An online monthly research publication by the Ivey Business School 

Volume 14, Number 3
March 2008

From ordinary to extraordinary

The research of Oana Branzei shows that a common resource can lead to a significant competitive advantage

For Starbucks it’s the brand. For Wal-Mart it’s the price. They each have a source of competitive advantage that sets them apart from their competitors.

In the past, researchers tended to focus on how to sustain a competitive advantage once you had it. But in recent years they have been looking more closely at where it comes from. That’s the question that intrigues Ivey Professor Oana Branzei, who studies the origins and early dynamics of competitive advantage.

Corporate strategists, in their search for that elusive something that their competitors can’t replicate, usually look to one resource or investment that is really unique. “The accepted wisdom is that it’s only the extraordinary resources that give firms the edge,” she says. “But the development of an extraordinary resource is often preceded by the acquisition of a very ordinary one.”

In a recent study, Branzei asks the question: can an ordinary resource, available to everyone, lead to an extraordinary advantage? After all, this idea holds true in other areas. For example, a marketer might look at an ordinary moment in someone’s life and see the basis for a brilliant ad campaign. A teacher may leave a student with a transformative insight that’s lost on others.

In her study, Branzei focused on off-the-shelf information technology, a common yet valuable resource that is accessible to all firms at the same price. When a firm purchases IT, it’s often accompanied by a further investment in training. Her idea was to see whether a common resource such as IT could be leveraged and combined with a firm’s human capital to develop something unique.

Branzei conducted her study with Ivey Professor Stewart Thornhill, using the outstanding resources of Statistics Canada. Undertaking a longitudinal study of 823 firms in 21 manufacturing industries, they identified firms that invested in common IT solutions and followed their purchases with further investments in training. Through this data they also identified which firms were better endowed with human resource capabilities.

As expected, they found that adoption of ordinary IT on its own was not a source of competitive advantage. When accompanied by specialized training, however, ordinary IT often delivered extraordinary performance, at least in the short term. “It’s not the ordinary resource, but what it triggers that provides the performance edge,” says Branzei. “It’s the combination of the ordinary resource and what you do with it after that has this effect.”

Some firms benefited more than others. Those that were strong in human resources significantly outperformed those that were weaker, but not in all industries. “Firms with strong human resources that invest in training after IT adoption derive greater benefits,” says Branzei. “But this advantage is only found in fiercely competitive, technology-intensive industries that are not expanding - in other words when one has to eat someone else’s pie.” In industries that were less complex and growing quickly, superior human capital did not result in superior performance.

In looking for a competitive edge, managers usually ignore resources or investments that are available to all its competitors. That’s a mistake, says Branzei. “When something is accessible to everyone and fairly priced, managers assume that the benefits to all adopters will be equal,” she says. “In fact our research shows quite eloquently that the value one extracts from ordinary technology is really dependent on what kind of investments this initial adoption triggers.”

The lesson for managers is to pay more attention to ordinary resources and how they might be put together with others to create a “magic combination.” This gives managers a new perspective on competitive advantage, says Branzei. “Our study shows that what might seem ordinary and accessible to others may actually be something you really need to leap at and develop.”
 

Professor Branzei's Homepage

Supplement: Q&A with Professor Nicole Haggerty on the Importance of Business-IT Alignment

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