TABLE OF CONTENTS Lynda M. Applegate, F. Warren McFarlan and James L. McKenney
Five key questions can be used to guide an assessment of the impact of IT on strategy.
A successful entry barrier offers not only a new product or service that appeals to customers but also features that keep the customers hooked . The harder the service is to emulate, the higher the barrier to entry. A large financial service firm sought to build an effective barrier to entry when it launched a unique and highly attractive financial product that depended on sophisticated software that was both costly and difficult to implement. The complexity of the IT-enabled product caught competitors off guard; it took several years for them to develop a similar product, which gave the initiating firm valuable time to establish a significant market position. During this time, the firm continued to innovate, enhancing the original product and adding value to the services. Competitors not only had to catch up, but had to catch a moving target.
The payoff from value-added features that increase both sales and market share is particularly strong in industries within which there are great economies of scale and where customers are extremely price sensitive. By being the first to move onto the learning curve, a company can gain a cost advantage that enables it to put great pressure on its competitors.
Systems that increase the effectiveness of the sales force represent another kind of entry barrier ...
