressed the importance of this
attribute--two manufacturing companies have rejected the
idea of strategic planning documentation as a direct result:
"If you write strategy the danger is that it will soon be
outdated and you may be focusing your attention on the
wrong areas in the business."
This concern, to some extent, corroborates Mintzberg's
(1994c) "Fallacy of Predetermination/Planning" which questions the possibility of making adequate plans for a constantly
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Conclusions
This need for constant change is expressed in the companies'
recognition of the need to move away from old ways of doing
business and approaching competition. Elements of the two
approaches to competition identified earlier were manifested
by all the study companies, although the emphasis was more
on mix and match combinations of cost, differentiation, and
other incentives, rather than on any one generic posture. Such
a multidimensional stance represents a change in the way in
which companies are responding to a changing marketplace,
changing customers, and ever more competitive and complex
industries. Some aspects of Porter's (1980) views on the strategy process were evident, although all interviewees constantly
stressed the need to move away from older more static approaches, in favor of fresh and creative stances. So, while those
who operate in relatively slow-moving or stable environments
may be able to view customers and suppliers as threats, inconvenient obstacles whose influence must be reduced, and strategic plans as immovable feasts, the dynamics of the environment and hectic pace of change have meant that others have
to embrace the more flexible facets of competency-driven
approaches.
Such stances would seem to offer more flexible and unique
ways of competing in an environment where suppliers, customers (and, to some extent, competitors) are beginning to
play increasingly important roles within the organization. It
is this emphasis on external relationships which may prove
to offer IT its most important role in business: the technology
will be used in terms of the competency-driven approach,
and not within the more rigid and one-dimensional confines
of technology-based routes to competitiveness. Indeed, IT
will be used to deliver the increasingly flexible and tailored
response which today's customer demands.
An emphasis on flexibility was also apparent within the
actual processes of strategy formulation although the emphasis
of the majority was still firmly on planning and control; showing that remnants of Porter's work on strategy and strategy
making are still relevant.
The acceptance of the competency-driven approach is, to
a certain degree, the result of the way in which the environment has changed since Porter's (1980) views were first put
forward: global competition, faster product life cycles, increased uncertainty, recession, greater customer awareness,
and, increasingly, the introduction of often computerized deliveU channels such as the Internet. These have all played a
part in the changing nature of competition from a highlyplanned and one-dimensional stance, to the need for a more
multifaceted, easy to change, and increasingly tailored response. This movement is best summed up by Haeckel and
Nolan (1993, p. 131), who view it as:
38
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