Technology Competitive Advantage

Internet of things is a metaphor to describe the enhanced capabilities for data gathering and transmission that exist in the world today. Different products, many that have traditionally been viewed as static, have the ability to gather and communication information. The authors outline what they mean with this awkward metaphor.

They refer to tracking capabilities, such as RFID tags -- Wal-Mart is a big proponent of these in its supply chain, enhanced situational awareness like security cameras and sensor-driven analytics such as advances in health care systems that provide decision-support information in real time. Other examples are process optimization, where data is used to enhance production, optimized resource consumption, seeking to enhance efficiency, and complex autonomous systems. The latter refers to machines that can read the external environment and react according to quasi-intelligent algorithms.

I look forward to the day that my automated car steers me head-first into the tractor-trailer in order to avoid the dog that ran in front of me. Even though I knew I had to hit the dog in order not to get myself killed. Autonomous systems like robots to clean up oil spills or perform surgeries are perhaps a little bit less dangerous to one's health.

The lesson with respect to the Internet of things is that these capabilities are being expanded, and the use of information is going to continue to drive business forward. This creates substantial opportunity for companies at the fore, and the authors wrote the article with the cautionary note in mind that companies not willing to embrace this enhanced information revolution are going to rapidly become uncompetitive. The cautionary note of course has significant implications for the market.

Proprietary information has always been a source of competitive advantage, but the sheer volume of information that is being gathered now represents a processing challenge for most companies -- the company that can process publicly-available information better can also gain competitive advantage. Companies that master the use of data almost always gain competitive advantage. Wal-Mart's use of RFID helps to give it the most efficient distribution system possible, helping it to maintain a price advantage over its competitors.

Amazon sells more to consumers, and enjoys better loyalty, because of its recommendations based on other purchases. There is tremendous power in leveraging data for competitive advantage. Perhaps the most power lies with the information gatekeepers. Companies that gather information have been able to capitalize on having superior access to information, because companies seeking competitive advantage are willing to pay for superior information. Google is perhaps the best example of this, because it has more information than anybody, and makes billions as a result of that.

Being an information gatekeeper, they profit from that intermediary role between sellers and buyers, by controlling the flow of information. But for firms that can leverage emerging technologies to gather their own information, market opportunities are equally powerful.

The authors note a wide range of emerging technologies as part of their concept, so there are many different ways companies can gain competitive advantage -- tracking is one, cameras and other data gathering devices another, and these can all be distilled through proprietary analytical capabilities in order to maximize the value that a company can gain from its information gathering capabilities. In general firms succeed with data when they use it to meet customer needs. Wal-Mart thinks consumers want the lowest prices possible, and tries to deliver that.

Consumers see this, and respond with their business. Amazon's recommendations help sell people things they might otherwise not have known about, but that they will like. Again, this is a benefit to both company and consumer. Where this intersection exists is the place where significant competitive advantage can be gained. From my life, I use smartphone apps to help me find things around me. If I want a restaurant, there are apps that tell me what restaurants are in the area, and what other consumers think of these restaurants.

I feel that this is better off, because it reduces the risk associated with trying to eat in an unfamiliar area and it helps me find new things even in my own neighborhood. For the restaurants, there is benefit, too. Bad restaurants that used to survive based on information asymmetry -- too many consumers didn't know they were bad restaurants -- now stand little chance of success. This brings the market closer to maximum efficiency, and it helps encourage restaurants to be.