Topics: MIT Sloan School of Management, Electronic commerce, National Invitation Tournament Pages: 17 (5535 words) Published: January 16, 2013
The Digital Transformation
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. Angela Andal-Ancion, Phillip A. Cartwright and George S. Yip uring tbe 1990s, companies bad vast amounts of funding for new information technologies, or NIT' Tbey 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 tbat 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 tbat are tbe most relevant to their businesses and strategic objectives, including their sales and marketing efforts.


What kinds of companies and products can benellt most from the use of NIT? Books and airline tickets sell readily over the Internet wbereas automobiles and higb fashion clothing do not. Furtbennore, what types of business transformations do sucb 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"Tbree 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 tbe potential transformations of tbeir industries, especially in terms of how products are marketed and sold. To tbat end, we have developed a systematic framework tbat identifies wbich drivers are important for tbe different approaches of classic disintermediation, remediation and network-based mediation. Using this tool, companies can determine both the optimum ways to transform tbeir businesses and the NIT investments required to accomplisb sucb changes.

The Drivers of NIT
From a study of large corporations in Nortb America and Europe, we have identified tbe different drivers that determine the competitive advantages of deploying NIT. (See "About the Research.") Each of the drivers is very specific to bow NIT can be applied in a particular industry. Tbat Is, they are not genAngela Andal-Ancion is a ajnsultant with ascension in London; Phillip A. Cartwright is a principal with BearingPoint in Paris; and George S, Yip is professor ot strategic and international management at the London Business Schooi. They can be reached at, phiilip.cartwright@bearingpoint.oom and




of Traditional Businesses \
test drive the vehicles and physically inspect them before taking delivery. 2. hiformation intensity.^ Nearly all products and services have some information content, but the amount varies dramatically. Cars come with volumes of operating instructions; ice cream bought from a street vendor comes with no information except the name of its flavor. With books and magazines, the information they deliver is the product. In the past, information was limited and difficult to collect, and customers often had to shoulder the burden of extracting the data they needed by sorting tbrougb manuals and other documentation or by calling toll-free numbers for help. The advent of new technologies such as the Web has enabled companies to leverage the information content that is inherent in their products...
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