Social Media, Competitive Advantage and Porter
Quick update on my PhD. My topic has finally been approved and here’s my initial thinking on mapping social media to competitive advantage. Any feedback or comments are always welcome.
One way to evaluate usefulness of any social media initiative within an organization is to find out if by using social media, an organization is able to get competitive advantage vis-à-vis its competitors. For the purpose of my research, I plan to use the concept of competitive advantage as proposed by Porter in his 1985 work. I can’t get into Porter’s work in this blog but just to summarize, he has described how firms can create sustainable competitive advantage in his 1985 publication “Competitive Advantage”. Porter describes three different ways that companies can use for competitive advantage:
- Cost leadership
Further, according to Porter, an organization’s Value Chain consists of all the activities that are required for the production of organization’s goods and/or services. These activities can be primary activities that add value directly to end product (goods or services) and support or secondary activities that add indirect value to end product. An analysis of organization’s value chain can then be used to find out how an organization can gain competitive advantage. The analysis identifies all the activities – both primary and support of the organization and then identifies activities that can either be a source of Cost Leadership, Differentiation Advantage or Focus. Based on this analysis, the identified activities can be targeted for improving competitive advantage or removing competitive disadvantage. I extend this analysis to social media. In order to use social media to gain competitive advantage, activities in an organization’s value chain can be analyzed and a model can be evolved to map those activities that can use social media. The impact of using social media can then be measured. This can be analyzed for cost, focus as well as differentiation advantage. For example, the table below provides a sample analysis of activities and how social media can help to reduce cost or increase differentiation. For each activity in the value chain, the table shows examples of how Social Media can contribute to that activity and resulting impact on cost and differentiation. A similar analysis can also be carried out for Impact on Focus.
Of course, this is still work in progress but would such an analysis be useful to identify and then prioritize which social media initiatives to undertake within an organization?