by Michael E. Porter and Victor E. Millar
Harvard Business Review
J U LY– A U G U S T 1 9 8 5
How Information Gives
You Competitive Advantage
Michael E. Porter and Victor E. Millar
he information revolution is sweeping
through our economy. No company can escape its effects. Dramatic reductions in thecost of obtaining, processing, and transmitting information are changing the way we do business.
Most general managers know that the revolution is
under way, and few dispute its importance. As
more and more of their time and investment capital is absorbed in information technology and its
effects, executives have a growing awareness that
the technology can no longer be the exclusive territoryof EDP or IS departments. As they see their rivals
use information for competitive advantage, these executives recognize the need to become directly involved in the management of the new technology. In
the face of rapid change, however, they don’t know
This article aims to help general managers respond
to the challenges of the information revolution. How
will advances in informationtechnology affect competition and the sources of competitive advantage?
What strategies should a company pursue to exploit
the technology? What are the implications of actions
that competitors may already have taken? Of the
many opportunities for investment in information
technology, which are the most urgent?
To answer these questions, managers must first
understand that informationtechnology is more than
just computers. Today, information technology must
be conceived of broadly to encompass the information that businesses create and use as well as a wide
spectrum of increasingly convergent and linked technologies that process the information. In addition to
computers, then, data recognition equipment, communications technologies, factory automation, and
other hardware andservices are involved.
The information revolution is affecting competition in three vital ways:
It changes industry structure and, in so doing,
alters the rules of competition.
Mr. Porter is professor of business administration at the
Harvard Business School. He is the author of the new
best-seller Competitive Advantage (Free Press, 1985) and
Competitive Strategy (Free Press, 1980), and herecently
served on the Presidential Commission on Industrial
Mr. Millar is the managing partner for practice of Arthur
Andersen & Co. and is responsible for the professional
practices of the firm worldwide. He has worked extensively with executives to increase their understanding of
information in the management function.
Authors’ note: We wish to thank Monitor Company andArthur Andersen for their assistance in preparing this article. F. Warren McFarlan also provided valuable comments.
Editor’s note: All references appear at the end of the article.
Copyright © 1985 by the President and Fellows of Harvard College. All rights reserved.
It creates competitive advantage by giving companies new ways to outperform their rivals.
It spawns whole new businesses,often from
within a company’s existing operations.
We discuss the reasons why information technology has acquired strategic significance and how it is
affecting all businesses. We then describe how the
new technology changes the nature of competition
and how astute companies have exploited this. Finally, we outline a procedure managers can use to
assess the role of information technology intheir
business and to help define investment priorities to
turn the technology to their competitive advantage.
Information technology is changing the way companies operate. It is affecting the entire process by
which companies create their products. Furthermore,
it is reshaping the product itself: the entire package
of physical goods, services, and information...