Thriving in an Increasingly Digital Ecosystem

  • Peter Weill and Stephanie L. Woerner
  • June 16, 2015

Given the amount of turmoil digital disruption is causing, it’s time for companies to evaluate the threats and opportunities — and start creating new business options for the future.

The business world is rapidly digitizing, breaking down industry barriers and creating new opportunities while destroying long-successful business models. We call this process digital disruption, and although sweeping technology-enabled change often takes longer than we expect, history shows that the impact of such change can be greater than we ever imagined. Think steam engines, cars, airplanes, TVs, telephones and, most recently, mobile phones and e-books. With e-books, the market has been slow to develop. Traditionalists said you wouldn’t be able to replace the experience of a paper book. But e-books are gaining traction — they are cheaper than paper books, faster to acquire and searchable. Although the margins on them are thinner than the margins on traditional books, the market is growing. In 2014, 28% of American adults read an e-book, up from 17% in 2011.1

Given the amount of turmoil digital disruption is causing, it’s time for companies to evaluate these threats and opportunities and start creating new business options for the future — the more-connected future of digital ecosystems. Board members at large companies agree. In recent research by the MIT Center for Information Systems Research, board members estimated that 32% of their company’s revenue would be under threat from digital disruption in the next five years; 60% of board members felt their boards should spend significantly more time on this issue next year.2 Among the disrupters board members worried about the most were Uber (disrupting taxis); Airbnb (disrupting hotels); Apple Pay, Kabbage, Venmo and others (disrupting banks); and Amazon (disrupting booksellers and retailers of many other products).

On the other hand, increasing digitization also offers opportunities. Companies can leverage strong customer relationships and increase cross-selling opportunities. This article presents a framework, supported by examples and financial performance impacts, for helping managers to think about their competitive environments in the digital era. (See “About the Research.