Platt Perspective on Business and Technology

Leveraging information technology to revitalize mature industries and marketplaces 8: adding in a competitive context 3

Posted in business and convergent technologies, strategy and planning by Timothy Platt on February 19, 2014

This is the eighth installment in a series in which I discuss and analyze businesses as information management systems, and in which I characterize their competitive strength and marketplace capabilities in corresponding information technology implementation terms (see Ubiquitous Computing and Communications – everywhere all the time 2, postings 273 and loosely following for Parts 1-7.)

I began the thread of discussion of this series installment in Part 7, focusing there on an individual business to individual business competitive context. I complicated matters by adding in the possibility that one or both of a pair of directly competing businesses might be single location businesses and one or both might be outlets belonging to larger, chain store operations. And I ended that posting’s discussion by overly compressing what is in fact a much more complex area of discussion. I begin this posting by explaining that at least in a little more detail.

A larger multiple-location business can and often does offer economies of scale for its perhaps many business locations, and its locally sited operations. This certainly applies for purchasing, whether of salable inventory or of supplies and materials needed for business maintenance. But there can be disadvantages of scale too, as well as gray areas where local outlets of larger businesses and locally owned and run businesses can operate on an essentially equal footing. Local marketing is definitely a place where locally owned and run can hold an advantage, and particularly where local is a draw for customers in and of iself, and where distantly owned and run large businesses are viewed as not being connected into or part of the local community. I mention the issue of largely autonomous local franchise operations, versus by contrast, tightly controlled outlets that have to remain directly responsive to outside and perhaps distant oversight and management as a source of nuance here. But either way, large business and perceived as such, versus locally owned and independently operated can make a positive difference for local marketing and community identity purposes.

But let’s reconsider the one area of potentially significant advantage that I cited for large businesses and for their franchise and other locally sited outlets: economy of scale in purchasing. That is in fact often a real source of value, helping significantly with cash flow and profitability. But I have also seen central management and overall brand owning business headquarters impose “in-house managed” inventory purchasing systems on franchises that are onerous, forcing local outlets to buy essentials at higher costs to themselves then they could realize with local self-selected sourcing – as a part of the franchise cost to the brand name owning business. My point here is that the issues of big name business versus small and locally owned can get very complex when you see this played out by real business organizations, where their worst competition for some chain operation businesses can be between the centrally owning home office and their own outlets and franchises.

As a final additional point here, I have been citing local marketing here and in Part 7 as an operational area of particular interest, and in this information systems and processes context, because marketing is quintessentially all about developing and presenting information. So the fact that this can reverse what at first glance might seem an automatic big business advantage is telling. And with this added in, both to help explain and to help complicate matters for the end of Part 7, I turn to consider the intended topic of this posting: supply chain systems and competition between them. And I start out with a simple principle that can in most circumstances be considered as if axiomatically immutable:

• As soon as you add competition to a marketplace and to the businesses that serve it you create pressures for change.

When you view and I add model a business in terms of its information management systems, as they formally standardize and enable their ongoing operational and strategic processes, you measure and track this change in terms of its impact on competitive position, and gain or loss of competitive advantage. And this is where the concept of natural selection enters this narrative, and this is where competitive position and competitive selection at the supply chain level enter this discussion too.

• When the concept of natural selection is invoked in its usual biological systems context, it is individuals with their complete genomes that do or do not survive to successfully perpetuate themselves. But over a span of generations, and certainly for sexually reproducing species where genomes are assorted and remixed and blended from generation to generation, the ultimate unit of natural selection is the individual gene.
• A gene is a set of instructions: a blueprint encoding a structural or functional, or a structural and functional molecule that serves as a component type in the overall body plan.
• In a business context, competitive selection, on the most directly observable level, takes place between entire businesses (as a simplest consideration.) But ultimately, the basic and most fundamental unit of selection between them is the individual operational process. New competitors develop and adapt combinations of operational processes from their own ongoing experience and through emulation, and as a response to their competitors, and as businesses grow and evolve they change and update their processes and systems of operational processes too. So the basic selection unit is the individual operational process.
• Like genes in a biological system, operational processes in a business system offer levels of competitive advantage, or of disadvantage that are largely context-based. For a simple biological systems example, I would cite industrial melanism: an empirically observed phenomenon in which certain species of insect, and particularly certain species of moths and butterflies gain advantage from a genetic mutation that darkens their wings and body color – precisely and explicitly when they happen to live in areas were soot and other industrial pollution darkens the surfaces that they have available to alight upon. Absent this increased pollution-caused darkening in their habitats, darker coloration increases vulnerability to predation and reduces competitive capability.
• Business operations can differ in realized competitive value in a similar way. As an example, an up-front more complex and costly business intelligence access approvals process might be a competitive detriment, absent externally sourced security risk such as hacker intrusion attempts. But it might offer essential competitive capability and even essential overall business value if that form of business risk is realized and that business does face this type of information systems intrusion attempt.

And this brings me to a point that I noted as an aside above, where I wrote in a bullet point of competitive selection taking place between individual businesses “as a simplest consideration.” And that brings me to competitive selection at the supply chain level. I mentioned in Part 7 that I will discuss an approach to natural selection called group selection for that, and add that I will also discuss a phenomenon called kin selection in that context too. And as I have passed the 1,100 word count for this posting now, I will do that in a next series installment. Meanwhile, you can find this and related postings at Business Strategy and Operations – 3 and also at Page 1 and Page 2 of that directory. You can also find this and other related material at Ubiquitous Computing and Communications – everywhere all the time 2 and at the first page to that directory.

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