The Importance of Information

A generation ago, computer hardware and software had little to do with managing business information. Today, computer hardware and software are an integral part of managing business information.

This is due mainly to something called Moore’s law. Gordon Moore is one of the founders of Intel Corporation, which makes 75 percent of the integrated processors used in PCs. In 1965, Moore predicted that computer-processing power would double and that its cost would drop by 50 percent every two years.

Raw data are facts and figures. Researchers make the distinction between raw data and information. In today’s hypercompetitive business environments, information is as important as capital (that is, money) for business success, whether it’s about product inventory, pricing, or costs.

First-mover advantage is the strategic advantage that companies earn by being the first in an industry to use new information technology to substantially lower costs or to differentiate a product or service from that of competitors.

Companies that use information technology to establish first-mover advantage usually have higher market shares and profits. Companies need to address three critical questions to sustain a competitive advantage through information technology.

Second, is the information technology the same or different across competing firms? If all the firms have access to the same information technology and use it in the same way, then no firm has an advantage over another (that is, there is competitive parity). Third, is it difficult for another company to create or buy the information technology used by the firm?

In short, the key to sustaining a competitive advantage is not faster computers, more memory, or larger hard drives.