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Section 2.4.6

Consulting Reports

The consulting report provides expertise on technical problems for audiences that are not expert in the field of interest. Consulting reports are written by outside experts for groups or organizations that do not have the time or the expertise to treat the subject or problem. Hence, a consulting report may present experimental work on a problem defined by a client. One common variation on the consulting report is the white paper, which examines a general problem from an expert's perspective. White papers do not present experimental inquiries but, rather, cover a series of findings or generalizations based on expert insights into a problem or class of problems and a set of issues. These findings constitute the body of the consulting report. In other respects, the consulting report follows the general structure of the formal report: front matter, body, and back matter.

The following white paper examines a class of problems from an expert's point of view. It is addressed, however, to the nonexpert who stands to benefit from this information.

The New Strategy of Integrated Systems:

Why Technology Doesn't Always Mean

Competitive Advantage

May 15, 1984

M. B. Packer

Executive Vice President

Technology Systems and Operations

Simon and Schuster

Upper Saddle River, NJ


Many executives now devote substantial portions of their day to worrying about new technology: how to develop it, how to market it, how to use it, and not least how to pay for it. Yet, because the new wave of technology sweeping through corporations is fundamentally different from previous technologies, new kinds of strategies must be devised to gain competitive advantage.

The new wave of technology has been building ever since the advent of computers. Between information technology (e.g., database management systems, office automation, and personal computers) and design and manufacturing technology (e.g., computer-aided design, robotics, automated storage/retrieval systems), few industries have remained untouched by computerization. Any firm that wishes to remain in business must ride this wave of technology, both in its product line and in its own operations.

How New Technology Can Build Competitive Position

There are only three ways to gain advantage using technology: keep your competitor from obtaining it, develop or adopt each new technology faster than your rivals do, or implement it better than the opposition.

The first of these avenues--keeping competitors from obtaining technology--is impossible if the technology was developed in another industry. For instance, Aetna Insurance cannot stop Liberty Mutual from buying the latest IBM computer. Even proprietary technology developed for a firm's own products is not always safe: "reverse engineering" can reveal technological advances to competitors. A strategy based on trying to keep the competition from obtaining technology over the long term seems to work only in industries with large financial barriers to entry (e.g., the chemical process industry) or for firms with unusually strong patent positions.

The second avenue, to develop or adopt new technology faster than the competition, can work in two situations: extremely agile companies willing to commit their resources to speculative ideas, and large firms that dominate by virtue of their sheer financial and technological power. However, firms that try to stay ahead of their competitors by continually marketing technologically more advanced products are vulnerable to later market entrants, who learn from earlier mistakes while avoiding heavy R&D investments. Similarly, attempts to outflank rivals by adopting new technology for one's own operations may simply lock a company into expensive and obsolescent systems.

The third approach, to surpass competitors by implementing technology better in your own products and operations, has been largely neglected by corporate strategists in the U.S. Yet Japanese firms have captured whole markets by stressing the implementation of manufacturing and product technology. These firms lavish attention on vital components of implementation: quick changes in manufacturing set-ups, detailed quality control, low inventories, and highly trained workers. Using systems and technology, these Japanese firms have made implementation the core of their strategy of quality and responsiveness to customer demand.

In contrast, American strategists focus on broad considerations of market growth rates, market share, and the competitive structure of the industry. Executives concentrate on quick, dramatic moves (such as acquisitions and divestitures) that they can directly control. Unfortunately, implementing new technology is harder to accomplish. It often requires a change in corporate structure and culture, and demands detailed knowledge of the technology and operations of both one's own business and that of one's customers. As Robert H. Hayes and William J. Abernathy have pointed out, relatively few American executives have this kind of knowledge (Robert H. Hayes and William J. Abernathy, "Managing Our Way Toward Economic Decline," Harvard Business Review). As a result, implementation is viewed as an obstacle rather than an opportunity, as something that needs to be "managed" and overcome.

Yet implementing technology better than competitors can be the key to long-term success: the "how" is more important than the "what." The ability of a firm to use implementation as a competitive weapon hinges upon its appreciation of the basic characteristics of these new technologies and of their strategic implications.

The Rise of Integrated Systems

Most new technologies share not only a common dependence upon computers but also two crucial, basic characteristics: they hold the potential to integrate business functions and to improve the flexibility with which an organization can respond to a changing environment and change its direction. Three examples will illustrate this point.

The new wave of participative management methods and work redesign efforts is also characterized by its emphasis on integrating business functions and increasing flexibility. For example, the quality control concepts espoused by Deming, Juran, and others combine the functions of production work, quality assurance, and often maintenance or process development, as well. Since workers have broader skills, management can deploy them more flexibly. Similarly, new transaction processing systems in some banks give one clerical worker control over an entire customer transaction, improving both job satisfaction and responsiveness to customer requests.

All of these new technologies and management methods are fundamentally different on a strategic level from older technologies. Older technologies such as transfer lines in mass manufacturing or early financial transaction processing systems targeted two strategic goals: achieving economies of scale and tightening management control. These technologies and methods assumed strategies of minimization: to minimize cost and to minimize variances. The result was systems that divided tasks into small pieces and repeated each task efficiently. Unfortunately, as world-wide competition becomes more important and as manufacturers stress quicker response to customer demands, these strategies are no longer adequate.

Implications for Corporate Strategy

How can a firm use new technology to maximize the effectiveness of its operations and of its products? The key is not to look at new technologies and management methods in isolation. Each represents a possibility of competitive advantage by integrating business functions and enhancing flexibility. The implications of this idea range from new product development to customer service and from manufacturing to finance. Four brief examples show the advantages of this type of strategic approach.

Technology and Strategy Formulation

Strategic planners traditionally study the structure of the market in great detail: market segmentation, industry structure, and product positioning are ubiquitous phrases in their vocabulary. Technology often appears only in comparisons with competitors: does the firm lead or trail its rivals in product line X? Does it have lower manufacturing costs in Division Y?

Yet technology and its implementation can play a more central role in strategy formulation. Planners should consider technology not just as something in which the firm is strong or weak, but rather as something with its own inherent strategic characteristics. Implementation of technology can be viewed as an opportunity to gain competitive advantage, not just as a challenge thrown in the path of strategic planners. Specifically, strategic planners should:

Without modern technology, firms will not survive. Yet paradoxically, technology by itself often gains a company little beyond parity with its strongest rivals. It is in the implementation of technology to coordinate and integrate business functions that a firm can win a new kind of competitive advantage.

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## Consulting Reports ##
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