MIT Sloan Management Review

Management of Information Systems, Marketing

 

The Digital Transformation of Traditional Business

By Angela Andal-Ancion, Phillip A. Cartwright and George S. Yip

July 15, 2003

New information technologies, such as broadband networks, mobile communications and the Internet, have well-known, but often unrealized, potential to transform businesses and industries. The key to success is knowing how and when to apply the technologies. Companies should look at 10 specific drivers to help determine their best strategy.

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During the 1990s, companies had vast amounts of funding for new information technologies, or NIT.1 They invested millions of dollars on Web sites, sophisticated software packages, teleconferencing equipment, broadband networks, mobile communications and other digital technologies. Such investments helped them to keep abreast of competitors that were making similar expenditures. Today, many companies are strapped for resources, and they need to be extremely selective about the technologies they fund, deploying NIT in ways that are the most relevant to their businesses and strategic objectives, including their sales and marketing efforts.

What kinds of companies and products can benefit most from the use of NIT? Books and airline tickets sell readily over the Internet whereas automobiles and high fashion clothing do not. Furthermore, what types of business transformations do such investments enable? A company might, for example, use NIT to cut away layers of middlemen, such as distributors, that separate it from its customers (called classic disintermediation). Or, instead of getting rid of middlemen, it might choose to embrace them (remediation). Or it might build strategic alliances and partnerships with new and existing players in a tangle of complex relationships (network-based mediation). (See “Three Mediation Strategies,” p. 37.)

All three mediation strategies depend on various factors, such as a product’s customizability and information content. By fully understanding those drivers of NIT, companies can begin to predict the potential transformations of their industries, especially in terms of how products are marketed and sold. To that end, we have developed a systematic framework that identifies which drivers are important for the different approaches of classic disintermediation, remediation and network-based mediation. Using this tool, companies can determine both the optimum ways to transform their businesses and the NIT investments required to accomplish such changes.

The Drivers of NIT

From a study of large corporations in North America and Europe, we have identified the different drivers that determine the competitive advantages of deploying NIT. To read the complete article, login or sign-up using the form below.

 
 

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