CUTTER BUSINESS TECHNOLOGY JOURNAL VOL. 30, NO. 2
In this issue of Cutter Business Technology Journal, we have asked our authors to share their thoughts related to two concepts: information superiority and digital capital. Our assumption was that these concepts are particularly relevant to business leaders, who are right to believe that “digital” and “hypercompetition” are the “new normal” in business. Especially in the area of consumer services delivered primarily through mobile, digital touchpoints, the rivalry for customer attention is fierce and open to anyone. It is not just hypercompetition but “hyperconvergence” as well, where retailers, financial service providers, entertainment companies, and productivity applications need to fight for customer engagement — arguably the most scarce and capricious resource.
Organizations that are transforming to explore the opportunities of digital business must find a way to adapt to hypercompetition and hyperconvergence. In our opinion, information superiority and digital capital should serve as the strategic foundation for those architecting their digital transformation.
It was Paul Strassmann who introduced information superiority into the world of management, calling it the “capacity to increase economic value faster than the competition.” While Strassmann’s definition stresses the outcome (i.e., increased economic value added [EVA]), another perspective, which comes from the US Department of Defense, defines information superiority as the “operational advantage derived from the ability to collect, process, and disseminate an uninterrupted flow of information while exploiting or denying an adversary’s ability to do the same.” In the world of business, we focus on winning markets rather than crushing rivals, but the essence of the advantage remains the same. Information superiority may be one of the rare examples of sustainable advantage in hypercompetitive markets, where any kind of product- or customer-related supremacy can be relatively easily replicated and neutralized.
Digital capital is the wealth of information assets (data, automated business logic) that enables effective information superiority. Access to these assets — through the practice of data science and/or API management — can give smart businesses leverage for growth and economies of scale that support superior performance. However, although everyone agrees that data is the “new oil,” the question of how to effectively refine data and fuel operational processes engines using it is still a major issue. There are countless real-world stories reporting that the road to success may be rough and full of potholes. Many companies fail to collect the right data, properly manage its quality, build a data science-oriented culture, and/or operationalize the results. On the other hand, big players like Google, Facebook, Amazon, and Netflix are able to push their competitive advantage to the limits, and even transform whole markets, by leveraging their digital assets.
Digital capital must fuel the execution of an information superiority strategy. Businesses manage a large number of customers, partners, products, and events. In such a complex environment, it is simply impossible to consistently make the right decisions if they are not guided by hard evidence. For this to happen, organizations need to embrace evidence-based management — a well-established paradigm that calls for effective use of available information assets to support decision making.
In This Issue
In this month’s issue, our authors have done great work exploring these concepts in a way that gives readers a truly diverse yet coherent perspective on the subject.
Mariusz Rafalo opens the issue with an article entitled “Data Doesn’t Matter. Time Matters,” based on his survey research of nearly 100 Polish companies across a variety of industry sectors. At first glance, Rafalo’s title seems to contradict our key assumption about the importance of this issue’s proposed topic. In actuality, the article makes a sound case for the importance of both information superiority and digital capital. Rafalo argues that “information (or data) itself is not as important as the organization’s ability to exploit it within a specific context. As a result, organizations must strive to be not only data-driven in the strict sense, but also ‘time-driven.’ ” Time is a critical resource in hypercompetition. Rafalo’s research identifies enablers for companies that compete by dictating the tempo of market changes. Among them is “information flexibility,” a key enabler of the speed of change and new business models.
Readers who would like to approach systematically the process of achieving, maintaining, and improving information superiority will find many actionable insights in the article by Cutter Senior Consultant Paul Clermont. In Clermont’s view, information superiority and digital capital are closely related. “If you have information superiority, you perforce have digital capital,” he observes. “If you don’t have information superiority, your digital capital account will be meager no matter what tangible assets are on the books.” The approach Clermont offers is consistent with this observation. He urges decision makers to cross-check the company-specific vision of information superiority with the actualstatus of digital capital, which should be made available to support it. He also points out the importance of establishing digital capital stewardship, which is necessary to support the evolution of information superiority. Clermont rightly notes that hypercompetition makes information superiority a moving target — a journey rather than a destination.
Our next article, by Richard Veryard, takes a similar starting point to Rafalo’s, linking the concept of information superiority to US Col. John Boyd’s adaptive OODA (Observe, Orient, Decide, Act) loop, the “archetype” concept for time-based competition. Citing experiences primarily from the retail industry, Veryard shows us different facets of information superiority in the context of customer experience management, or “customer centricity.” He demonstrates how the capability to collect and analyze data related to customers and customer interactions can lead to different strategies, from players cornering market segments by monopolizing customer data and turning it into a product (conventional information superiority), through attempts to use contextual data to respond dynamically to customer needs and wants (adaptive information superiority), up to “allowing the customer to actively participate in the creation of content” (collaborative information superiority).
Next, Stefan Henningsson and Christian Øhrgaard offers a technology-driven perspective on information superiority and digital capital. In their article, the authors discuss the process of converting digital artifacts — which produce a “digital trace” — to digital capital, assets that can be reliably and systematically used to support fact-based decision making. Henningsson and Øhrgaard argue that “digital artifacts present new opportunities for fact-based management that can meet the increasing need for innovation of products and processes in the digital era.” The authors recommend a thorough, five-step process of transforming digital artifacts into digital capital and advocate thefollowing key managerial principles: focus on areas where transformation can create a meaningful impact on the organization; use tools that offer specific, actionable insights; and understand that digital capital should primarily enable future actions, not just explain the past.
Our final author, Tarun Malviya, supports the view that information superiority has to be rooted in evidence-based management. At the same time, he makes the interesting observation that business transformations — and digital transformations in particular — can make existing information superiority capabilities unsustainable. Whereas established strategies are executed through tested, optimized business operating models, the new strategies often associated with digital transformations are neither established nor optimized. The author argues that “to make sure that [the transformation] occurs smoothly and is working as expected, it is imperative to continuously measure the [business operating model’s] effectiveness both in terms of current and predicted performance.” To support decision makers in their efforts to manage organizations that are undergoing a (potentially continuous) transformation, Malviya offers a framework that can be used to measure the effectiveness and efficiency of the target business operating model.
One of the big paradoxes of digital business is the fact that technology — the very asset that enables creative organizations to envision, deliver, and monetize business innovations (new value propositions, better experiences, smarter products) — lowers the barriers to entry for the followers who would copy and improve on the ideas of the pioneers. Sustainability of digital business is of primary importance to anyone who wants to bet their money and career exploring these exciting opportunities, which may only grow with the advent of commercially viable artificial intelligence, augmented reality, and the Internet of Things. As the capabilities and pervasiveness of the technosphere inevitably evolve, we are challenged to make our organizations smarter and more resilient in a very turbulent and chaotic business environment. We believe that our authors’ insights on information superiority and digital capital will serve as inspirations on that journey.