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The O’Reilly Radar on Web2.0 Best Practices includes an interesting section about the value of digital data. In the past decades, IT has created value through function: Software has been developed to particularly serve certain specific interests and to make businesses as well as individuals more productive.

The Greek philosopher Heraclitus coined the phrase: “Nothing endures but change” which in particular can be claimed to hold in the information (technology) market. O’Reilly says that with the changes that emerge by online networking it increasingly becomes evident that “the value is the data itself.”

The point is a valid one I believe: Software is not merely standalone but rather exists as a combination of modules that function in a predefined way. In many cases software is combined in numerous ways and thus serves customer needs more individually than traditional large-scale software. This modular lightweight architecture of software changes the competitive landscape. In a digital economy, value is created through information: Having the right information at the right time in the right place in the correct form is important. Value is thus created from informed action on information.

O’Reilly speaks of three sources of competitive advantage (CA): First, from using software as a service (SaaS), second from leveraging network effects and third from the data and the control of data.

When talking about CA the next step is naturally to talk about strategy. CA is a state in which a person or organization is able to provide a service or good at a better input/output cost-efficiency level than all current competitors. Another option is that a person or organization can identify a relevant service or good better than competition in order to better serve customer needs thus attaining a unique leadership position in the market.

I will talk about strategy in my next post