The Digital Transformation of Traditional Businesses

Abstract

What kinds of companies and products can benefit most from the use of new information technologies (NIT), such as the Internet, broadband networks and mobile communications? Books and airline tickets sell readily over the Web whereas automobiles do not. Furthermore, what types of business transformations does NIT enable? A company might, for example, use NIT to eliminate 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). 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, the authors have developed a systematic framework that identifies which drivers are important for each of the three mediation approaches. Using this tool, companies can determine both the optimum ways to transform their businesses and the NIT investments required to accomplish such changes.

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