CXO

How being fast and flexible can lead to a competitive advantage in business

Size and complexity used to confer competitive advantage. Now, flexibility and speed can fell giant competitors. Here's how IT leaders can adapt.

Image: iStock/mik38

Until relatively recently, size and complexity were a dynamic duo that created unassailable competitive advantage. If a company could grow its size, either in customer base, assets owned, or markets served, and combine that with a complex industry, they'd guarantee that competing against such a behemoth as themselves became a herculean task and was nearly impossible. The last successful American automotive startup was a company called Maxwell Motor Company more than 100 years ago, which ultimately became Chrysler. Despite digitally-driven disruption in many other industries, the most asset-heavy and complex remain dominated by centuries-old organizations, whether ExxonMobil or the United States government.

Size does matter

Historically, size was such a competitive advantage that entire bodies of law and government organizations were created to ensure companies did not gain an unfair size advantage. A similar scenario existed in IT systems. The largest companies could buy the most expensive software, and leave less capable solutions to their smaller competitors. If one company could buy bigger hardware, more software, and more IT employees, it almost always acquired an advantage on the technology front.

Similarly, technological complexity served as an advantage that went hand in hand with size. Only a massive IT organization could afford to acquire, implement, and customize technologies like Enterprise Resource Planning (ERP) or complex HR systems. If you worked for a smaller organization in the 1970s to the mid-2000s, you might have looked at huge corporations' IT capabilities with envy.

Market and industry stability were keys to keeping size and complexity at the forefront of competitive advantage. If an industry were relatively stable, an incumbent company could spend years building size and complexity that shut out everyone else. However, technology conspired with everything from geopolitical change to evolving consumer tastes to introduce increasing instability to most markets. Just as the massive series of defenses built by the French after WWI to prevent an assault on France's eastern front were simply bypassed by a German army using evolved military tactics in WWII, so, too, are massive defenses erected by large companies being bypassed as new tactics emerge and markets rapidly shift.

Investing in simplicity

In the era of size and complexity, most IT investments were geared toward meeting the maximum number of features as requested by business counterparts. Additional time, money, and complexity were worthwhile investments to meet additional requirements, and checking all the boxes meant more capabilities than a potential competitor. However, meeting the maximum number of features has created complex systems that in many cases have stayed in production for decades since they're so complex as to be largely irreplaceable. Shift to our current market, and it's rare that one meets an IT leader who is happy with the portfolio of large and complex systems he or she has inherited, and many lament the ability of startups to have a clean slate in terms of their technology environment.

This environment obviously benefits companies with nimble and adaptable infrastructure. IT leaders can make the mistake of focusing on the cost of maintaining complexity, which, while expensive, is not as costly as the complex business processes and feature requirements that engendered the technical complexity in the first place. Putting nimble systems in place to support large, complex business processes does little to address the ultimate problems introduced by size and complexity, and IT leaders should encourage simplification of the business to drive technical simplicity, rather than attempting the reverse.

Rather than focusing primarily on features and functions as you consider new technology investments, focus on how additional complexity will limit your company's ability to react to a dynamic marketplace. Investing in complex infrastructure that supports today's business but limits future flexibility may ultimately cost significantly more than forgoing a feature or two. Focus on technology that allows for rapid integration and modification, and offers support for key business processes that are unlikely to change. Your ability to check every box on procurement's wish list is probably far less beneficial than an ability to quickly integrate with new partners, or migrate to different hosting methods. If nothing else, it's critical for IT leaders to emphasize smaller and flexible, whether directly related to technology or the business model that the technology supports.

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About Patrick Gray

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

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