application software has become a commodity, how can a company be better than
the competition? Commodity software means all or most of the products have the
same functions. Since the vendors strive to provide best practice, practices
based on the product will mean a company will have the same practices as their
competitors. So, if both you and your competition use software, and application
software is a commodity, how can you be better than your competitors?
need to face the fact that commodity software means everyone can have best practice.
We cannot assume that competitors are doing less with than best practices because
today, it is easier to use best practice than not to. We need to assume that
application software makes us as good as our competitors at best. This is true
unless we take a conscious step to be better.
where in the business do we need to be better than best practice? The answer
comes from the company's core strategy. Business schools and consultants tell
us that only three strategies exist:
Low cost producer
Superior customer service
company must focus on one of these three to be successful. That does not mean
they can be weak in the other areas, it means you have to at least be average
in those areas. As one executive related, "We need two C's and an A+". Can a
company get two or three A+ grades? Yes, it is possible, but business schools
tell us that this means that the company could have been even more successful
if they had spent more time on only one instead of two or all three.
what does this mean to commodity software, best practice and competitive advantage?
It means that application software can provide best practice but that only gets
a company even with the competition. Best practice does not mean an A+ but it
may mean a grade of B or C according to your industry. A company needs application
software to give them a passing grade in two of the three areas, but for their
core competitive strategy, they need more. What they need for an A+ is "industry-leading
Can Software Lift You Above Your Competition?
industry-leading practice be found in a software package? If we accept that
application software is a commodity, by definition, the answer is no. If a vendor
claims industry-leading practice, then it is available to your competition.
If we really want to have practices that lift us above the competition, it cannot
be in a standard package.
can we get to industry-leading practice with an application package? Yes we
can, but not unless a conscious decision is made to go beyond what is provided
in the software. Getting industry leading practice starting with a package means
excelling in how the package is used, or extend the package into new areas.
For example, if a company's core competitive strategy is to be the low cost
producer, how can they use the base provided from packaged software to drive
cost even lower? How do they make better decisions and make them faster. How
can they communicate better, lessen cycle times, remove non-value added steps,
a company could get to industry-leading practice though a custom development
effort. This is a viable path but often proves expensive in both the short term
and the long term. If a company has truly unique and superior business practices
to further their core competitive strategy, they may have no option other than
the custom path. Note, if they convince the vendor to add these practices to
the base product, they are giving away their hard earned competitive advantage.
competitive advantages are temporary. Therefore, unless something is done to
stay ahead a company falls behind. Staying ahead means continual improvements.
Therefore, think of the software that supports the core competitive strategy
as an on-going work in progress. If the software cannot change quickly enough
or at an economical cost, any competitive advantage will be lost as the competition
improves. The long-term ability for the software to change may be as important
as what it provides today.
enterprises Understand your competitive strategy. Identify the core
strategy (low cost producer, superior customer service or innovation). You need
best practice (at least a C) in the two areas that are not your core competitive
strategy. Continually focus on projects that improve your core competitive strategy
to get an A+ in that area now and into the future. Packaged software is an excellent
place to start, but you need to go beyond the inherent practices in the package
by using it better, expanding its functions or even developing custom, industry-leading
functions. To stay ahead of the competition, view the software and practices
that serves your core competitive strategy as an on-going work in process.
- What do customers want from you? They want to be a C or better in some areas
and an A+ in others. Always understand your customers' competitive strategy
and sell to that need. Highlight how your products and services can make them
better than the competition by serving as a base for their search for an A+
in their core competitive strategy area. Discuss and demonstrate how your products,
services and technology can give them the ability to stay ahead by quick and
economical evolution of their industry-leading processes. Your products still
need to be best practice in all areas in insure your customers get their C or
better grades. Should you pick the areas to get a C and focus on a single area
where you allow your customers to get an A+? This will mean you do better when
the customer's core competitive strategy matches your chosen area but less well
in other deals.
Thompson is a principal of Process ERP Partners. He
has over 25 years experience as an executive in the software industry. Olin
has been called "the Father of Process ERP." He is a frequent author and an
award-winning speaker on topics of gaining value from ERP, SCP, e-commerce and
the impact of technology on industry.
can be reached at Olin@ProcessERP.com.