USING IT AS A



USING IT AS A

COMPETITIVE WEAPON

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Group 2

Megan Cox

Matthew Pasley

Vaishali Soneta

Michelle Wagener

Executive Summary – Using IT as a Competitive Weapon

Competitive advantage in IT is the method in which information technology is used by companies to create a sustainable advantage. There are numerous theories that have been proposed and utilized over the years in order to try to explain how companies leverage information technology in order to gain a competitive advantage. In our research we found that there is a tremendous amount of discussion and thought about the Resource Based View. Many researchers have “extended the theories concepts” in order to better match different industries and technologies. These extensions aim to help develop the theory and make it more applicable to all companies.

Competitive advantage may be obtained when one or more of a business’s IT systems become a critical differentiator in the business’s industry. One model for identifying critical differentiator’s places all IT systems into four different categories. These categories are useful commodity, useful differentiator, critical commodity, and critical differentiator. Useful differentiators are expensive distractions that need to be eliminated or migrated. These can be systems that differentiate a company from its competitors, but generally do not produce any added revenue. Critical commodities, on the other hand, are systems that everyone in the industry has, but whose operations are critical. The critical differentiator is something that gives your company an advantage over your competitor in the minds of your customers. The primary focus is on service excellence.

In our research, we chose to concentrate on the Resource Based View and the benefits it provides to gaining a competitive advantage. The backbone to our research was based on the Wade and Hulland article titled “Review: The Resource-Based View and Information systems Research Review, Extension and Suggestions for Future Use.” In this article, the authors build on the four main resources, value, rarity, non-imitable and non-substitutable, and add appropriability and mobility. These RBV scholars believe that resources are the main drivers of firm performance. Not all resources are sources of competitive advantage. Some resources are necessary to be competitive but in themselves are not sources of high economic rents. Barney (1991) defines resources as "all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc.”

Our research exemplifies why managers should place much of there attention on using IT initiatives for a competitive advantage because of the benefits that it will bring not only to the company but also the market as a whole. By obtaining a competitive advantage they can exploit their internal strengths, respond to environmental opportunities, neutralize their external threats and avoid internal weakness. The main benefit that IT as a competitive weapon brings to a company is that it strengthens an otherwise structurally weak department or company. That reason alone should cause managers to seek ways to use their IT functions as ways to be more competitive.

In order for our group to prove and support the Resource Based View, we performed three case studies. The case studies show a clear picture of how IT can secure a distinct competitive advantage in the market, or in the case of International Multifoods, the lack of competitive advantage that can result from IT initiatives. The companies researched were RehabCare Group, Inc, Progressive Insurance, and International Multifoods, Inc. In terms of how the research was handled, most research was done through published articles or in-depth readings. The case of RehabCare Group consisted along with published articles, a personal interview with the CIO, and a phone interview with a current manager. RehabCare Group, Inc depicts an IT driven project that not only vaults them ahead of their competitors but rescues them from their own demise. Progressive Insurance took a once staple industry of insurance and used IT driven initiatives to enter markets that were once thought unattainable. They also diversified the insurance business into a market of highly segmented products. However, with International Multifoods, they are a strong example of a company not able to attain or sustain a competitive advantage according to the Resource Based View. In reality, the companies had many other issues, which made it difficult to create a competitive advantage.

In concluding our research, there were two glaring realities that came through. One was that much research and many ideas about using IT to gain a competitive advantage were not based on our six attributes theory. Many researchers felt that the four attributes, value, rarity, non-imitable and non-substitutable, were the main staples of the RBV and the other attributes were just theory. However, we also recognize that the article we used was new, and so the theory may still be developing and being discussed, which is why it is lacking support. On the other hand, hundreds of articles support the view of the four attributes and more analysis and research has occurred based on the original theory. The second finding was that many firms can gain a competitive advantage but it is in question how long they can sustain the advantage. Companies must continually use their IT framework and skills that helped them first achieve competitive advantage to reinvent or retool their product or service they are providing. No researcher or businessman can tell how long a company can sustain their advantage. They will sustain the advantage only by continually improving their processes and products they are putting in the market. RehabCare Group and Progressive are perfect examples of companies attaining a competitive advantage in their respected markets, but how long can they sustain it? We have found the more important question to be what do companies need from their IT function in order to sustain a competitive advantage?

Introduction

The topic of our presentation and paper explains how information technology is used by companies to create a sustainable competitive advantage. There are numerous theories that have been proposed and utilized over the years in order to try to explain how companies leverage information technology in order to gain a competitive advantage. Our group researched and analyzed the various theories that exist, and choose to use the Resource Based View. Our group was able to find a more extended version of the Resource Based View, which we learned about early on in the class. We found that this theory had two more attributes than the original Resource Based View theory, and thought it would be exciting and challenging to learn this new theory and introduce it to the class.

In our research we found that there is a tremendous amount of discussion and thought about the Resource Based View. Many researchers have “extended the theories concepts” in order to better match different industries and technologies. These extensions aim to help develop the theory and make it more applicable to all companies (2). The first extension that we found was the “Dynamic Resource-Based View.” This theory is a form of the original theory, but explores the capabilities further. The theory focuses on dynamic capabilities. It explains that “dynamic capabilities involve adaptation and change, because they build, integrate, or reconfigure other resources and capabilities” (3). Hence, the theory attempts to provide a more comprehensive understanding of the Resource Based View through a detailed analysis of dynamic capabilities. Just as the dynamic resource based view tries to provide deeper meaning than the original view, other researchers have studied even further and claim that capabilities are part of it, but that it is the asymmetries that allow firms to create and sustain a competitive advantage. We are then presented with the “Asymmetry-Based View of Advantage.” Thus, researchers are trying to clarify the theory through saying that companies are built on the resources and capabilities. Yet, the competitive advantage stems from “asymmetries: imitable differences between themselves and other firms that in their initial states could in no way be considered valuable,” and turning these into capabilities which can then market opportunities (1). These are just a few of the many extensions of the theory that have been proposed, studied, and are currently trying to prove as methods for creating a sustainable competitive advantage.

The many extensions of the Resource Based View also presented a problem for our group. In our research we found that there are many articles on this theory, but in regards to information systems little discussion has occurred. Therefore, our paper presents a strong argument for how and why this Resource Based View should apply, but there is little empirical research done in this particular area to strongly support it (4). Moreover, the theory is still new, which is why there are so many extensions and new versions. This is because the theory is still developing and being researched. As a result, it is difficult to say how well the theory may be applied in all situations. Yet, our case studies were all sound examples of how the Resource Based View can be applied to information systems within companies.

There is a plethora of information and articles discussing the Resource Based View. We have tried to give a little background on what this large amount of information has taught our group, but we will focus the rest of the paper on the new version of the Resource Based View, which introduces two new concepts: appropriability and mobility. Our introduction of the theory will go into detail regarding the theory the class first studied to ensure that everyone can logically follow where the new attributes are introduced and the importance of their introduction. Our group then will present three case studies and discuss in detail how each attribute of the Resource Based View applies within that particular study. You will find that with Rehab Care Group and Progressive that both companies have been able to create a competitive advantage. Also, these companies have been able to sustain the advantage short-term, but the long-term sustainability is in question. The last case study on International Multifoods presents an excellent example of a company that was not able to create or sustain a competitive advantage. Thus, we hope that you are able to learn and understand the six attributes and how each of them may or may not be applied in various situations.

Introduction of Resource Based Theory

“Information Technology” can be defined as:

The branch of technology devoted to (a) the study and application of data and the processing thereof, i.e., the automatic acquisition, storage, manipulation (including transformation), management, movement, control, display, switching, interchange, transmission or reception of data, and (b) the development and use of the hardware, software, firmware, and procedures associated with this processing.

- ANSI Telecom Glossary, 2002

Information technology (IT) has long been used as a tool to facilitate business. Computing equipment, once very expensive and quite bulky, is now small and relatively inexpensive. Companies everywhere leverage the capability of technology to make business processes more efficient and/or to assist in delivery of goods and services to customers. It can be used on a very small scale, such as facilitating an employee with a daily task, or on a large scale, such as automating 24x7 manufacturing robots.

Few people would doubt that use of IT has profoundly affected the way businesses operate. Even fewer, however, realize just how much IT has affected the way they as consumers interact with these businesses. In fact, some businesses leverage IT in such a way that it provides a competitive advantage in the eyes of their customers.

A competitive advantage may be obtained when one or more of a business’ IT systems become a critical differentiator in the business’ industry. This is a very difficult achievement, and even more difficult to sustain once it is achieved. What is a critical differentiator?

One model for identifying critical differentiators places all IT systems into four different categories (see table on next page). These categories are useful commodity, useful differentiator, critical commodity, and critical differentiator. Useful commodities are standardized IT products and services. These are systems a business finds useful to complete a task, but are not critical to a company’s continuing operations. The primary focus is on low cost. A good example is productivity software such as word processing software. While nice to have, it is not usually necessary to move products.

Useful differentiators are expensive distractions which need to be eliminated or migrated. These can be systems that differentiate a company from its competitors, but do not generally produce any added revenue. If the system were to disappear, operations would not change much. The useful differentiators tend to be expensive and used minimally. As a result, they usually end up getting shut down or migrated to an alternate system or process.

Critical commodities are systems that everyone in the industry has, but whose operations are critical. These are described as systems a company needs to survive and compete in the marketplace. Aircraft maintenance or oil refining would be two examples. The primary focus is on service excellence. In order to compete in the airline or energy business, you must have those things.

Finally, the critical differentiator is something that gives your company an advantage over your competitor in the minds of your customers. The primary focus is on service excellence. This type of system not only differentiates your business from others, it provides things to customers they cannot get anywhere else or it provides it in such a way that few others can deliver. These systems are difficult to achieve, but businesses that obtain them will usually gain market share and have an easier time getting and retaining customers.

Four Types of IT Contributions

|Contributions |Commodity |Differentiator |

|Critical |Aircraft Maintenance |-CRITICAL DIFFERENTIATOR- |

| | |e.g. Federal Express |

| | |Baxter, Dell |

|Useful |Personal Productivity |Over-Customization |

| |e.g. Payroll |e.g. ICI paints |

COMPETITIVE ADVANTAGE: RESOURCE BASED VIEW

It was stressed above that it is quite difficult for an organization to obtain a competitive advantage using IT competitive differentiators. When an organization develops a competitive advantage, benefits such as greater market share and revenues result. Since management wants such progress to continue, the organization will naturally want to sustain this advantage. How does one determine whether a competitive advantage is sustainable or not?

The Resource-Based View started to appear in IS research in the mid-1990’s. The Resource-Based View of the Firm (RBV) has become an important stream of literature in strategic management. The main element of RBV is strategic assets and it is the crucial determinants of sustainable competitive advantage.

The first section discusses strategic management. The second section discusses RBV, including its assumptions and the notion of strategic assets and conditions. The third section describes the six key resources attributes that have been employed by RBV.

To determine whether an organization has sustained competitive advantage, you must understand its resources. Understanding sources of sustained competitive advantage for firms has become a major area of research in the field of strategic management (Porter, 1985; Rumelt, 1984). Since the 1960’s a single organizing framework has been used to structure much of research. This framework suggests that firms obtain sustained competitive advantages by implementing strategies that exploit their internal strengths, through responding to environmental opportunities, while neutralizing external threats and avoiding internal weaknesses. (4)

Implicitly, this work has adopted two simplifying assumptions. First, these environmental models of competitive advantage have assumed that firms within an industry (or firms within a strategic group) are identical in terms of the strategically relevant resources they control and the strategies they pursue. Second, these models assume that should resource heterogeneity develop in an industry or group, that this heterogeneity will be short lived because the resources that firms use to implement their strategies are highly mobile. (4)

There is little doubt that these two assumptions have been very fruitful in clarifying understanding of the impact of a firm’s environment on performance. There is no link between firm’s internal characteristics and performance. So the RBV of the firm substitutes two alternative assumptions in analyzing sources of competitive advantage. (4)

RBV scholars believe that resources are the main drivers of firm performance. Barney (1991) defines resources as "all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable a firm to conceive of and implement strategies that improve its efficiency and effectiveness" (p 101).

Not all resources are sources of competitive advantage. Some resources are necessary to be competitive but in themselves are not sources of high economic rents. For instance, accountants will likely need office furniture to perform requisite tasks. However, it is unlikely that such resources will be sources of sustainable competitive advantage. (2)

Resources that are sources of sustainable competitive advantage and superior profits are called strategic assets (Amit & Schoemaker, 1993; Barney, 1991; Michalisin & Acar, 1994). Strategic assets are resources that are simultaneously valuable, rare, imperfectly imitable, and nonsubstitutable (Barney, 1991). (2)

Resources can be categorized into the following table 1:

|Types of Resources |Includes |

|Physical Capital Resources |property, plant, equipment and other physical technologies |

|Human Capital Resources |Know-how, insight, judgment and experience of employees |

|Organization Capital Resources |Organizational culture, organizational systems, intellectual property rights, and|

| |other intangible resources |

Resources can also be categorized in table 2:

|Types of Resources |Includes |

|Tangible |Physical properties as well as physical capital resources (from |

| |table 1) |

|Intangible |Includes human capital resources and organizational capital |

| |resources |

Assumptions and Conditions

There are two assumptions and two conditions underlying RBV. First, RBV assumes that resources are asymmetrically distributed across firms in an industry (Barney, 1991). The asymmetric distribution of resources results in firms having either a resource-based advantage or a resource-based disadvantage. Second, RBV assumes that resources are relatively immobile. If a competitive advantage is based on having resources superior to one's competitors, then the ability to sustain the advantage is a function of the immobility of such resources. Firms attempt to block or slow the dissemination of critical resources through mobility and entry barriers (Barney, 1991; Amit & Schoemaker, 1993). (2)

RBV theorists have identified sets of resource attributes that might conceptually influence a firm’s competitive position. Some researchers have made the useful distinction between resources that help the firm attain a competitive advantage and this help the firm to sustain that advantage. These two types of resource attributes can be thought of as, respectively, ex ante and ex post limits to competition. (1)

Ex ante limits to competition suggests that prior to any firm’s establishing a superior resource position, there must be limited competition for that position. Attributes in this category include value, rarity, and appropriability. Ex ante attributes helps the firm attain a competitive advantage. (1)

Value: A resource has value in an RBV context when it enables a firm to implement strategies that improve efficiency and effectiveness. Resources with little or no value have a limited possibility of conferring a sustained competitive advantage on the possessing firm. To take an extreme example, the use of new, innovative paper clip design may set one firm apart from others, but it is unlikely the paper clip design would be valuable from a competitive advantage standpoint. (1)

Rarity: Resources that are valuable cannot become sources of competitive advantage if they are in plentiful supply. Rarity refers to the condition where the resource is not simultaneously available to a large number of firms. For example, an ATM network might have significant value to a bank, but since it not rare, it is unlikely to confer a strategic benefit. (1)

Appropriability: The appropriability of a resource related to its rent earning potential. The advantage created by a rare and valuable resource or by a combination of resources may not be major benefit if the firm is unable to appropriate the returns accruing from the advantage. Technical skills provide an example of this phenomenon. A computer component supplier may be unable to enjoy the benefits of improved cost efficiencies if the computer manufacturer is sufficiently powerful to appropriate away such benefits. This might be done by sharing the learning with other suppliers, or by pitting more efficient suppliers against one another, forcing them to set lower prices than they might otherwise establish in order to win the business. (1)

Ex post limits to competition mean that subsequent to a firm’s gaining a superior position and earning rents, there must be forces that limit competition for those rents. Attributes in this category include imitability, substitutability, and mobility. Ex post attributes helps the firm to sustain that advantage. (1)

Imitability: In order to sustain a competitive advantage, firms must be able to defend that advantage against imitation. The advantage accruing from newly developed features of computer hardware, for instance, are typically short-lived since competitors are able to quickly duplicate the technology. (1)

Substitutability: A resource has low substitutability if there are few, if any, strategically equivalent resources that are themselves, rare and inimitable. Firms may find, for example, that excellence in IS product development, systems integration, or environmental scanning may be achieved through a number of equifinal paths. (1)

Mobility: If firms are able to acquire the resources necessary to imitate a rival’s competitive advantage, the rival’s advantage will be short lived. Thus, a requirement for sustained competitive advantage is that resources be imperfectly mobile or non-tradable. (1)

The preceding attributes – both ex ante and ex post are summarized in table 3:

|Table 3: Resource Attributes |

|Resource Attribute | Terminology |

|Ex ante limits to competition |

|Value |Value |

|Rarity |Rare |

| |Scarcity |

| |Idiosyncratic assets |

|Appropriability |Appropriability |

|Ex Post limits to competition |

|Imitability |Imperfect imitability: history dependent, casual ambiguity, |

| |social complexity |

| |Complexity |

| |Replicability |

| |Uncertain imitability |

| |Social Complexity |

| |Causal ambiguity |

|Substitutability |Non-substitutability |

| |Transparency |

| |Substitutability |

| |Limited substitutability |

| |Substitutes |

|Mobility |Imperfect mobility |

| |Transferability |

| |Low tradability |

| |Tradability |

After having a solid understanding of the RBV, you can now see how it applies with three case studies. The first case study is on Rehab Care Group, followed by Progressive Insurance, and then International Multifoods, Inc. Each case provides a different analysis in relation to the RBV, so it is important to understand and comprehend the differences.

RehabCare Group, Inc. – A Company who Attained a Competitive Advantage, but May not be Able to Sustain Their Competitive Advantage

RehabCare Group, Inc. is a provider of temporary healthcare staffing and therapy program management for hospitals and skilled nursing facilities. They were incorporated in 1982 and the corporate office currently resides in Clayton, Missouri. The company's business is divided into two main business segments: healthcare staffing services and program management services. RehabCare's healthcare staffing services business, also known as StarMed Staffing Group, historically provided temporary placement of nurses and other healthcare professionals on a supplemental basis with locally based personnel and on longer-term assignments with travel personnel. Its program management services business consists of the management of hospital-based inpatient acute rehabilitation and skilled nursing units, hospital-based and satellite outpatient therapy programs, as well as contract therapy programs with skilled nursing facilities. In February 2004, the Company sold StarMed Staffing Group (3).

RehabCare Group’s 2003 annual revenue was $540 million. They control over 50 percent of the program management services currently provided in the market. Sixty two percent of all revenues are generated from the program management services while thirty eight percent come from the healthcare staffing division. As of 2003 they employ 6,000 people nation wide and are in more than 700 hospitals and skilled nursing facilities. They serve clients in all fifty states including the District of Columbia. (4)

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There are various types of therapy provided. These include: acute care, outpatient care, sub acute nursing units and contract therapy/skilled nursing are all types of care that RehabCare specializes in. The following graphs depict there main sources of patient care.

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The business model of RehebCare Group is broken down as follows. All divisions of Program Management operate based on contracts. Inpatient Rehabilitation Services, LTACH, Transitional Care Unit or Subacute units and Outpatient division operate on 3 to 5 year contracts. Contract Therapy or Skilled Nursing operates on 1 year contracts. These contracts are binding between the customer, the hospital, and the vendor, RehabCare. Seventy Five percent of all contracts are renewed upon completion.

The premise of this service is that a hospital or nursing care facility does not have the means to deliver acute, subacute or nursing care. RehabCare comes in and runs the facility with the only money out the hospital’s pocket coming from a monthly bill based on patient stay. Daily census as it is called is the accumulation of days spent in the facility by one particular patient. This census is collected daily for analysis and billed to the hospital in per patient day form or in per discharge form. Per discharge form is where the facility records the days spent by each patient in the unit, but bills the hospital only when the patient is discharged from the facility. Contracts could be billed at $252 per patient day or $4,200 per discharge. Again, the customer in this relationship is the hospital and administration, not the patient.

The IT at RehabCare has been growing and improving. As of 2000, the IT division of RehabCare consisted of seven people. One CIO, two directors, and the remaining were staff. There were no programmers and no IT helpdesk available for the field and corporate staff. No training or service was being given to the staff; and many of the processes being done in the field and corporate office were manual. Due to the fact that RehabCare had cornered the market on acute care, many thoughts of IT advancement were tossed out of the budget for a more revenue focused agenda. (5)

“According to upper management and to the field, we in IT were just overhead or a group to call if their cell phones weren’t working.” Natasha Hawkins, CIO. (5)

There were many problems facing the company. For example, in 2001 RehabCare saw almost 40% of their existing contracts come up for renewal and one out of every three the customer was backing out. Finger pointing began to run ramped, but the main reason for the declining of contracts was due to the hospital’s disgust. The hospital felt it was not getting information in a timely manner and most times the information was incorrect. If they wanted a forecast, then the census was incorrect or incomplete. If they wanted to estimate their monthly bill from RehabCare then the data caused them to grossly underestimate in their monthly financial forecasts. When they wanted to discuss issues they were unhappy about, then managers of RehabCare would push them aside because they could not answer their demands.

Many competitors were short cutting the billable rates of RehabCare by 17% and hospitals viewed that as enough reason to go with another provider. Some clients who had watched RehabCare for 3 years or more decided they could perform the service themselves at a lower cost. Continual Medicare audits came up with facilities being non-compliant with government standards and some facilities were forced to close until their data was clean. Divisions such as Contract Therapy watch their monthly contract signings go from 10-15 contracts a month to 3-4 if they were lucky. The joke amongst the clients was that RehabCare and its corporate office were the black hole.

RehabCare brought in a consulting firm to diagnose the problem. What they began to find was that RehabCare was lagging as a company in many aspects. For instance, they did not have an internal audit function, their systems were not always accessible, and most importantly a major cause for concern was the IT division. They increased the staff to where today there are 17 employees in the IT department ranging from the CIO, to programmers, to a four person IT help desk.

In order to respond to RehabCare Group’s problems a proposal was suggested. Upper management knew that the problems they were having could not be a result of the product because for all intents and purposes, the product sold itself. They knew that the clinicians were not the problem and in the market, they were still the boss. So, the management team turned to the most lackluster part up to that date of the company to revive and save them.

“The CEO and the division presidents can to IT and sought answers to how we can gain back the customer’s confidence. We determined that the main problem was the lack of timely information as well as the feeling that they, the hospital, were disconnected from the company. We also knew that the Medicare audits had to begin having positive results. Our IT team stepped to the front of the line and said let’s get this thing rolling!” Natasha Hawkins, CIO. (5)

The project scope was in-depth. IT was given a budget of $1.5 million dollars and one year period was established to get the process done and the package built. This was not to include the time to train the clinicians and corporate workers. As of January 2003 it was to be fully implemented. They were to construct a model that incorporated all the census systems that were currently being used into one central mainframe. The types of census systems being used will be discussed in the section on how the census was being collected. (5)

The management team determined that the census data that was compiled daily should be available to all users either in the facility or accessed from the internet. This was going to be especially difficult due to all the new HIPPA regulations on patient information security. IT knew that in order to make this project successful they would need input from not only the clinicians that treated the patients but also from the hospital administration. The project was supported heavily by upper management because they knew what a daunting task this would be. (5)

The way in which the daily census was being collected is summarized by one particular phrase, paper pushing at it finest. Each facility had paper sheets that each clinician filled out detailing the patient that was being treated and for what they were being treated for. The form consisted of their name, payer type whether it is Medicare, Medicaid or other, their diagnosis and how long their treatment was for. Each facility had a secretary or census clerk that would take each of these paper sheets, compile them by clinician name and input them each into the census system which as called FOXPRO. FOXPRO was a glorified spreadsheet. The software did not interact with any other systems and it contained no flexibility when it came to financial reporting.

The next day, the census clerk would go in and reconcile each line that was input the previous day and reconcile it to a system called STAR. STAR was the software program that was owned and operated by the hospital and is used to feed the hospital census to the Federal Government or Medicare. FOXPRO and STAR had no capabilities to interact with one another. This caused reconciling to be quite difficult and most of the time the data was incorrect. Not to mention, clinicians might leave for the day and never give the census clerk their sheets.

Data from the facility would not be available to the hospital administrator until the next day. At month end a census clerk at the corporate office would then go into FOXPRO and reconcile all the facilities accounts. They would correct any errors they might find by calling the facility. Since the process was manual and lacked internal control, sometimes days of information would go without being input into the system until it was found at month end. This was a two day process before the bills could even be created. Once again, the hospital would not get their bill on time; they would have issued incorrect estimates and not have an idea of what they owed RehabCare until the middle of the next month. This was not conducive to a business environment.

Rehab’s IT Enabled Project

The IT enabled project was determined to be built in-house. It was believed that this method was needed to create the new software package in order to accommodate all needs of the company. The new census software was to be called PROMOS (Performance Management Operating System). A team consisting of the CIO, two directors and three software architects were to create the software package. The software would allow for information to be updated instantly and consolidated the FOXPRO and STAR systems into one functioning database. PROMOS was web enabled and allowed managers as well as hospital administrators to access the program at all times of the day. It was also built with the flexibility to produce many statistical reports for management upon request. For the implementation, reports that were currently being used were integrated and later requests would be processed on an as needed basis. (5)

The census collection did change with the new software. Now, instead of clinicians using paper documents, they would use laptops to sign-in before treatment and sign-out once they had completed treatment. A laptop was provided to each type of clinician such as one physical therapist, one occupational therapist and so on. In much bigger facilities with many clinicians, they used PDA’s in order to log their time and patient treatment. The form was the same that had always been used, but now it was computerized.

Once the information was entered, it was updated immediately in all systems. For example, once Mrs. Smith was finished with her therapy and the clinician had clocked out, the information is instantly available to be used and complied. It also would update STAR and balance the census systems instantly in the back office function of the software. If something didn’t balance, then the secretary was notified via an error report and would then figure out the problem. It took 3-5 steps and made it one quick function. RehabCare went from driving a 1920 model T to a Cadillac.

Hospital administrators went crazy over PROMOS. They could not believe what a change had occurred and how easy it was to manage their business and estimate their future needs. One client made sure that his secretary would have it up on his computer every morning waiting on him. Some administrators confessed of playing around with PROMOS all day. A downfall to this software was that many relations coordinators were let go, but many found jobs in other parts of the hospital. (5)

Project Results

• Took three months longer than expected due to training the clinicians and debugging the software.

• Upper management was ecstatic about the results and is now pushing to put more money into IT enabled projects.

• Success was contributed to the business lines and not to the IT group. This is a typical occurrence in most IT projects.

• Instant praise was given to management by the hospital administrators.

• Days sales outstanding dropped by 7 days in a matter of 3 months. (5)

Market Results – Competitive Advantage

• In September 2003 RehabCare purchased CPR Therapists which consisted of over 70 contracts and 13 million dollars in revenue per year. This was the largest contract signed in RehabCare’s history. (7)

• In August of 2003 signed a joint venture with UCLA hospitals for 10 years. (1)

• Contract Therapy is now signing approximately 18 new contracts a month. (5)

• St. Anthony’s hospital in St. Louis just completed a therapy wing to accommodate patient care that is being given by RehabCare. (6)

Keep in mind that all of these acquisitions and joint ventures are being completed

with intense competition from their competitors such as Select Medical and Sundance. Most competitors are small and revenue hungry, so in many cases RehabCare has sustained competitive advantage because all their competitors are focused on growing and securing revenue. They are not worried about the back office function or sustaining a customer base. An example of the competitive advantage gained is in the following quote from the program manager at St. Anthony’s in St. Louis:

“When we first started here in 2001 they shut an entire outpatient program down because they didn’t have enough faith that we could correctly manage it. Now, they have increased our inpatient unit from 19 beds to 48 beds and they are begging us to treat outpatient, subacute, or any type of therapy because we are making their lives easy. We put in systems such as PROMOS that makes operating their business easy, flexible, and makes them look good in the hospital market.” Bridged Jensen, Program Manager. (6)

The question now becomes was RehabCare Group able to attain and sustain a competitive advantage with the new IT. As discussed in the introduction, a competitive advantage may be obtained when one or more of a business’s IT systems become a critical differentiator in the business’s industry. The critical differentiator is something that gives your company an advantage over your competitor in the minds of your customers. In RehabCare’s case, the customer or the hospital is now seeing that PROMOS is differentiating them from their competitors.

The RBV reminds us that not all resources are sources of competitive advantage. In fact, some resources are necessary to remain competitive but by themselves do not render high economic value to the firm. So, using the RBV identified sources of resource attributes value, rarity, appropriability, imitability, substitutability and mobility we will look at how RehabCare has or will try to sustained competitive advantage. We will analyze the ex ante aspect as well as the ex post aspect. Let’s start out by taking a look at all six attributes in table form.

|  |RehabCare |

|Value |Joint ventures and acquisitions |

|Rarity |In-House built Census software |

|Appropriability |IT infrastructure and IT resources such as PROMOS |

|Imitable |Cornered the market |

|Non-Substitutable |No software has flexibility nor is web enabled |

|Mobility |Strong IT infrastructure and in-house built design |

Value being defined as a resource that enables a firm to implement strategies that improve efficiency and effectiveness is shown the RehabCare case study. We can see that with the flexibility of PROMOS and the ability of PROMOS to interact with STAR, costs were cut and the business as a whole was able to run on a smooth basis. PROMOS was also a key resource or the value that was giving RehabCare the competitive advantage in the acquisitions of new business and the joint ventures such as the UCLA deal. Because of its design and uniqueness in the market, RehabCare was able to capture market share that it once was losing.

Rarity in the RBV view mean resources that are valuable cannot become sources of competitive advantage if they are in plentiful supply. There is also an underlying assumption that the resources are not made simultaneously available to a large number of firms. Due to the fact that RehabCare built PROMOS in-house, this almost assures that the resource passes the test of rarity. With it not being purchased from a vendor that may be available to others in the industry, this secures rarity. There are others forms of census software out there, but none that have the capabilities of PROMOS or it flexibility. Most are glorified spreadsheets or Access databases.

The last element of the ex ante stage, which are the elements or resources that allow the firm to attain competitive advantage, is appropriability. Appropriability is the advantage created by a rare and valuable resource or by a combination of resources may not be major benefit if the firm is unable to appropriate the returns accruing from the advantage. In RehabCare’s case, since they were the first firm to possess IT resources with PROMOS they possessed what is called first-mover advantage in its use and competitors will find such resources hard to take away from the firm. RehabCare used these new IT resources to improve the company’s efficiency and effectiveness thereby enhancing short-term competitive advantage. It is important to remember that with appropriabililty that it only secures competitive advantage in the short term.

In order to sustain a competitive advantage, firms must be able to defend that advantage against imitation. RehabCare is currently the largest provider in the market and because of that everyone is coming at them from the point of view of acquiring new business and revenues with little worry of their back office function. This scenario has allowed RehabCare to build, implement and use PROMOS software without the threat of competitors imitating their software. Will this change in the short-term? More than likely, but for now, RehabCare has no threat of imitating PROMOS. There is other software in the market, but like it was stated before they do not have the capabilities.

A resource has low substitutability if there are few, if any, strategically equivalent resources that are themselves, rare and inimitable. Currently there are no other software templates that are web enabled, user friendly and flexible to user demands. PROMOS is all of that in one contained system. Historically, the healthcare industry is very paper driven. Again, with this be sustained in the future, only time will tell.

Mobility is a new term to the RBV and it structure. Mobility means that unless a firm is able to secure their resources that let to the competitive advantage from their competitors, they will not sustain competitive advantage. With mobility it is hard to determine if RehabCare was able to sustain it, but in my opinion since they have a defined and strategic infrastructure and their software design was developed within, they were able to secure mobility. This is a far stretch and if a team member goes elsewhere, it is very volatile to the competition. This is not a strong point for RehabCare at this time.

RehabCare is a company that had tremendous inconsistence within it business line and chose to turn to IT for help. PROMOS was the software system that made their dreams a reality. The IT built resource improved the firm’s efficiency, improved their product effectiveness, won back the loyalty of their customers, was a cost cutting tool and provided a distinct competitive advantage in their market.

In terms of the RBV’s six stage view, the IT resource in PROMOS met all six categories of competitive advantage. The resource showed value, rarity, appropriability, imitability, non-substitutability, and mobility; all parts to obtain and sustain competitive advantage in the short term. That is what is so interesting about RehabCare’s case. Their market is a continual short term environment. A competitor could start up tomorrow so they have competitive advantage now, but for how long. It could be 1 year, 3 years or 20 years, but no one knows. That is why it is important to keep in mind that many companies feel like they are possess competitive advantage when in reality, it is slipping away by the hour.

For RehabCare to sustain their advantage, they must continually re-attain their value, rarity and appropriability through the constant monitoring and adjusting of their ability to not be imitated, substituted or mobile. How do they do this? I think at this point PROMOS is so new that they have not even begun to see changes that are needed. Will it need to be constantly updated and re-evaluated? Absolutely, but for the mean time they have competitive advantage over the market. I think that there are so little firms that are able to sustain this that eventually RehabCare will falter to some degree. However, at this point they have achieved too much and have too much invested in PROMOS to let down their guard. I am sure with the new IT initiatives that upper management is supporting, constant re-evaluation will be a must at RehabCare. It will be definitely fun to watch and see what the future holds.

Does Progressive Demonstrate all Six Resource Attributes?

“The implication is that heterogeneity is a potential source of competitive advantage” (13). Progressive Insurance has proven to have this heterogeneous characteristic seeing that the company has developed many systems that make the company quite distinct from their competitors. For instance, Progressive was the first company to launch a website in 1995 when most competitors were far from this technological advance (2). “The benefits of an IT innovation will ultimately flow to customers rather than industry competitors” (13). Progressive insurance has established itself as quite a critical differentiator considering the company focuses on designing technology that directly interfaces the consumer and systems that are “user-friendly” in the eyes of the average consumer. “Managerial IT skills can be the foundation for sustainable advantage” (13). That is, Progressive’s IT experts are leaders working arm in arm with business leaders who view their job as solving business problems. Furthermore, Progressive’s business plan and IT are inextricably linked because of their job objectives (14). These factors mentioned above are what establish a company as a critical differentiator; a company that has a truly successful business enterprise because their systems are so difficult to replicate. This report emphasizes the fact the Progressive has built itself as a critical differentiator in the insurance industry and employs its various types of resource strengths to advance itself as one of the main technological leaders in the industry.

Joseph Lewis and Jack Green established Progressive Insurance in 1937 because they wanted to provide vehicle owners with security and protection (9). In 1956, the company formed Progressive Casualty to write auto insurance for high-risk drivers. In an interview with Peter Lewis, former CEO he stated that “we needed to change our delivery. When a claim happens, I decided, let’s be there right away” (6). With that said, in 1990 the company introduced a full range of personal auto insurance products and immediate response claims service that was available 24 hours seven days a week. Then in 1993 Progressive changed its focus from nonstandard insurance by offering its products to all drivers. In 1994 the company had a record breaking $2 billion in premiums (8).

The chart below displays Progressive’s revenue and net income activity from 1999-2003. It is quite apparent that revenues along with net income have been increasing over the five-year period. For example, Progressive enjoyed a 27% increase in revenues from 2002 to 2003 and an 88% increase in net income for the same period. As stated in the 2003 annual report “expanding profits reflect our customers’ and claimants’ increasingly positive view of progressive” (8). Another reason why Progressive’s financials have seen such powerful growth is because the company has established a competitive advantage in the areas of pricing, claims handling, and brand development (8).

Next, is how Progressive was able to utilize the internet. Do you remember your first Internet experience? Well, Progressive does and in fact they were the first company to step into the future and launch . The company was the first in the industry to make such a giant step. In 1997, the company was offering real-time online sales of insurance to customers (9). In 1998, Progressive was yet another first to give its customers access to their account information online by using personal.. Also, in the same year the company introduced site which provided numerous functions to Progressive’s authorized independent agents (9).

The following table below illustrates the company’s top employees. These include Glenn Renwick, Thomas Forrester, Ray Voelker; some of the major key players in the business.

|NAME |POSITION |

|GLENN RENWICK |CEO |

|THOMAS KING |VICE PRESIDENT |

|THOMAS FORRESTER |CFO |

|RAY VOELKER |CIO |

According to Voelker he and Renwick communicate three or four times a week:

“Its obviously a lot easier for me to discuss technical things with Glenn, “says

Voelker, “Although he was only in technology for two years, he has a context for

the things that we need to discuss. “The product of such communication,

according to Renwick, is strategic technology that benefits both the customer and

Progressive (14).”

The above statements by both gentlemen clearly demonstrate the importance of communication between the CEO and CIO. Furthermore, Mr. Voelker mentioned their conversations run much smoother because Mr. Renwick has previously worked in the technology department.

Progressive offers a variety of products. It offers insurance for not only the average driver of a standard automobile but in addition they offer the following:

• Auto

• Motorcycle/ATV

• Boat/PWC

• RV

• Segway HT

• Commercial Auto

It was in 1999 when the company was the first to offer instant online quotes for motorcycle and boat insurance. Yet another first for Progressive was in 2003 when they became the first insurance company to offer policies for owners of Segway human transporters (2).

The following list demonstrates the fact that Progressive ranks third for private passenger market share with the industry leaders being State Farm and Allstate. Considering Progressive has been quite an innovator in the insurance industry, the company has the potential to move up in the industry and dominate the top two leaders.

PRIVATE PASSENGER

AUTO RANKINGS

Market Share

1. 1 State Farm 20.1%

2. 2 Allstate 11.4%

3. 3 Progressive 7.0%

4. 4 GEICO 5.4%

5. 5 Nationwide 4.6%

6. 6 USAA 3.8%

7. 7 Farmers/Zurich 3.8%

8. 8 Liberty Mutual 2.5%

9. 9 AIG 2.4%

10. 10 American Family 2.1%

Source: Progressive 2003 Annual Report

Another important focus of Progressive is the customers and shareholders. Progressive is dedicated to superior customer service and making customer’s their number one priority. Progressive’s customer growth rate over the past few years with the implementation of the company’s policies has been 57% (8). As stated in the annual report: “Our goal to be consumer’s number one choice for auto insurance demands that we not only attract new customers, but also that we make it attractive for them to stay” (8). This statement is crucial because it demonstrates the fact that Progressive not only strives to attract new customers but at the same time to keep the customer base they have already established so customer loyalty is created. “Everything we do recognizes the needs of busy customers who are cost conscious, increasingly savvy about insurance and ready for easy new ways to quote, buy and manage their policies, including claims service that respects their time and reduces the trauma and inconvenience of loss” (8). This just reiterates the fact that Progressive is 100% committed to their customers ensuring their satisfaction and understanding their needs.

Progressive’s shareholders experienced a healthy return in 2003. That is, a return of 22.8% compared to the S&P 500 average return of 9.1%. “…the way to maximize shareholder value is to achieve these financial objectives and policies consistently” (8). That is, Progressive needs to continue to increase its revenues along with its net income and shareholders will be quite content with their investment.

Now I shall discuss how and why Progressive is a critical differentiator. “By making innovative use of information technology and new service strategies, Progressive has been able to increase its market share and improve bottom line performance” (4). It is the way Progressive integrates its technology, which causes the company to be a critical differentiator. Technology has become the cornerstone of Progressive’s competitive strategy. The company is committed to applying information technology to continuously improve customer service and lower the cost of its operations. According to Peter Lewis:

“Technology is just a tool, but you can turn it into a weapon against competitors if

you focus on a single mantra—in our case, speed—and keep innovative around it.

It has worked well for us and will continue to do so…” (6).

The following are four applications that Progressive has implemented to establish themselves as differentiators in the industry. Now the fact must be restated it is not the actual technologies that Progressive uses, but it is how the company integrates the applications into their business systems to establish themselves as critical differentiators. The four applications are the following:

• Wireless Application Protocol

•

• Personal.

• Immediate Response Vehicle

Wireless Application Protocol

This technology enables Progressive to get onto every cell phone with a web browser. In addition, it gives policyholders access to company and account information through WAP. Furthermore, customers can also access direct staff, claim representatives and customer service support through a WAP enable device (12).



Progressive along with IVANS applied systems developed this application to help agents provide faster more accurate customer service by giving them access to real time information. Chris Garson, Progressive’s Agency Business IT Director states:

“agents and brokers tell us that they want to work with companies that make

things easy and this technology does just that…This speeds up transactions,

satisfying agents and their customers. And, agents and brokers can be confident

that the information they provide their customers is up-to-date and accurate” (5).



This application was developed because CEO Renwick thought that it was not enough that you can buy insurance online at . He thought you should be able to manage your policy, by making payments and changing coverage, whenever you want. This type of technology enables a customer to have this control (5). Renwick stated that “…it aims to make us more transparent to our customers” (5).

Immediate Response Vehicle

The IRV as its acronym is known by is a specially marked and outfitted vehicle that transports trained claims professionals to wherever the customer needs them. The agents are outfitted with the latest technology, which allows them to make a damage estimate and write a check right on the spot (7). Peter Lewis thought this application was key in outperforming Progressive’s customers because, “If we do it first and better, we’re going to get all the business,” and, “the faster we get to the losses, the fewer the lawyers that get on the other side” (6).

It is now important to discuss what IT has done for Progressive. Since starting its net initiatives, Progressive’s revenues have jumped from $3.4 billion in 1996 to $9.5 billion in 2002. This is an average of almost 20% annually versus 5% for the overall auto-insurance industry.

As the discussion above illustrates information technology is essential to the survival of Progressive now and into the future. Technology interfaces with almost all aspects of the company including the most important factor, which is the consumer. “I have often described Progressive as a technology company in the auto insurance business.” Progressive is equipped with key experts in the technology field that make the implementation of these applications possible, “much of what we have achieved has been made possible by our talented information technology staff…” Progressive realizes that technology is a crucial asset for positive performance in the industry, “our continuous investment in technology over the past several years has positioned us well to remain a leader in technology solutions for service delivery to both our customers and agents…” (8).

Progressive Corporation is an example of a company that demonstrates all the resource attributes of RBV to an extent. In that, the company possesses superior assets that allow the company to attain such resources.

The first resource attribute, value, which has a higher value with the outside-in and spanning resources is the first resource that will be under analysis. Progressive proves to have value in the way the company offers expedient service to its high valued customers. Furthermore, the company is able to respond to changes in market conditions to keep themselves competitive and to keep their customers content.

Rarity, the next resource under discussion, is the condition where the resource is not simultaneously available to a large number of firms. This resource is especially evident in the IS-business partnership that Progressive has formed. As stated above the CEO, Glenn Renwick, said that “technology and business alignment are key” (14). At Progressive they have technology leaders working arm in arm with business leaders who view their job as solving business problems.

Appropriability is the third resource under research that is defined by if a firm possesses next-generation software to improve efficiency and therefore have rent-earning potential. Progressive is the innovator in the auto industry. That is, the company is usually the first to develop these technologies while their competitors are still trailing behind. The systems that the company develops improve customer satisfaction and overall efficiency.

Imitability is another resource attribute that Progressive possesses. This particular resource makes it difficult for Progressive’s competitor’s to imitate their information integration strategy. The way that Progressive integrates its technology is what causes the company to have a strong competitive advantage in the industry. The company invests highly in technology and in addition they make their systems innovative knowing that no other company has the expertise to implement the type of highly advanced systems that they do.

Next, substitutability is a resource that is defined by the fact if an equivalent resource exists and is potentially available to the firm while leading to an equifinal outcome. Progressive possesses a staff that has highly advanced technical skills. Most companies in the industry do not own assets like these compared to Progressive. These IS technicians are very knowledgeable of the field and use this expertise in development of these complex applications that are in turn cost efficient.

Imperfect Mobility is the last resource attribute under analysis. Progressive’s IT staff is well equipped with superb technological knowledge along with managerial experience. As stated above by Mr. Renwick, Progressive’s IT leaders work arm in arm with the business leaders so this suggests that the IT staff does not only have this technical knowledge but they understand the problems that arise in the general business world and they know how to tackle them. This type of resource cannot be acquired just anywhere in the industry proving that these capabilities and skills that Progressive owns are truly unique and not easily acquired in the industry.

In conclusion, Progressive demonstrates all six resource attributes to an extent as mentioned above. However, the question remains can the company sustain the competitive advantage that they have built seeing that they are not the industry leader. Considering the constant successes and numerous awards the company has received I think staying competitive will not be a problem. Furthermore, as mentioned before Progressive has been called a technology company and given this type of label along with the heavy investment in technology the company should not have a problem continuing their success into the future.

International Multifoods Does NOT Create or Sustain a Competitive Advantage

The last and final case study was on International Multifoods Corporation and Vending Services of America. This case study was found in the Journal of Information Technology and consisted of part A and B. International Multifoods, Inc. and Vending Services of America proved to be a good case study because these companies demonstrated how a competitive advantage was not created or sustained through applying the Resource Based View.

International Multifoods Corporation (IMC) was established in the late 1800s. It began as a Midwest-based flour milling company distributing flour and related baking products to bakeries, grocery stores, hotels, and restaurants. Over many years the company grew, and became one of the leading food product and service distribution firms in the United States. Thus, by the 1980’s the company’s product included grain, milling, retail consumer food products, agricultural feeds and related agricultural products. IMC operated in the United States, Canada, and Venezuela.

Furthermore, IMC acquired Vending Services of America in 1984. (1)

[pic]

The above chart explains the net sales and earnings of IMC for the years 1992, 1993, and 1994. The chart is important because if you pay close attention there was a significant profit in 1992 and 1993, but in 1994 the company suffered a major loss. (1)

Vending Services of America (VSA) was started as an entrepreneurial venture of two brothers in the 1970s. The brothers were able to grow the company by slowly acquiring small vending service firms in the United States. Hence, by 1984 VSA had become a known supplier to the vending food service segment in the United States. As far as financials go for VSA, the company experienced major financial growth from 1985 to 1993. Yet, in 1994 it also experienced a financial loss. (1)

The financial losses of both companies in 1994 alerted upper management. The upper management concluded that the losses were the result of no strong strategic focus. Thus, it was decided that food distribution would be the new market for IMC, and VSA would now be critical to IMC’s strategy. (1)

As it was previously stated, VSA is in the vending industry. Consumers were spending approximately 22 million dollars on vending products. There were 4.5 million machines in 1.2 million locations. The industry consisted of many large and thousands of small vending machine operators who had vending machines in manufacturing plants, office buildings, schools, hospitals, and military bases. The below graphs demonstrate the overall industry sales and what items are sold through the vending machines. (1)

[pic]

In 1994, there was great concern about the future of the vending industry. The concern was because manufacturing jobs were decreasing, changing consumer preferences, substitutability of vending machine products, the introduction of quick service restaurants, warehouse clubs, and no barrier to entry in the market. (1)

Next, is the information system at VSA. Overall, the company lagged behind the industry in terms of the information technology budget. Furthermore, information technology was not well understood by the top managers. Likewise, the IT expense was not viewed as a strategic asset. The IT expense was used for operations, technical support, and hardware upgrades. In addition, VSA had fallen behind competitors, so there was increased customer and user frustration. (1)

VSA was facing a number of challenges in 1994. For example, the costs of operating were increasing, while profit margins were decreasing. The company was only earning about 2-3 percent on sales. Also, VSA was having multiple problems with customer service and inventory. The vending industry relies on close personal relationships with customers, so VSA’s problems with customer service needed major attention. Moreover, the poor information systems of VSA created a major challenge. In 1994, the company’s sales declined. Another challenge was that VSA competed in a decentralized manner. Thus, the company could not achieve any type of purchasing power or economies of scale. Finally, VSA was experiencing major morale problems. The employees of VSA never regained the enthusiasm that existed when it was managed by the two brothers. (1)

As a result of the many challenges facing VSA, and indirectly affecting IMC, the Renaissance Information System was proposed. This was believed to be “the most advanced system in the industry.” Thus, IMC invested 20 million dollars in order to allow VSA to implement this system. The Renaissance system would support a central sales order staff. Moreover, it would allow VSA to better measure: product freshness, manufacture promotion and rebate programs, product turnover trends, and customer usage history. Most importantly, the Renaissance system was expected to transform VSA into an integrated company, which would allow the company to finally achieve the economies of scale it has long struggled with attaining. Thus, the system would “leverage VSA's strengths and consumer knowledge into assisting its customers.” (1)

The following figure explains the four areas that Renaissance would focus on and attempt to improve.

[pic]

There were multiple expected benefits of the Renaissance system. For example, it was going to reduce operating expenses and improve customer service. The Renaissance system would allow VSA to centralize operations. Furthermore, Renaissance would provide VSA with workstation reductions in purchasing, operations, and administration. Additionally, because of the Renaissance system the general managers would no longer have to rely on close personal relationships with customers for major sales. Instead, they could focus their attention on maintaining the warehouses and running their districts. As a result of these many benefits, the overall cost savings was expected to be 25 million dollars saved over five years. (1)

The Renaissance system was to be implemented over a two year period. There would be two years devoted to system design, implementation, and development. Once all of these areas were understood, there was to be a planned roll-out of Renaissance over two, six month phases in 1994. VSA did bring an IT consultant group in to help with some of the system design and implementation. In addition, VSA planned to perform pilot studies before launching the system in all of its distribution centers. (1)

As was stated previously, VSA did perform pilot studies of Renaissance. These pilot studies revealed major problems, which required VSA’s direct attention. For instance, the employees had a difficult time reconciling the orders processed between shifts. Furthermore, the response time in regards to customers was slow. This then caused the customers to be extremely unhappy with the system. Plus, the customers disliked the loss of interaction with the order taker, and this was an industry that relied on close personal relationships with customers. In addition, there were disappointing results concerning: manpower savings, overtime requirements, fill rates, revenue, and sales margin improvement. The management at VSA believed all of these problems stemmed from poor implementation and misjudgments about the system’s capabilities. (2)

Since the pilot studies revealed so many major problems, the management at VSA concluded that it had already invested 20 million dollars, and that it would be worth still trying to modify the system and/or implementation plan in order to enhance the chances of success. The new system would focus on four areas: customer waiting times and order processing, system’s capacity, improving data integrity, and simplifying the system. (2)

The second alternative was focused on from 1994 to 1996. When 1996 came around, the IMC management found that VSA had not made much improvement with the Renaissance system. Instead, more problems were arising. For example, management turnover was increasing. Additionally, morale problems were increasing among the employees at VSA. Further, the sales declined one percent. Finally, the IMC management continued to distance itself from VSA and the Renaissance project. (2)

In our introduction, the Resource Based View was explained in relation to creating and attaining a sustainable competitive advantage. For example, it was said that there are two types of attributes, ex ante and ex post. The ex ante attributes allow a company to attain a competitive advantage, while the ex post allow a company to sustain that advantage. The resources that are ex ante are classified as value, rarity, and appropriability. The ex post resources are imitability, substitutability, and mobility.

The case of International Multifoods Corporation and Vending Services of America provide an example of a company that was not able to attain a competitive advantage. As a result of not attaining a competitive advantage the company was never able to sustain one. Therefore, only the ex ante attributes will be discussed since the ex post attributes do not apply.

The first of the ex ante attributes are value. It was explained that value is created when it enables a firm to implement strategies that improve efficiency and effectiveness. If the company does not have valuable resources then there is a limited possibility of conferring a sustainable competitive advantage. VSA did not have any valuable resources. For example, the Renaissance system that was proposed and partially implemented did not improve efficiency and effectiveness. The goals of the system were to focus on these areas; however, the system was not functioning as it should. Instead, Renaissance reduced the efficiency and effectiveness of VSA. This was the only strategy that was implemented in the case studies. VSA was struggling, and it was thought that the Renaissance system was the solution to the numerous problems within the company. Despite this, VSA did a poor job of implementing the system and made many misjudgments regarding the systems power and communication capacities. Thus, VSA was not able to create value because the strategies utilized by the firm did not improve efficiency and effectiveness.

The next ex ante attribute is rarity. Rarity is the condition where the resource is not simultaneously available to a large number of firms. Once again, the Renaissance system was not rare. It was never stated in the case that Renaissance was not available to other food distribution firms. It claimed that Renaissance was the most advanced system in the industry, but never said that no other firms had this. Furthermore, the information in the case never says that this system was made specifically for VSA. Thus, there is no reason to believe that the Renaissance system is rare. In addition, the information in the case supports the idea that many of the other firms are much more advanced already in terms of information technology, which could mean that they already have implemented Renaissance or have other means that allow the firms to be more competitive. Hence, there is not enough information to support that Renaissance is rare. The system did sever relationships with customers and these problems encouraged them to find other food distributors. Thus, the Renaissance system is not rare, and did not allow VSA to attain a competitive advantage.

The last ex ante attribute is appropriability. Appropriability is related to the rent earning potential of a resource. This is created by a rare and valuable resource or by a combination of resources. Based on the information stated in the case, the Renaissance system was not appropriable. Since it is based on rare and valuable resources or a combination of resources, this attribute is difficult to apply. The Renaissance system was not rare or valuable nor were there a combination of resources utilized by VSA to help attain a competitive advantage. As a result, the Renaissance system was not appropriable.

In conclusion, the International Multifoods Corporation case study was a strong example of a company not able to attain or sustain a competitive advantage according to the resource based view. The resource based view explains that the ex ante and ex post attributes are necessary to create this sustainable competitive advantage. This case study made it difficult to apply any of the attributes because the Renaissance resource was so poor. After reading the case, it seems that the management at both IMC and VSA had other problems that were affecting how well the Renaissance system could have been implemented. In addition, the management should have done a more thorough analysis of the companies and the direction it wanted to move in. It seems as though the management had major financial losses and simply reacted by thinking that an expensive information technology system would be the cure. In reality, the companies had many other issues, which would make it difficult as it demonstrated to attain or sustain a competitive advantage.

Conclusion

Overall, the RBV and the three case studies have proven how important IT can be in creating and sustaining a competitive advantage. Our group has tried to provide a solid discussion on RBV, and then applied the three case studies to the theory. Each of the case studies offer a different analysis of RBV in regards to attaining and sustaining a competitive advantage. This newer version of RBV did introduce two new attributes. Our group is not convinced that these two, appropriability and mobility, are necessary for explaining if a firm is going to be able to create and sustain a competitive advantage. The other attributes are better because they are easy to apply to each organization. Furthermore, our group was left with one question unanswered. That is we all question if any competitive advantage is sustainable. We thought of many companies that we have interacted with and we all discussed how many times they have had a competitive advantage and then it will switch to a competitor and then it goes back to the first company. It seems to be one big circle within industries. Thus, IT will only create a sustainable competitive advantage if that firm is committed to constantly improving and updating the system. However, if the firm is only committed short-term then it is unlikely that it will create a sustainable competitive advantage. Yet, if the firm is committed to reinnovating, redeveloping, changing, and improving the IT system, infrastructure, and employees, then it is possible for that firm to have created a sustainable competitive advantage.

References

Introduction

(1). Miller, Danny, “An Asymmetry-Based View of Advantage: Towards an Attainable

Sustainability,” Strategic Management Journal, Vol. 10, 24, October 2003, pp. 961-

976.

(2). Hoopes, David, Tammy Madsen, and Gordon Walker, “Guest Editors’ Introduction

to the Special Issue: Why is there a Resource-Based View? Toward a Theory of

Competitive Heterogeneity,” Strategic Management Journal, Vol. 10, 24, October

2003, pp. 889-902.

(3). Helfat, Constance, and Margaret Peteraf, “The Dynamic Resource-Based View: Capability

Lifecycles,” Strategic Management Journal, Vol. 10, 24, October 2003, pp. 997-1010.

(4). Wade, Michael, and John Hulland, “The Resource-Based View and Information Systems

Research: Review, Extension, and Suggestions for Future Research,” MIS Quarterly,

Vol, 28, 1, March 2004.

Introduction of the Resource-Based View

(1). (Srikanth) Michalisin, Michael, “In Search of Strategic Assets,” International Journal of

Organizational Analysis, Vol. 5, 4; pg. 360, 28 pgs., Oct. 1997.

(2). Wade, Michael, and John Hulland, “The Resource-Based View and Information Systems

Research: Review, Extension, and Suggestions for Future Research,” MIS Quarterly,

Vol, 28, 1, March 2004.

(3). David F. Fenny, and Blake Ives, “IT as a Basis for Sustainable Competitive Advantage,”

Managing IT as a Strategic Resources, 3, pgs.43-62.

(Hui) Barney, Jay, “Firm Resources and Sustained Competitive Advantage,” Journal of Management, Vol. 17, 1, pp.99-120.

RehabCare Group

(1). 2003 RehabCare Group, Inc. Annual Report

(2). 2002 RehabCare Group, Inc. Annual Report

(3).

(4).

(5). Natasha Hawkins, CIO of RehabCare Group, Interviewed by Matthew Pasley, February 19,

2004

(6). Bridged Jensen, Program Manager of RehabCare Group, Interviewed by Matthew Pasley,

March 5, 2004

(7).

Progressive Insurance

(1). , viewed on March 21, 2004

(2). , viewed on March 21, 2004

(3). Lewins, Lisa and Tim R V Davis, “Progressive Insurance Competes with the

Strategic Application of Information Technology,” Journal of Organizational

Excellence, Vol. 21, 2, 2002, pp. 31-38.

(4). MacSweeney, Greg, “Progressive Inside and Out,” Insurance & Technology. 30

Sept. 1999: 13-15.

(5). , viewed on March 3,

2004

(6). , viewed on March 3, 2004

(7). 2003 Annual Report, Progressive Corporation

(8). , viewed on March 21, 2004

(9). Green, Heather, “Companies That Really Get It Using Tech to Chip Away at Problems

is What Gave These Leaders a Winning Edge,” Business Week, 25 Aug. 2003: 144-

145.

(10). , viewed on March 3, 2004

(11). MacSweeney, Greg, “Progressive goes Wireless with WAP technology,”

Insurance & Technology, Dec. 2000: 14

(12). Feeny, David and Blake Ives, “IT as a Basis for Sustainable Competitive

Advantage,” Managing IT as a Strategic Resources, 3, pgs.43-62.

(13). Gallagher, Julie, “Business-savvy CIO turns tech-savvy CEO,” Insurance &

Technology, July 2001: 38.

International Multifoods

(1). Descantis, Gerardine, and Robert Price, “International Multifoods-Case A,” Journal of

Information Technology, 16, pg. 175-184, 2001.

(2). Descantis, Gerardine, and Robert Price, “International Multifoods-Case B,” Journal of

Information Technology, 16, pg. 185-189, 2001.

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