Business & IT alignment and Competitive Advantage

I have recently been contacted my former colleagues with whom I worked in a Motorola authorized reseller in China. My first placement there was to implement an ERP system and I was told that they were getting more and more used to it. While still remembering the frustrations and resistiance we all shared, this makes me want to introduce some thoughts about the use of information technology in modern organizations.

The term "alignment" usually can be explained as a smooth integration between two or more than two things. The motivation behind pursuing effective business-IT alignment is probably the great challenge faced by companies in the 21st century. Michael Porter (1985) suggested that a firm’s competitiveness ultimately falls into cost advantage, differentiation and focus. Firms pursuing the focus on both low cost and differentiation will face a dilemma. However, it is arguably true that many firms have achieved both through smooth business-IT alignment. For example, Amazon.com, the largest online book retailer, uses data mining technologies and the Web to delivery low price books while offering personalized features for customers.

Advantages created by technologies also raise the question of being either technological leadership or follower. Earl(1998) suggested that: ”The firm that pursues a strategy of being an IT follower may be able to improve considerably on the design of a predecessor’s system and, with fourth-generation productivity tools, might do so in short order.” However, there have been tons of online retailers who tried to create uniqueness by following the Amazon model but yet not quite successful. Porter (1985) also indicated: “Firms tend to view technological leadership primarily as a vehicle for achieving differentiation, while acting as a follower is considered the approach to achieving low cost.” This answer suggests the success of utilising technologies to drive business must depend on a firm’s understanding of its position in an industry, which corresponds to Porter’s five-force analysis.

On the other hand, companies tightly aligning business with IT may neither improve competitiveness nor reduce it or it could distract a firm from achieving competitive advantage. Davenport (1998) indicated that the failure the enterprise systems in Apple computer did not affect its competitiveness because of its strong brand and unique operating system. He also warned that companies that compete on cost may lose the initial advantage because of implementing costly ERP applications.

The complexity of ERP applications in today’s enterprises may also make the usefulness of the alignment model questionable. eweek (2003) reported that increased strategic alignment could be harmful if it restricts IT infrastructure flexibility. For example, Dell’s implementation of SAP conflicted with its flexible business model because the standardized application prevented regional managers from responding to their local markets. Problems become even more complicated when considering ERP implementation in a different cultural context. Xue (2003) argued that the unique Chinese culture could dramatically cause unpredictable under-performance of Western ERP systems and cultural issues should be tackled first when introducing ERP to Chinese enterprises.

Google's hard move in North East Asia

I remember reading lots of academic articles discussing the standardization vs customization of a product or service when global firms entry a foreign market. Although most of the articles I have come across focus on the traditional marketing field, this kind of notion is taking place more and more heavily in those relying the Web to survive and expand. A report from Business Week has caught my attention, the report talked about how the South Korean search engine-Naver, owned by NHN (http://www.nhncorp.com/), took over Google in the Korean market. NHN’s strategy was not too difficult to understand, targeting the key weakness of Google, which is its poor performance of looking for abundant Web documents in Korean. NHN executives made concerted efforts to create their own content and build up Naver's database with partnerships with content owners. To keep its edge, NHN blocked rivals from accessing the trove. To a great extent, such move stopped Google showing relevant results appealing to local users.

The report reminds me of the search engine atmosphere in China, where Google is having a hard time getting its China strategy to Baidu.com. The Chinese search engine owns more than 58% of China's Internet search market, compared with less than 25% for Google. The reason is simple, just like how NHN won the market in South Korea, most Chinese and Korean people do not feel that they can get more quality information in their own native language from Google. It is not surprising to see that most of my family relatives and friends use Baidu much more often.

The search engine giant has to face the reality: its dominance in northeast Asia is weak. However, Google is still trying to customize its service in order to make it more appealing to the local market. One effective way is to develop strategic alliances. Google now has a revenue-sharing partnership with Tianya, a Chinese social-networking site. In addition, big portals like SINA.com China.com all have integrated Google search into their website, so that visitors have more channels to put their search terms in Google’s search engine. Would it be successful on its way to isolate Baidu? We’ll see.

You can find the report I read on Business Week from here:

http://www.businessweek.com/globalbiz/content/sep2008/gb2008095_505433.htm

Something interesting about Lenovo's ordering system

I don't suppose if most of my friends have got the similar experience. On Tuesday, 2nd of Sep, I was sitting in front of my computer and checking Lenovo's Canadian website. I was tempted to click on the offer shown on the homepage, after that I noticed that all the Thinkpad laptops were priced as $0, which was a big surprise. Being out of interest, I went further with a few more clicks and then I found most additional services and software and accessories were also free. Unfortunately I do not live in Canada so I could not register an account, which is required to place the order. Surely this was a mistake, probably because of the system update during that time. I also know that even if the order was being placed, it would have been rejected by Lenovo anyway.

The reason I am mentioning here is that because a similar case happed in Jan this year. I can still remember that it was Lenovo's US website and the well-known Thinkpad T61 was priced as $224. As a result all the buyers who tried to take avantage of that error were all turned down by a letter from Lenovo to inform them that orders got cancelled.

Although Lenovo is a Chinese company and I myself is a Chinese consumer, I am not the first person who would argue about Lenovo's service quality and I also often heared about the dealy of delivery before. I think it still has lots to learn in the global market. By constrast, when IBM made the same mistake by pricing something (I cannot remember the name, maybe an optical drive) for $1 only on the website, the company delivered every single product to its buyer rather than sending a letter to cancel the order. Maybe Lenovo is considering making profit as a more important subject than building its brand. Anyway, let's just wish it will not keep making more mistakes like this.

Communication is the key

Communication, just like the important role it plays in the field of traditional marketing, has a great deal of impact on the web marketing as well. Recently our company has removed a range of replica products and punshied their sellers. Thanks to the effective and time-efficient e-mail sent to every publisher, we hardely received any complaints from publishers. Here I would also like to thank their kind co-operations.

Despite this, there still have been some publishers who showed excellent performance in the past month. We found that communicating with them brought some surprises. For example, one of the TOP 10 publishers I contacted not only answered my question regarding how he prompted our banner link, he also mentioned some of our competitors' commision policy. That's some extra surprise. However, I am not arguing that copying from your competitor is a good practice, since every company has its own strategic focus, e.g. acquiring new buyer or retaining old buyer. This will all be reflected by every company's affiliate program policy.

For every affiliate marketing specialist, part of the success depends on how you can overcome the sense of insecure and unfamiliarity between you, as a merchant and your publishers, in this virtual world. Do not just rely on those fancy web tools to develop your affiliate program, the root of long-term success usually relies on something rather basic and simple :)



Wei