Meeting clients and discussing their IT challenges and how they look at how IT can support competitive advantage is always interesting and enlightening. One common argument that often comes up is that the truly differentiating solutions, where a company builds an edge towards their competitors, need to be supported by internally developed IT systems that are unique. The view is that standard off-the-shelf packages can´t be used since competitors could then copy the solution and the competitive edge would be lost. I would like to state an alternative view on this!

Off the shelf systems with standard functionality can always be used for standard processes that are shared among all companies. This would include things like invoice handling, order handling and similar transactional processes that essentially are hygiene factors that are needed to run a company. These kind of services could also very well be outsourced to a service provider where the company access their needed information and data through a web interface. The main aspect on how to handle these type of services should be on cost containment.

Some core processes, where actual value is added should be developed by the company itself. One of the best examples of such a core process is Google’s PageRank algorithm and the systems attached to it. Such a system and service can never be bought from an external supplier, it is in the absolute core of the value creation for Google.

Some other value adding processes could very well be bought as services from other parties. The common factor for such processes is that the value that IT provides to them is in HOW IT is used, not the actual services that are delivered by IT. 

One good example would be, a virtual t-shirt company. The basic logic behind Threadless is that members of the site design their own t-shirt, uploads it to the site (which essentially is a community site), other members of the site vote for their favourite design and the top votes get produced and sold through their website. This has turned out to be a quite profitable business. The value that they add is essentially that they connect designers and consumers of t-shirts, i.e. they are not using a specific proprietary IT service that create value by delivering a specific solution that can’t be found somewhere else but it is in HOW they use IT for the purpose of connecting people. The value to the members of the site is not the actual functionality of the site (as long as some basic standards are met), the real value are the other members of the site! I don’t know the exact architecture that Threadless uses but let us examine how another company could build a similar solution with standard off the shelf components. Remember, the value is not in the functionality but in HOW that functionality is deployed to connect people (i.e. how do we design a business model, how do we attract people to contribute, should we rewards top contributors and make it visible, can we write insanely funny texts for the webpage to make it fun to read)

  • Infrastructure
    • Use Amazon S3 and EC2 to provide storage and server capacity to run your application.
  • Billing and logistics
  • Finance and HR
  • CRM
  • Networking capabilities
    • Use Ning to build and maintain social network.
  • Communication and marketing
  • T-shirt sourcing
    • Use American Apparel Wholesale t-shirt sourcing for clothes.
  • Printing

I might have missed a few bots and bolts here and there but essentially these are the services that you need to run Threadless. You might want to write a few applications that do some fancy networking data mining and push it back into the application at the Ning platform. But all in all, if your true competitive advantage is in the product you produce (remember, the Threadless value is not the IT, nor the product but the connection of great designers and interested consumers) an off the shelf assembly like this might very well be a great differentiator compared to your competitors.

So this brings us back to the title of this post.What have we actually done here? We have “assembled” a platform that essentially could deliver the same kind of services as the Threadless plattform and we have assembled it by using standard off the shelf services and applications. The competitive advantage comes from the design and architecture of the standard components and HOW we use them. 
This is Lego IT. Give me a box full of Lego pieces and I will probably build a square box in only one colour. Give the same box to Damien Hirst and the result will very very different. He is the superior architect and could probably make something amazing from the standardised pieces that Lego consists of. This is one of the ways companies can create competitive advantage and lower cost with IT at the same time. Might come in handy during next year budget cuts.