Digital Systems and Competitive Responsiveness: The Dynamics of IT Business Value

Abstract

The mechanics of competition involve perception and reaction to competitor moves. Both incur delays that can be reduced by digital systems. Using system dynamics and the Red Queen paradigm, we modeled the impact of IT investments on response delays and business value, with the following results: (a) value has significant transient components; (b) value depends on investment level and the relative delays of competitors; and (c) relative delays affect the first-mover advantage. These results show that when assessing the value of IT investments, it is important to consider (a) the temporal pattern of benefits, not just their total magnitude, and (b) the impact of ongoing moves by competitors.

Keywords: IT business value, competitive dynamics, response delay, simulation modeling