The ability to effectively manage and protect information has become critically important because it is becoming a basis for gaining a competitive advantage. Over the past decade companies are struggling to understand the need and how place a value on the protection of information in a competitive landscape. Many forward thinkers see information management as a source of value creation instead of what is traditionally considered a cost, information is an invisible asset that, when managed properly, can be used to leverage other firm resources therefore increasing productivity. The ability to effectively manage information helps to ensure that firms are more attuned to changes in the market and could result in a competitive advantage over slower, ill-informed competitors.
Development of strategies that focus on information technology (IT) as a resource to facilitate the effective collection and utilization of information as with other competitive advantages may be considered as confidential as other intellectual property (IP) and need to be protected.
However, seeking to gain a competitive edge by spending more on managing and protecting information without a clear understanding of how it impacts strategy and critical performance is a common pitfall. While some firms achieve a higher degree of success due to their IT endeavors, others continue to fall victim to the technology productivity paradox (Lucas, 1999). As such, in today’s knowledge economy, many companies may find that spending on IT far outweighs the perceived benefits derived from it. Thus, while managers have begun to realize that the adoption and integration of IT by organizations has become a competitive necessity, they have also begun to realize that there is still much to learn about how best to strategically position IT to ensure the greatest positive effect on firm performance. Determining which firm processes and structures will benefit from the integration of IT has therefore become a major hurdle that managers must overcome if they wish to avoid the negative implications of the productivity paradox.
The importance of understanding how IT affects the organization has become more critical and can be better appreciated considering the significant percentage of capital investment that is being allocated to it.
Many managers are simply adopting a technology designed to facilitate information management and sharing overlooking the need for automating processes. Technology solutions are often not enough, especially when it cannot be utilized to leverage other firm-specific capabilities. And, the imprudent integration of such IT systems may eventually lead to a less desirable competitive position within an industry since the capital investment could be better used supporting other capabilities.
Managers need to be aware of the mistake of ‘throwing’ IT resources into the organizational mix with the hope of improving bottom line performance. This problem is widespread and continues to be perpetuated by the myth that IT can fix almost any problem. Companies that continue to spend significant amounts of money on their technical infrastructures are routinely confounded when pressed to assess the return on their IT investments.
Managers should not focus on the bottom line, technology should focus on applications with increased capabilities and efficiency associated with enhanced processes and structures, since this is where the real benefits can be found. To obtain a true competitive advantage IT investments should increase productivity through automation of processes while simultaneously ensuring the information is available for internal collaboration.