In 1965, Gordon Moore, co-founder of Intel, wrote a four-page paper for Electronics Magazine describing how the process of chip manufacturing has enabled more powerful chips to be produced at cheaper prices (Moore, 1965). The paper predicted the pace of this advancement, which was then coined as Moore’s Law.

The law was commonly translated to double computing power every two years for the same price point. While the paper also deeply discussed the technical aspect of transistor density, it is the prediction that caught people’s attention. It is captivating and it has held true for decades (Bourgeois, 2019).

Another perspective to describe this law is to see it as “the price for the same computing power will be cut in half every two years”. The implication of this perspective is the emphasis on the economic impact, instead of a technical semiconductor manufacturing issue. The cheaper price of the chip does not only mean that more and more people will have affordable access to powerful computing, but that the power of computers can be built into devices other than computers themselves (Watson, 2007).

As the cost continues to decline, computers will be available to be utilized in various ways and people can still afford them. This utilization of cheap and powerful computers can become a strategic way for firms to create sustainable competitive advantage.

When analyzing the implication of Moore’s Law, strategic planners and managers should try to answer these questions: how will the industry or the market change and adapt when chips are available everywhere, including in the product or the service they deliver? Is there any added value that can be applied to the firm using the currently available cheaper computing power?

To answer these questions, managers should broaden their view that utilizing cheaper computing power does not necessarily mean buying faster computers for faster operation or buying chips to be added to the product. It can be about making the process more efficient through cheaper database processing, increasing inventory turnover through a better warehousing system, streamlining the communication system, refining the customer relationship system, and many more. It can be about creating a sustainable business model using powerful Enterprise Resource Planning (ERP) just like Patagonia.

It enabled Dell to decrease its inventory by as much as a single percentage point in value each week (Breen, 2004). It enabled companies like Netflix and Spotify to thrive. It even came to a ubiquitous point where we find chips in daily stuff, like an umbrella that sings a tune to alarm the user when the weather forecast for the day is raining or a home doors card access that can record entry and exit.

Managers should be able to have a sharp grasp, seeing how the industry and the market change due to the availability of cheaper and more powerful chips, and the availability of product or services that was enabled by it, while also looking for a way to utilize the cheaper computers. All for the company’s sustainable competitive advantage.

Lastly, when managers found a way to utilize Moore’s Law or utilize technology enabled by it, they should also consider the nature of the law. They can try to answer these questions: if it’s about investing in computing equipment, how long it will remain useful? If it’s about investing in upgrading or implementing software, how this can be translated to the cost or the capital expense budget? Is there any risk of implementing it? (Information Systems: A Manager’s Guide to Harnessing Technology, 2015) Calculate the value of time when there will be faster computing power in the near future.

Moore’s Law is still relevant decades later according to the executive vice president of Intel Corporation (Brown, 2017). No doubt, the implication of the law has shaped the landscape of almost every industry and market nowadays. However, a firm’s ability to take advantage of it for sustainable competitive advantage will depend on its ability to see and understand the change, and its ability to make a sound decision based on it.

References


Bourgois, D.T., Smith, J.L., Wang, S., & Mortati, J. (2019, August 1). Information systems for business and beyond. Saylor Foundation. https://digitalcommons.biola.edu/cgi/viewcontent.cgi?article=1000&context=open-textbooks

Breen, B. (November 24, 2004). Living in Dell Time. Fast Company.

Brown, J. (2017, March 30). Intel EVP: Moore’s Law is our core competitive advantage. CIO Dive. Retrieved April 17, 2022, from https://www.ciodive.com/news/intel-evp-moores-law-is-our-core-competitive-advantage/439325/

Information Systems: A Manager’s Guide to Harnessing Technology. (2015). University of Minnesota Libraries Publishing. https://open.umn.edu/opentextbooks/textbooks/16

Moore, G. (April 19, 1965). Cramming More Components onto Integrated Circuits. Electronics Magazine. http://www.computer-architecture.org/textual/Moore-Cramming-More-Components-1965.pdf

Watson, R. T (Ed.). (2007). Information systems. Global Text. http://ufdcimages.uflib.ufl.edu/AA/00/01/17/04/00001/InformationSystems.pdf

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