Chapter 1: Strategic Management and Strategic Competitiveness 13
The Information Age
Dramatic changes in information technology (IT) have occurred in recent years. Personal
computers, cellular phones, artificial intelligence, virtual reality, massive databases (“big
data”), and multiple social networking sites are only a few examples of how information
is used differently as a result of technological developments. An important outcome of
these changes is that the ability to effectively and efficiently access and use information.
IT has become an important source of competitive advantage in virtually all industries.
The Internet and IT advances have given small firms more flexibility in competing with
large firms, if the technology is used efficiently.^59
Both the pace of change in IT and its diffusion will continue to increase. For instance,
the number of personal computers in use globally is expected to surpass 2.3 billion by 2015.
More than 372 million were sold globally in 2011. This number is expected to increase to
about 518 million in 2015.^60 The declining costs of IT and the increased accessibility to
them are also evident in the current competitive landscape. The global proliferation of
relatively inexpensive computing power and its linkage on a global scale via computer
networks combine to increase the speed and diffusion of IT. Thus, the competitive poten-
tial of IT is now available to companies of all sizes throughout the world, including those
in emerging economies.^61
Increasing Knowledge Intensity
Knowledge (information, intelligence, and expertise) is the basis of technology and its
application. In the competitive landscape of the twenty-first century, knowledge is a criti-
cal organizational resource and an increasingly valuable source of competitive advantage.^62
Indeed, starting in the 1980s, the basis of competition shifted from hard assets to
intangible resources. For example, “Walmart transformed retailing through its propri-
etary approach to supply chain management and its information-rich relationships with
customers and suppliers.”^63 Relationships with customers and suppliers are an example of
an intangible resource which needs to be managed.^64
Knowledge is gained through experience, observation, and inference and is an intan-
gible resource (tangible and intangible resources are fully described in Chapter 3). The
value of intangible resources, including knowledge, is growing as a proportion of total
shareholder value in today’s competitive landscape.^65 In fact, the Brookings Institution
estimates that intangible resources contribute approximately 85 percent of total share-
holder value.^66 The probability of achieving strategic competitiveness is enhanced for
the firm that develops the ability to capture intelligence, transform it into usable knowl-
edge, and diffuse it rapidly throughout the company.^67 Therefore, firms must develop
(e.g., through training programs) and acquire (e.g., by hiring educated and experienced
employees) knowledge, integrate it into the organization to create capabilities, and then
apply it to gain a competitive advantage.^68
A strong knowledge-base is necessary to create innovations. In fact, firms lacking the
appropriate internal knowledge resources are less likely to invest money in R&D.^69 Firms
must continue to learn (building their knowledge-base) because knowledge spillovers to
competitors are common. There are several ways in which knowledge spillovers occur,
including the hiring of professional staff and managers by competitors.^70 Because of the
potential for spillovers, firms must move quickly to use their knowledge in productive
ways. In addition, firms must build routines that facilitate the diffusion of local knowl-
edge throughout the organization for use everywhere that it has value.^71 Firms are better
able to do these things when they have strategic flexibility.
Strategic flexibility is a set of capabilities used to respond to various demands and
opportunities existing in a dynamic and uncertain competitive environment. Thus,
strategic flexibility involves coping with uncertainty and its accompanying risks.^72
Strategic flexibility is a
set of capabilities used to
respond to various demands
and opportunities existing
in a dynamic and uncertain
competitive environment.