Today, things look pretty different

Todays economy relies heavily on information and communication technology (ICT). Therefore, digitalization activities are of strategic significance as they change the way companies operate and, with it, the rules of competition.

According to the renowned Prof. Michael Porter from the Harvard Business School, each activity that creates value for a company has a physical and an information-processing component. In the past technological development primarily affected the physical component of activities. For example, the assembly line helped companies to achieve a competitive advantage. However, the information component, on the other side, was primarily created manually by humans – frequently in a time-consuming manner.

Today things look different. While the performance of the processors increased exponentially over the last decades, the cost of ICT has fallen substantially. It is therefore hardly surprising that today’s development processes mainly affect the information component of business activities. These factors lead to a massive expansion in information. Using this data increases a company’s ability to control, predict and analyze developments, thereby generating a competitive advantage.

Literature:

Porter, M. E., & Millar, V. E. (1985). How information gives you competitive advantage.