Leveraging Information Technology Infrastructure to Facilitate a Firm's Customer Agility and Competitive Activity: An Empirical Investigation

this paper investigates how information technology (It) facilitates a firm’s customer agility and, in turn, competitive activity. customer agility captures the extent to which a firm is able to sense and respond quickly to customer-based opportunities for innovation and competitive action. Drawing from the dynamic capability and It business value research streams, we propose that It plays an important role in facilitating a “knowledge creating” synergy derived from the interaction between a firm’s Web-based customer infrastructure and its analytical ability. this will enhance the firm’s ability to sense customer-based opportunities. It also plays an important role in “process enhancing” synergy obtained from the interaction between a firm’s coordination efforts and its level of information systems integration, which facilitates the firm’s ability to respond to those opportunities. We also leverage the competitive dynamics and strategic alignment literature to propose that the alignment between customer-sensing capability and customer-responding capability will impact the firm’s competitive activity. We test our model with a two-stage research design in which we survey marketing executives of high-tech firms. Our results show that a Web-based customer infrastructure facilitates a firm’s customer-sensing capability; furthermore, analytical ability positively moderates this relationship. We also find that internal 232 RObERtS aND GROVER systems integration positively moderates the relationship between interfunctional coordination and a firm’s customer-responding capability. Finally, our results show that agility alignment affects the efficacy of a firm’s competitive actions. In particular, action efficacy is higher when sensing and responding capabilities are both high. Key woRds aNd phRases: alignment, competitive dynamics, customer agility, dynamic capability, It infrastructure, It value, open innovation. the iNcReasiNG pace of GlobalizatioN, competitive rivalry, shifting customer demands, and rapid technological advancements create an environment in which sustained competitive advantage is difficult—if not impossible—to achieve [20, 60]. Industries once considered relatively stable have evolved into fiercely competitive environments in which long-established giants are being threatened by agile start-up firms scattered across the globe [18]. as a result, firms must sense and respond quickly to opportunities if they wish to build a competitive advantage [82]. agile firms are able to adapt to and perform well in rapidly changing environments by capitalizing on opportunities for innovation and competitive action, such as launching new products and services, entering new market segments, and developing strategic alliances [9, 20]. Specifically, agility consists of two components—sensing and responding—that are key organizational capabilities that contribute to success in hypercompetitive environments [107]. a firm may be agile in various areas, such as its customer-based processes, interactions with supply chain partners, and day-to-day operations [82]. We focus on firm’s customer agility, which is defined as the degree to which a firm is able to sense and respond quickly to customer-based opportunities for innovation and competitive action. the advent of new information and communication technologies presents unique opportunities for firms to enhance their customer agility. Internet-based communities facilitate distributed innovation models that involve varied customer roles in new product development (NPD) [64]. Not only can customers generate ideas for new products and services, they can also use information technology (It)–based tools to test products and provide end-user product support in online environments [65, 77]. the social relationships that take hold between the various entities in online communities generate a continuous flux of valuable knowledge [68]. In turn, firms that effectively absorb this external knowledge are better able to sense market opportunities [17]. In addition to strengthening a firm’s sensing capabilities, It can also enhance a firm’s ability to respond to market opportunities. For example, digital process–based innovations such as electronic order fulfillment can be quickly scaled up with unprecedented speed to trump rivals in a hypercompetitive environment [60]. Integrated information systems (IS) allow organizations to quickly route relevant information to decision makers in a timely manner. When coupled with well-coordinated organizational functions, these integrated systems also allow firms to collaborate in areas such FacIlItatING a FIRM’S cuStOMER aGIlIty aND cOMPEtItIVE actIVIty 233 as NPD and service enhancement [8]. by strengthening organizational processes, It facilitates a firm’s ability to respond to customer-based opportunities for innovation and competitive action. consider the following illustration. Dell computer company developed a Web site—“IdeaStorm”—where customers can contribute and exchange ideas regarding Dell’s products and services. One customer commented that recent graphic user interface (GuI) innovations have yet to be implemented in Dell’s computers. the customer recommended that Dell work with open source projects to develop and implement GuI advances in Dell computers. Shortly after the customer’s online post, hundreds of IdeaStorm community members discussed and voted on this idea. Dell associates monitored this discussion to sense whether the GuI innovation idea was worth pursuing. When Dell management made the decision to pursue this idea, they developed It-enabled partnerships with open source projects to develop a custom GuI for ubuntu on Dell netbooks. this illustration shows us how Dell uses It to sense (via the Web site) and respond to (through It-enabled external partnerships) a customer-based opportunity. One theoretical perspective suggests that It provides the foundation for digital options, which greatly enhance customer agility [82]. Furthermore, some early research finds that It enhances organizational agility [32, 92, 93]. yet despite the importance of It and customer agility in hypercompetitive environments, we know little on how It supports a firm’s customer agility and, in turn, competitive activity. Such insight is important if we wish to move beyond our current understanding of how It generates business value. hence, we aim to answer two questions in this study: how does information technology facilitate the sensing and responding components of customer agility? and how does customer agility impact competitive activity? this paper proceeds as follows. We first describe the origins and characteristics of customer agility. We then form the theoretical foundations of our research model. building on these theoretical foundations, we develop our research model and hypotheses, followed by a description of an empirical study designed to test our research hypotheses. We discuss our findings, limitations, implications for research and practice, and avenues for future research.