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Hospitality Leadership Through Learning
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Making IT Matter: A Manager's Guide to Creating and Sustaining Competitive Advantage with Information Systems

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Vol 4 No 9
By: Gabriele Piccoli Ph.D.

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Executive Summary: Some industry observers have suggested that information technology (IT) has lost its ability to be a strategic resource for modern organizations. However, such examples as Harrah's and Ritz-Carlton present evidence to the contrary. Harrah's has used IT to gather substantial business intelligence and identify its best customers, while Ritz-Carlton uses IT to personalize every guest room and every stay for its returning customers. Many other firms outside the industry, such as Dell, eBay, and Lands' End, provide further evidence of how sustained competitive advantage can be built around IT. While the task is not easy, when firms are successful in doing so the rewards can be tremendous.

To exploit the strategic potential of IT managers must:

  1. Realize that there is a fundamental difference between information technology and information systems
  2. Clearly differentiate strategic information systems from tactical information systems;
  3. Evaluate the role of IT in creating value and focus on the design and implementation of IT-dependent strategic initiatives rather than on IT investments;
  4. Evaluate how the resources at the disposal of their firm combine with competitors' structural inadequacies to create the potential for value creation and appropriation;
  5. Evaluate how to exploit the characteristics of the IT development and implementation life cycle to estimate the extent of response lag as competitors attempt to imitate the initiative
  6. Evaluate how to exploit the characteristics of the value system in which their firm is embedded to preempt competitors' response and create obstacles to replication and
  7. Evaluate the evolutionary paths available to the firm to reinforce barriers to erosion of competitive advantage associated with IT-dependent strategic initiatives.

This report offers a framework that can help managers formally analyze existing and proposed IT-dependent strategic initiatives and offers a series of questions to guide the analysis. The framework begins with the following background questions:

  1. Is the proposed initiative aligned with the firm's strategy?;
  2. Is the proposed initiative designed to reduce the firm's costs or to increase customers' willingness to pay?; and
  3. What is the IS design underpinning the proposed initiative?

With the answers to those questions in hand, a manager can continue the analysis with the following questions regarding the extent to which the competitive advantage arising from the IS initiative is sustainable.

  1. What competitors are appropriately positioned to replicate the initiative?;
  2. How long before competitors have the same functionality in place?;
  3. Will replication do competitors any good?; and
  4. What evolutionary paths does the innovation create that the innovator can exploit?

Finally, having concluded the background and sustainability analysis, the manager can make one of the following three determinations about the proposed IS strategic initiative:

  1. Develop the IT-dependent strategic initiative independently, if the competitive advantage is deemed sustainable;
  2. Develop the IT-dependent strategic initiative as part of a consortium, if the competitive advantage is not sustainable, but the business and the industry as a whole will profit from the initiative; or
  3. Shelve the proposed initiative, if competitors' response will degrade value-appropriation potential for all.

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About Gabriele Piccoli Ph.D.

Gabriele Piccoli is assistant professor of Information Systems at the School of Hotel Administration at Cornell University. His primary research, teaching and consulting expertise is in the strategic application of information systems, customer service systems, and the use of IT to create and appropriate economic value in hospitality ventures. He also has expertise in the internal application of IT, such as in eLearning and computer based training, and the management of virtual teams.

Gabe writes extensively for practicing audiences and is the current editor of the Cutter Benchmark Review, a monthly publication addressing the hottest issues in IT management. His applied research has appeared in many of the leading hospitality and business publications, such as the Cornell Hospitality Quarterly and the Harvard Business Review. Through Harvard Business School Publishing and the Communications of the AIS Gabe has published several widely used case studies on information management and the use of IT in hospitality firms. His academic research has been published in the top Information Systems journals, including the MIS Quarterly, the Communications of the ACM, Decision Sciences Journal, and many others. He serves on the editorial board of the Cornell Hospitality Quarterly and Decision Sciences Journal.

For more information visit http://www.hotelschool.cornell.edu/industry/executive/pdp/about/faculty-desc.html?id=1133&event=PDP085HIM