The

Information Age and Strategic Paradox

Boar H., Bernard (2001)

The dramatic changes in information technology over the last decade have been some
of the primary drivers of hyper-competition (technology change) and have led to the
labeling of our era as the “information age.” The information age is proving itself to be
a period of extraordinarily intense competition.
New forms of information technology have led to the collapse of traditional industrial-
age barriers to entry such as economies of scale, access to distribution systems, mass
advertising, location, and competency access. Te nature of digital products enables
mass customization and micro-marketing, while the ability to perform comparative
shopping electronically drives prices to commodity levels. Suddenly, everything
becomes a generic product.
Consumers, for the first time in history, can have almost perfect knowledge of
what is being offered, at what price, and with what value proposition. Te result is the
creation of a highly competitive and swift marketspace that prizes speed, nimbleness,
aggressiveness, entrepreneurship, and niching—a marketspace that rewards
maneuver as opposed to attrition fighters. It is therefore not surprising that
companies that compete in the marketspace will be subject to strategic paradox (due
to the hyper-competition). Information-age companies will have to clearly understand
the paradoxes of the information age, deduce their implications, and adapt to them
appropriately. The business logic of the more staid industrial age will not suffice in the
extremely cut-throat information age.
This chaotic information-age environment will result in a shift to the nurturing
of temporary competitive advantages at the expense and decline of sustainable
competitive advantages. Rather than making huge investments, with the associated
risk of imitation, and expecting to create an advantage that provides extended
benefits, companies will covet styles and systems that enable the rapid creation of
sequential and overlapping temporary advantages. Companies will prize speed,
surprise, opportunism, niching, prototyping, and modularity to enable dynamic
reusability. The tempo of competition will accelerate as there are no longer any safe
fortresses and the marketspace becomes an ever more frenzied war of movement.
Given this unruly, competitive, and combative environment, the aware
strategist must be sensitive to the following five information-age strategic paradoxes
and take them into account in formulating how to engage the battlespace. The first
four paradoxes occur at the information-age level. The last one is a paradox specific to
IT.

Information-age strategic paradox I. As the world get smaller, small
companies get bigger and big companies get smaller.

Explanation: As products and services become digitized and the primary
distribution channels shift to electronic commerce, the world shrinks and many
industrial-age advantages of large companies erode. Small companies have access to
the same consumer reach technologies and value chain enhancement technologies as

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large companies but, in addition, often have the advantage of being nonbureaucratic,
nimble, fast, specific customer (market fragment) focused, and entrepreneurial.
Everyone, large or small, shares the same storefront location in cyberspace. The
competitive playing field is leveled by broad availability of convergent technologies
and the ability to precisely choose whom to serve and how to serve them.
As traditional time and space constraints on markets are dislodged by global
electronic markets, large companies find themselves confronting thousands of small
companies fighting for every niche who exploit one-to-one marketing and customized
services to overcome the large companies’ mass advertising and scale advantages. Of
course, a little niching here and a little niching there and before you know it, there is
nothing left.

Information-age strategic paradox II. To create advantage, you must quickly
destroy your advantages.
Explanation: The strategic paradox of the coming together of opposites is at
work here. In a world of hyper-competition, it is better to eat your young than have
others do it. The pace of information-age change will rapidly convert advantages into
disadvantages. It will be necessary to ride learning curves and continually roll out new
temporary advantages even though they destroy your own incumbent temporary
advantages. What you may expect to see, paradoxically, is companies announcing new
releases and features of products that appear to make their own products
prematurely obsolete for no apparent reason. Quite the opposite, however, is what is
really happening. What they are doing is not permitting the coming together of
opposites to occur. An advantage terminated before its time is much better than an
advantage held on to beyond its utility. Because nobody can control the marketplace
nor have intimate knowledge of competitor plans and announcements, the result is to
err, of necessity, on the side of rapid self-obsolescence.

Information-age strategic paradox III. To make money, you don’t need
money.
Explanation: The greatest barrier to entry of all industrial-age barriers to
entry was the scarcity and cost of capital. This resulted in the common maxim: To
make money, you need money. The basis of wealth in the industrial age was capital
(land and labor). In the information age, the basis of wealth is ideas. The wide
availability of global electronic markets makes it relatively inexpensive to start a
business and gradually scale it as it grows. So smarts, not capital, will drive who
makes money. More than in other eras, the information age will reward
entrepreneurship, risk taking, and foresight.

Information-age strategic paradox IV. To remain innovative, don’t listen to
your customers too carefully.
Explanation: Established customers have huge financial, skills, and emotional
investments in existing technologies. They most often state new requirements only in
terms of the evolutionary development of those technologies. Current customers tend
to want to sustain investments in existing technologies rather than underwrite
research and experimentation in innovative but disruptive technologies that date

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their own skills and investments. As a consequence, if you listen and follow your
customers’ requirements too closely, you will meet their stated needs through
incremental improvements to what is while starving research and development in
innovative technologies that will eventually substitute for them. Paradoxically, when
entrepreneurial companies, unbounded by these customers, do innovate, your
conservative customers, who limited your fields of investment, will abandon you for
the superior and now demonstrable substitute.

Information-age strategic paradox V. To use IT efficiently, you must use it in
excess.
Explanation: The most striking strategic paradox of IT in the information age
is that the cost-concerned IT strategist does not seek to use just enough means but an
excess of means to accomplish his or her ends. “Excess” means more than analytically
justified by circumstances; it does not mean, however, wasteful or prodigious. IT
achieves, paradoxically, its greatest value for the business when it is used in excess.

It is typical to observe project teams engage in extensive and exhaustive cost-
justification exercises (net present value, return on investment, cost/benefit
justification, pay-back period, etc.) to convince cost-conscious decision makers to
approve each IT expenditure. Their actions are understandable with linear logic but
are inappropriate because of the reversal of opposites. When the battle shifts to
information-age hyper-competitive environments, IT becomes subject to strategic
paradox and must be managed as such to achieve optimum results.

Consider a military commander who needs to engage his enemy. If he uses
linear logic and deploys just enough resources, he will win but it will be an expensive
(Pyrrhic) victory. If he applies a force far in excess of his opponent, he will achieve his
ends with minor causalities. All the downstream costs of battle will be avoided
(damaged weapons, confusion, wounded/killed soldiers, etc.) At the point of conflict,
the efficient commander does not seek to use just enough, but applies means far in
excess of the opponent. The commander does not use accounting logic that holds in
nonconflict situations but applies paradoxical logic that rules at the point of battle.
Unquestionably, it is easier to accept this paradox with regard to the military
situation than IT. This is because of the differences in the two situations between
cause and effect. In the military situation, the cause and effect are tightly coupled in
time and space. One can immediately see the results of the excess and correlate the
success to that excess. With IT, the cause and effect are often dispersed across wide
gaps of time and space. The use of excess IT will have the desired effect, but it may
occur perhaps months later at a remote branch office. While it stretches and strains
your business common sense, I believe that strategic paradox is an important
dimension of the spirit of exploiting IT. Ultimately, experience will prove that those
who use it in excess will achieve greater benefits than those who attempt to rigorously
cost-justify, exactly parcel it out, or horde its deployment. They will learn that their
approach is mathematically correct but strategically sterile. The logic of success in the
hyper-competitive information age is the logic of a warrior; not an accountant.

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A Remarkable Challenge

It would therefore seem that IT strategists are confronted with a remarkable
challenge. They will not only have to think paradoxically and formulate actions in
opposition to their normal thought processes, they will also have to convince an
astounded and unbelieving management team that a seemingly paradoxical action is
the right thing to do. Strategic performance will become a function of actions that
most will view as not even good nonsense. What will drive strategic success will be
the illogical.

Hyper-competition challenges conventional strategic thinking to renew itself.
Paradoxical thinking is an intimate and fascinating part of that renewal. Paradoxical
actions are perhaps the ultimate hyper-competitive behavior. As they lead you to
success, your competitors will not only have their business plans disrupted by them
but, constrained by conventional logical thinking, they will be unable to grasp the
deeper rationale of your actions. This will serve only to further your window of
opportunity as they respond inappropriately with conventional thinking. Their
seemingly logical actions will ruin their strategic performance, and your seemingly
illogical actions will enrich yours.
How well management teams accept and adopt the logic of paradox might well
make the difference as hyper-competitive environments accelerate in intensity and
conventional strategy formulation methods collapse under the demands of the hyper-
competitive portion of the conflict curve. The root of all strategic performance, as
always, originates in deep and far-reaching strategic thinking; in hyper-competitive
markets, the laws of strategic paradox will increasingly curve and guide our actions.
What we will learn is that in such hyper-competitive markets, the long way home is
often the shortest.