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Book Contents

Ch. 2
Gaining Competitive Advantage with DSS

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How can DSS provide a Competitive Advantage?

Evans and Wurster (1997) argue in a recent Harvard Business Review article that the World is in the midst of a fundamental shift in the economics of information. They think major changes will occur in the structure of entire industries and in the ways companies compete. The change that they feel is so important is the widespread adoption of Internet technologies. They believe the Internet is supporting new behaviors that are reaching critical mass. They claim millions of people are communicating at home and at work in an explosion of connectivity that threatens to undermine the established value chains for businesses in many sectors of the economy.

Internet technologies have also opened wide the doors for innovative web-based decision support systems. Inter-Organizational DSS can improve linkages with customers and suppliers. In some situations Group DSS and Groupware can remove time and location barriers. DSS can help a firm operate seven days a week, 24 hours a day and without regard to an employee’s or a customer’s location. In some cases DSS can help integrate a firm’s operations. An Inter-Organizational Web-Based DSS can create linkages that are difficult to overcome.

DSS can potentially help a firm create a cost advantage. DSS can provide many benefits including improving personal efficiency and reducing staff needs, expediting problem solving and increasing organizational control. Managers who want to create a cost advantage should search for situations where decision processes seem slow or tedious and where problems reoccur or solutions are delayed or unsatisfactory. In some cases DSS can reduce costs where decision-makers have high turnover and training is slow and cumbersome, and in situations where activities, departments and projects are poorly controlled.

Also, DSS can create a major cost advantage by increasing efficiency or eliminating value chain activities. For example, a bank or mortgage loan firm may reduce costs by using a new DSS to consolidate the number of steps and minimize the number of staff hours needed to approve loans. Technology breakthroughs can sometimes continue to lower process costs and rivals who imitate an innovative DSS may nullify or remove any advantage.

DSS can potentially create a differentiation advantage. Providing a DSS to customers can differentiate a product and possibly provide a new service. Differentiation increases profitability when the price premium charged is greater than any added costs associated with achieving the differentiation. Successful differentiation means a firm can charge a premium price, and/or sell more units, and/or increase buyer loyalty for service or repeat purchases. In some situations competitors can rapidly imitate the differentiation and then all competitors incur increased costs for implementing the DSS.

Finally, DSS can be used to help a company better focus on a specific customer segment and hence gain an advantage in meeting that segment’s needs. MIS and DSS can help track customers and DSS can make it easier to serve a specialized customer group with special services. Some customers won’t pay a premium for targeted service or larger competitors also target specialized niches using their own DSS.

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