technology, competencies, and competitiveness

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Technology, Competencies, and Competitiveness: The Case for Reconfigurable and Flexible Strategies Marilyn E. Booth THE QUEEN'S UNIVERSITY OF BELFAST

George Philip THE QUEEN'S UNIVERSITY OF 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 technology- driven 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.

T he search for competitiveness has become an increasingly important issue as organizations strive to come to terms with an increasingly fast moving global envi-

ronment; 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 interven- tion 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

Address correspondence to George Philip, The Queen's University of Belfast, Queen's School of Management, Belfast, Northern Ireland, BT7 1NN UK.

Journal of Business Research 41, 29-40 (1998) @ 1998 Elsevier Science Inc. All rights reserved. 655 Avenue of the Americas, New York, NY 10010

advice may lead many to question whether there can ever be any path to success. Given that companies are facing such changes, how do managers make sense of the complex and different choices they face?

Since the mid-1980s academic pundits have advanced two major theories on the achievement of competitiveness. The first, which takes its origin from the emergence of powerful and inexpensive PCs, terminals, and communication net- works, is prescriptive and based around the potential of information technology (IT) to improve efficiency and create strategic advantage. The second theory, part of which originates from the traditional marketing discipline, is more dynamic and multidimensional: it recommends that companies identify and harness their own unique skills and competencies through both internal and external consolidation. In other words, ac- cording to the first theory, technology is the bulwark of competitiveness, while the ethos of the second is that of the learning organization--playing on one's own strengths to stay ahead by benchmarking, as well as anticipating and responding effectively to change (Booth and Philip, 1996). In this article, we examine these two theories and, using the practical experiences of senior management figures, seek to understand their relevance to the real world of business. More specifically, we were interested in studying which view is more prevalent within the business community, and in establishing which, if either, will take companies forward into the next century.

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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Figure 1. Analysis of citations (Porter and Millar, ]985).

Porter's generic strategies, (cost leadership, differentiation, and focus).

Porter's views on industry structure and strategic types have been widely used as a basis for research aimed at establishing how companies can achieve competitive advantage through information technology; a linkage sustained by the range of case study evidence which served to further the claims of the technology-driven approach, and supported by Porter himself:

[T] he question is not whether Information Technology will have a significant impact on a company's competitive position, rather the question is when and how the impact will strike (Porter and Millar, 1985, p. 160).

For many investigating the linkages between IT and strategy, the framework laid down provides a valuable starting point (Cash and Konsynski, 1985; Griffiths, 1989; Jackson, 1991; Ives and Learmonth, 1984; McFarlan, 1984; Sabherwal and Tsoumpas, 1993), and it has been shown (Bergeron, Bluteau, and Raymond, 1991) that companies can use the work of Porter to identify areas where IT could be used in a competitive fashion. The case for IT's strategic potential is strengthened further by the year-to-year increase in IT/competitive strategy literature (Philip, Gopalakrishnan, and Ma- walkar, 1995). Figure 1 shows a corresponding increase in attention being paid to the work of Porter. A citation analysis was performed on the 1985 paper, "How Information Gives You Competitive Advantage," (Porter and Millar, 1985). The

recommendations made are still the focus of attention for many researchers addressing the part IT has to play in the creation of competitive advantage. However, it must be taken into account that not all these papers will be complementary in tone.

Earl (1989) showed that companies in many industries did increase their overall performance through the use of IT, although he also stresses the important role which management has to play in harnessing the technology's full potential (Earl, 1989, 1993). While many companies do see IT as a competitive weapon, its effective management has risen higher on the executive agenda (Galliers, Merali, and Spearing, 1994; Lefebvre, Lefebvre, and Pefontaine, 1994; Niederman, Bran- cheau, and Wetherbe, 1991) as many companies fail to realize any sustainable tangible or economic benefits from the technology (Mahmood, 1993; Strassman, 1994; Willcocks, 1992).

Touche Ross Management Consultants (1995), along with several other researchers (King and Grover, 1991), have put forward two main reasons for this failure to realize anticipated benefits from the technology. First, despite IT's ubiquitous presence in organizations, it is not a resource which is actively managed. Indeed our own research has shown that many companies lack technology management skills. Second, companies fail to distinguish between IT and information, with the result that the medium (technology) often becomes more important than the message (information).

. . although more technology has been implemented, the problems with information remain unsolved.. , the focus

Technology and Competency Approaches J Busn Res 31 1998:41:29-40

is still on IT . . . . (Touche Ross Management Consultants, 1995, p. 3).

Companies such as ASB Bank (Barton and Peters, 1992), Rosenbluth Travel (Clemons, 1991), and Otis Elevator (Jelassi, 1993) have shown how IT can be a factor in company success. Similarly, companies such as McKesson and American Airlines have undoubtedly benefited from innovative IT-based applica- tions. One has to ask, however, is it the single factor in the good fortune of these companies? The focus on case studies which the proponents of this approach have tended to rely on, has recently come under scrutiny (Segars and Grover, 1994; Kettinger, Grover, Guha, and Segars, 1994). Can the situation in one company be replicated in others, especially when information systems can be so quickly copied?

Porter (1980) argues that the path to competitiveness lies in overcoming the five forces of industry structure, (namely customers, suppliers, new entrants, substitute products, and industry rivals) through the use of the three mutually exclusive generic strategies (cost, differentiation, and focus). A concur- rent emphasis on exhaustive planning decreases the uncertainty surrounding the whole process of competition. Evidence has shown that such an approach can lead to significant advantages, including an improvement in financial performance (Orpen, 1994). Others have suggested that poor performance is directly linked to the lack of a coherent strategy, (Miller and Friesen, 1986a, 1986b). However, the work of Miller and Friesen (1986a, 1986b) also suggests that the choice of strategy is not the only factor in creating advantage, but that it depends on a range of strengths within the business.

Porter's focus on exhaustive planning has begun to be widely questioned, although evidence has been found to support the existence of generic strategies (Dess and Davis, 1984; Hambrick, 1983). Others, however, have questioned the range of strategic options (Mintzberg, 1992) and the inherent dangers associated with a focus on one particular front or issue (Miller, 1992). Indeed, Porter's overall approach can be considered as indicative of the "traditional strategic formulas" which some writers on strategy want to dispense with (Quinn, Doorley, and Paquette, 1990, p. 58). Despite these and other criticisms (Hen&y, 1990), the work of Porter still provides the basis for much research into strategy and strategy formulation.

As the debate on strategy making continues, the role of IT comes under further scrutiny as well. Hopper (1990) contends that the time when companies could view IT as a competitive weapon may have passed (if it ever truly existed); a view shared by others who have come to regard the technology as a competitive necessity, as opposed to an actual source of competitiveness (Applegate, Cash, and Quinn Mills, 1988; Grainger-Smith and Oppenheim, 1994). For the modern company IT will undoubtedly prove an important tool in the competitive arena, and will be an essential part of business life. The importance placed on IT in today's organization is highlighted by the fact that, for some, it also has an important part to play in competency-driven routes to success.

Competencies, Capabilities, and Multifaceted Strategies Unlike the technology-driven approach, the competency- driven 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). Com- petencies 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 organization- wide, 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.


Changing traditional modes of competing is also the order of the day for Bakker, Jones, and Nichols (1994, p. 13), who suggest that "more of the same won't do"; that reliance on either cost or differentiation is no longer enough to ensure sustainable advantage. Creativity in terms of competitive ac- tion and relationships with other organizations can result from this need to break away from "how things have always been done." Tampoe (1994, p. 66) calls for a deeper understanding of the sources of competitiveness, while recognizing that organizations have to move faster than ever simply to keep apace with the competition:

In today's hothouse atmosphere it is not good enough to produce a mouse trap today because someone else will produce a better and cheaper mouse trap tomorrow and take your competitive edge away. . , we have accelerated the evolutionary cycle. This means that organizations have to dig deeper to understand where their competitive edge comes from.

Companies must try to identify, and hence cultivate, the sources of advantage which they have at their disposal.

One more departure from prescriptive approaches to strategy is found in regard to actual formulation of strategy: "the strategy of successful firms is adaptive and opportunistic" (Kay, 1993, p. 4). Kay's wide range of strategic options leads to more flexible approaches to planning for the future. Hamel and Pralahad (1989, p. 64) take a similar view, regarding approaches such as that advocated by Porter in terms of "a snapshot of a moving car." Rigorously planned strategies, which are adhered to at all costs are considered as archaic, and too static for fast-moving marketplaces (Collis and Mont- gomery, 1995). Mintzberg (1994a, 1994b, 1994c) warns of the dangers of rigidly planned and inflexible strategies which leave no room for creativity and changing circumstances. In- stead he reasons that strategy should sometimes be allowed to "emerge" and that firms be adaptable enough to take advantage of opportunities as and when they arise. In this respect the competency-driven approach can give rise to a wide variety of strategic combinations and orientations. Haeckel and Nolan (1993, p. 123) also point out the importance of adaptability and versatility in the fast-moving "sense and respond" environment of the 1990s, claiming that "adding the institutional ability to adapt in a dynamic environment has become a survival imperative for many companies." Strategies which can be modified quickly thus assume greater importance.

In such a dynamic environment the role of highly planned strategies comes under scrutiny, as does Porter's somewhat static approach to the appraisal of industry structure, an approach which somehow seemed to negate the fact that those other players would be involved in similar analysis, reaction, and counter-reaction. For Stacey (1996), strategy, the response, and how it is implemented is an active process, a game where the actions of the other players have a significant

impact on the range of outcomes; as Clemons (1991, p. 25) points out, however, this is a game which "is not Solitaire."

This approach has been criticized, however, for the lack of information on how competencies themselves can be identified (Tampoe, 1994). Collis (1994, p. 147) suggests that the very "tacit" or inbuilt nature of the resources are their main downfall, containing "the seeds of its own self-destruction." What happens when a valuable, but tacit, competence or capability is made explicit: will others seek to replicate it, and will it cease to have any value? Collis (1994) also criticizes the lack of methods by which individual competencies can be measured and quantified.

Given that these two approaches (technology-driven and competency-driven) seem to be so diametrically opposed, we were interested to find out which would prove to be more prevalent in practice. Would managers subscribe to one view, or would it prove to be a combination of the two? We also wanted to establish which approach managers felt would be suitable to take them into the next century and the rationale behind their position. Also, because the technology-driven approach is based on a range of case study evidence, we wanted to test its applicability to actual business practice across the board.

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


Table 1. Breakdown of Company Type

Company type Number in Study

Food and drink manufacturing 3 Clothing manufacturing 1 General manufacturing 1 Engineering 2 Construction 1 Retailing 1 Transport 1 Financial services 3 Telecommunications 1 Utilities 1 Private health care (nursing homes) 1

manager, and a strategic planning manager. Each interview was recorded for future reference.

The same interview schedule was used within each interview, although the nature of the semistructured method meant that issues could be probed as they arose. Although the emphasis was on prepared questions, each interview was tailored by drawing on cues given by individual interviewees. The open- ing question held true for each company, "What is the secret of your success." This broad and wide-ranging question set the scene for the rest of the interview. Each interviewee was then given a brief description of Porter's "Model of Industry Structure" and generic strategic types and asked to relate their own experiences.

While the work of Michael Porter was used to test the claims of the technology-driven approach, Kay's "Structure of Strategy" was used to test the importance placed on competencies and capabilities. Here, managers were questioned on the role that each of the four distinctive capabilities played within their organization. Kay also suggests that an organization's strengths may only be appropriate for certain markets; an attempt was made to examine this issue by asking each interviewee if they thought their company would be as successful if it moved into other unrelated areas of business. The question, "What do you see as your sources of competitive advantage," was included in order to try and establish which, if either, of the two approaches was most prevalent. This proved useful in that it avoided the interviewer having to directly mention competencies or information technology, which might have, inadvertently, affected the responses obtained. At the end of each interview if IT still had not been discussed, a direct question on its importance was asked.

Approaches taken to the formulation of strategy were also raised within each interview, in an attempt to ascertain the flexibility or otherwise of the strategies being employed, and whether or not they were emergent or highly planned and inflexible. Here, the interviewee was asked to relate what actually happened in the strategic planning process, and asked about their own level of involvement--although in one case the managerial position of the respondent made such questions infeasible.

Results Redefining Porter's "Model of Industry Structure" Porter's "Model of Industry Structure" proved a useful toot for companies to identify the competitive threats which they were currently facing. The nature of this particular framework also enabled representatives to chart the history of the linkages between the different elements, and detail relationships with others in the supply chain.

Porter suggests that companies will compete by attempting to reduce the influence of each of the five forces of industry structure. This did prove true for some companies; however, the maj ority claimed that this situation was changing as supply chain relationships come under the microscope. Only three companies actively agreed with Porter, following his suggestions by trying to minimize the impact of each force upon their business. One, a leading engineering company, minimizes the threat from new entrants by continuous product development and redevelopment, making the cost of entry prohibitively high for any potential entrant into the industry. Another was firmly controlled by a single customer, and tried to have equal influence over the actions of its own suppliers. Despite their attitude to new entrants, the former company prefers to adopt a more conciliatory attitude to suppliers.

The other companies shared similar views on potential entrants and producers of substitute products. However, a move away from this view was apparent in the attitudes taken to the remaining forces, namely customers, suppliers, and competitors. This reflects the belief expressed in the literature that company structures are being redefined as one way of finding fresh competitive stances.

Several representatives pointed out that "the whole supply chain is changing" as managers realize that suppliers can play an active and vitally important role in consolidating, and assisting firms with their competitive strategies. Relationships with suppliers are the current focus of attention for half the study companies who recognize that partnerships with those suppliers can lead to significant improvements in cost and quality. One representative remarked on the dangers of not viewing the supplier as a "long-term co-producer of equip- ment," claiming that, "It has to be a partnership with your supplier: otherwise you end up destroying each other." Two companies actively involve suppliers in the business. In these instances the margins of the organiration become increasingly blurred as employees frequently cross over between organiza- t ions-one sign of a movement toward the "boundaryless" company (Kay, 1993; Syrett and Kingston, 1995). The benefits include an insight into how suppliers produce "raw material"; knowledge which was used by individual employees to suggest where savings could be made in both companies. This marks a departure from the more antagonistic stance advocated by Porter (1980), and a recognition that a close relationship can provide more sustainable and long-term benefits.


Relationships with customers are also undergoing redefini- tion, 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 mecha- nisms. 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 bureau- cracies."

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 "constantly- changing fluid position." Within this company structural changes were also apparent in the appointment of business- focused 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 Reen- gineering (BPR) offers companies a chance to renew and re- fresh 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 collabo- rate on issues where competitive interests did not overlap.

Generic Strategies and Unique Mixtures "We would continue to try and increase our customer base by looking at a number of areas."

This view proved to be the consensus among the study companies, as they reject generic and unidimensional strategies in favor of multidimensional strategies which combine elements of cost leadership, differentiation, and "the flexibility to meet the needs of customers."

Only two companies subscribed to the use of generic strategies: both were involved in manufacturing and had decided to concentrate on differentiation. Although they were following pure differentiation strategies, they claimed that this did not have to preclude cost leadership. It is interesting to note that both of these companies have exceptionally stable relationships with their customers, and that the markets within which they operate are less susceptible to change than others in the study. Indeed, a similar point was raised by one interviewee following a mixed strategy. The representative claimed that generic strategies would only be suitable in a more stable industry, but the threat from potential entrants meant that customers had to be attracted via a range of cost and differentiation measures.

The other companies were keen to stress aspects of quality (differentiation) in their competitive responses. Cost reduction was also an important issue, as respondents reasoned that there would be a limit to the price which customers would be willing to pay for that quality. One representative claimed that competition today was essentially about "keeping the delicate equation of cost efficiency and quality in balance," while another rejected the idea of generic strategies on the grounds that: "If you concentrate on one thing the rest would fall around you". Better relationships with customers and suppliers also formed part of mixed strategies, addressing both the issues of cost and quality of service.

So, companies tended to follow multifaceted strategies, rejecting the generic strategies put forward by Porter (1980). Hence, while the research of Dess and Davis (1984) and Hambrick (1983) did validate the existence of generic strategies in practice, such rigid formulas do not seem to be appropriate for the demands of the 1990s. The nature of the environment calls for strategic choices which are more difficult for rivals to pinpoint, and subsequently replicate. Imitation of a "non-generic" strategy becomes more difficult, and when tailored responses and constantly changing strategic mixtures are added into the equation it becomes harder for companies to catch up with stronger competitors. Constant change and "moving the goalposts" were advocated by six interviewees, showing just how dynamic companies have to be at a time when advantages are becoming sustainable for shorter periods of time:


"Ultimately, the only thing that separates a company from the masses is its ingenuity and the determination to change faster than anybody else."

This view was shared by others who agreed that, yes, strategies of cost and differentiation were important to them, but many other factors come into play in the competitive arena. Certain companies closely mirrored Kay's views on distinctive capabilities and their translation into competitive advantage--more evidence for the competency-driven approach was found in a focus on core skills.

Harnessing Distinctive Capabilities The growing importance placed on relationships with other companies in the supply chain highlights the importance placed on architecture. Four company representatives remarked upon the equal importance of internal architecture as a means of enabling faster responses. Here, various methods were used to improve communication with employees at operational levels, including the promotion of team-based management, cross-functional activities, opportunities for employees to put questions directly to senior management, and management by walking about.

Building on architectural strengths was seen as a realistic way of creating long lasting advantages, as savings can stretch right back through the supply chain. Innovation, however, was not felt to offer such sustainable or long-term advantages:

"Generally you only have short-term advantage and if a new innovation comes in somebody else is right behind you with it."

Six companies referred to the importance of innovation in their strategies. Again those strategies were mixed, as companies stressed the importance of both cost and differentiation. Not surprisingly, innovation was never quoted as a single factor in company strategy. New innovations are regarded as being too susceptible to replication by rivals. Indeed, none of the four distinctive capabilities were used in isolation, with architecture playing a strong role for both those who rely on innovation and reputation.

Reputation was viewed as an important factor for those companies producing consumer goods, where image is constantly reinforced by strong advertising and marketing cam- paigns as well as other brand-building exercises. Good customer relations was also seen as important for fostering this particular capability. Again those involved in food and drink manufacturing were at the forefront in this respect, offering the customer 24-hour delivery and caflout, and helplines. Representatives also pointed out that they too would only deal with those suppliers felt to have equally good reputations. Only one person dismissed the importance of this attribute.

The last capability--strategic assets--was manifested in several ways by the companies in both a positive and a negative sense. Restrictive government legislation (UK-wide) has

proved to be a competitive barrier for three companies. How- ever, 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.

Sources of Competitive Advantage So, it would seem that companies are competing more in line with Kay's suggestions and adopting their own strategic mixtures to reflect the demands of their own particular situation. However, many other sources of competitive advantage were put forward, strengthening the view that competitiveness arises from strengths in a range of areas. When asked directly about their sources of competitive advantage, the most popular response (five companies) was a focus on customer satisfaction. The importance of the company's people was mentioned by three companies--again support for the competency- driven approach in that the assets and skills are often "tacitly" held by the employees within an individual company, and when those people leave it is difficult to replace that asset base (Nonaka, 1991).

Several other factors were put forward--many being mentioned by one or two companies--again highlighting the fact that advantage may arise from those attributes which are unique to a firm (see Table 2). Here, the increasing attention being paid to customers, and the quality of service which is provided to them, is very much in evidence, as is a sincere


Table 2. Sources of Competitive Advantage

Advantage Number in Study

Focus on customer satisfaction (TQM) 5 Employee skills 3 Management skills 3 Promotion 2 Brand 2 Customer relations 2 Inward investment 1 Location 1 Size 1 Flexibility 1 Caution 1 Global outlook 1 Information technology 1 Incumbency 1

acknowledgment of the role of employees. However, how much the importance of employees is actually acknowledged within the company is difficult to verify without gaining closer access to those employees themselves.

Table 2 also provides more supporting evidence for the increase in the use of multiple strategies and flexibility of approach adopted by companies. It is, perhaps, misleading that flexibility was only mentioned by one respondent as a direct source of competitive advantage, given that flexibility of response was advocated by many throughout the interviews, especially in relation to strategy formulation. Significantly, only one respondent felt that their company had benefited from a single source of advantage--its management skills.

Information technology was mentioned by only one company as a source of direct competitive advantage; however it was not seen by this company as an isolated factor in success, reflecting the wider recognition articulated by the other companies that technology (of all kinds) must be integrated into the organization and used firmly in conjunction with other skills and resources--that is, in line with competency-driven approaches to competitiveness.

Role of Information Technology As mentioned above, only one company directly attributed its competitiveness to its information technology platforms. However, it was felt that this advantage was only worthwhile when systems were still new--sustainability was the main concern here. Systems would only be able to confer advantage until they were, inevitably, reproduced by others in a similar line of business. More important however, IT was not seen as the single factor in securing this competitive advantage.

Two other companies mentioned the strategic impact of their IT at later points in the interview, claiming that it was a useful way of differentiating products and offering unique features to customers. One manager looked forward to the day when IT would enable direct electronic links to the customer, with separate strategies being adopted for each of those

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 TQM- based 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 IT- based 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


changing environment. Admittedly the two companies that had rejected strategic planning were operating in an extremely fast-moving and unstable environment, where technological innovations have substantially reduced product life cycles, and the sustainability of competitive advantage. The second company had rejected strategic plans because they were never used, as it was felt that they failed to take account of the realities of business life at operational level:

"It was very difficult to get a link between the business planning department and the delivery arm."

In this company people were also too caught up in the actual day-to-day operation of the business to take account of written documentation. The chief executive reasoned that the perfect solution to this particular problem would be to have those at the front line formulating strategy. However, they were not considered to have the necessary experience to effectively do so.

Planning itself was seen as beneficial when making decisions on future investments. It was also seen as a means whereby the unpredictability of the external environment could be reduced and controlled:

"You've got to have a sense of direction. It's no use saying I hope this path takes me somewhere nice."

Indeed, emergent strategies were also dismissed by three representatives for this reason, as preparation was seen as a way of being able to take advantage of opportunities as they arose. Strategies were constantly appraised by one company, who described strategy making as "a living process." The others were keen to stress that, although they did rely on strategy documents, they did find room for opportunistic decision making if and when those opportunities presented themselves.

Documentation was updated by all the companies on an annual basis, although most were couched inside three- or five-year plans which took a longer-term view of the company's future. Those involved suggested that luck or chance was not a factor in their success, but that benefits ensued as a direct consequence of the preparedness which they pro- moted--in the words of one senior executive, "You make your own luck." A wide range of stakeholders in the organization were included in the formulation of the strategy, addressing the fallacy of detachment put forward by Mintzberg (1994c). The chief executive (or equivalent) tended to assume overall responsibility, forming a team to represent as many interests as possible: "the benefit is that (those involved) know what's happening to the business." In one case the customers were also actively involved in the planning process.

The emphasis on flexibility within what would appear to be a rigid planning framework highlights the fast-moving world within which the study companies are operating, as well as the need to be in a position to take advantage of the changes which the}, are facing, reflecting the views expressed

by one chief executive: "you've got to be changing all the time to try and keep ahead."

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, incon- venient 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 de- live U channels such as the Internet. These have all played a part in the changing nature of competition from a highly- planned 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 J Bush Res M.E. Booth and G. Philip 1998:41:29-40

[N]othing less than a change in the nature of strategy itself, from a plan to produce specific offerings for specific markets, to a structure for sensing and responding to change faster than competition.

This new structure is built around flexibility, adaptability, and anticipation of customer needs.

From this study we can draw several conclusions. First, competitive advantage is more likely to result from a unique combination of factors, with competition occurring on a number of dimensions. This represents a change in the received wisdom of Porter (1980), and from the experiences described by Dess and Davis (1984) and Hambrick (1983). Companies are rejecting formulaic and generic strategies, realizing that they have to compete on a different basis to attract a more informed and sophisticated customer who wants an acceptable balance between low cost and high quality.

Second, increasingly flexible and reconfigurable strategies are required as advantages gained become harder to sustain. Technology and other influences make it easier for follower companies to replicate innovations and decimate advantages. Constant innovation, product redevelopment, service improvement, and enhancement become the norm in such an intense environment.

Third, the move away from inflexibility in strategy and strategy making is accompanied by the recognition that structural and process changes may be necessary in order to remain competitive into the next century. The need to move quickly necessitates a change in structure with decisions being made by those who will implement them, closer to the customer interface. Increasing cross-functional cooperation may also result in moves to find more effective ways of performing processes.

Fourth, great changes are occurring in relationships with customers and suppliers. There is a greater recognition that these players in the supply chain can have a beneficial impact as their influence and connection with the company increases. It is no longer valid to view the customer or supplier as a threat--rather, they should be seen as long-term partners who are as intent on ensuring continuing success for the company as those within the organizational boundary. Increasing ex- ploitation of vertical relationships will act as a driver in the increased importance placed on IT. Again this represents a move away from conventional attitudes where IT was viewed as a means of control as opposed to partnership.

The strategies which companies employ are changing as they attempt to come to terms with changes in the way products and services are produced and eventually delivered to the final customer. The companies involved in this study have become more competitive by selecting from the two approaches, and are formulating strategies which offer the greatest degree of flexibility, versatility, and suitability for the marketplace in which they find themselves.

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