Is IT a driver of competitive advantage or a necessary cost?

Discussing both sides of the argument

Glance through any MBA course book and you’ll find the words “competitive advantage” used liberally throughout.

In the modern, highly connected and competitive business landscape, sources of competitive advantage can be difficult to find.

Yet experts are united in the view that in order to win out against other market players competing for the same customers, business organisations must create competitive advantage through:

• Cost differentiation: relentlessly focus on reducing operating costs, to increase margins and/or reduce prices
• Product and/or service differentiation: develop and offer products or services that are better or preferable - in the eyes of the customer - to those of competitors

Achieve one of these and your company can maintain an edge; achieve both and your organisation will almost certainly find itself in a market leading position.

Key inputs to both of these sources of differentiation are process efficiency, quality and innovation.

And often underpinning all of these are IT developments that have the potential to disrupt and replace established, less efficient processes.

IT as a driver of competitive advantage

In our recent article “What does digital transformation actually mean for SMEs?”, we argued that digital transformation (moving key processes online and reducing inefficient paper usage) is a driver of competitive advantage.

Technologies that enable organisations to cut costs, save time, improve process efficiencies, deliver better customer service, speed up transactions and enhance customer satisfaction are, therefore, all drivers of competitive advantage.

Zetadocs for NAV and Zetadocs Expenses are both examples of software that provide organisations with the ability to replace paper-based accounting and finance processes with digital ones. By so doing, these organisations derive various benefits which together generate competitive advantage in the following ways:

• Reduction in paper usage, leading to direct (lower paper requirement) and indirect (postage) cost savings
• Time savings, leading to faster handling processes and improved customer service
• Faster generation and dispatch of invoices, leading to faster cash collection
• Easier and faster expense processing, leading to faster staff reimbursement and higher levels of motivation

IT as a necessary cost

Because most business organisations are driven by the pursuit of competitive advantage, it can also be argued that because IT is a driver of competitive advantage, it is by definition a necessary cost.

Of course, this does not mean that all forms of IT or comms technology are drivers of competitive advantage; nor does it mean that all IT is strictly a necessary cost.

What it means is that by purchasing IT solutions selectively and based on a set of criteria (perhaps under the umbrella of a digital transformation strategy), businesses can evolve new and improved ways of working.

In virtually every case, the new ways of working will involve both saving time and cost, leading to process differentiation and, therefore, competitive advantage.

In summary

If you haven’t yet developed your business case to show how investment in IT can deliver competitive advantage, you now need to consider how new digital IT solutions can support your business strategy and improve your service positioning.

Start by looking for ways to reduce and eliminate paper usage in your key financial and accounting document management processes, resulting in cost and time saving opportunities.

If you’re a Microsoft Dynamics NAV user, start by looking at Zetadocs, the highly popular add-on for NAV that’s already been deployed by over 5,000 companies.

Zetadocs was conceived with the sole purpose of delivering new efficiencies in common accounting and finance processes for NAV users, by helping them become paperless and thus saving time and money.

Next steps

Contact Equisys now on 0207 203 4001 to find out how Zetadocs for NAV and Zetadocs Expenses can help you go paperless and deliver competitive advantage for your organisation. Or speak to your NAV partner.