Many products and services are becoming digitized and,
consequently, software is emerging as the "factory"
in many industries. Examples include products, like newspapers, and
services, such as voice communications. With the emergence of consumer
online services in the mid-1980s and the commercialization of the Internet
since the mid-1990s, many consumer markets have been or are being digitized.
In this environment, firms are struggling to adopt
digital production and distribution. Information technology challenges
existing cost structures and, therefore, "law and order" in
industry. Examples include the combination of first, (near) zero cost
of copying and second, distributed, peer-to-peer delivery systems
(e.g., Kazaa). Lower fixed cost tends to erode entry barriers in
many markets. In this digital world, incumbents face start-ups pursuing
specialization strategies. Start-ups, on the other hand, struggle with
the uncertainty of whether the cost advantages of specialization can
offset higher transaction cost and the risk of vertical foreclosure
all of which depends on the target industry's level of integration or
degree of "openness."
As a result, new structures in supply chains and channel
systems are emerging. Often, such structural change is referred to as
"convergence", because new vendors and channel partners
enter the industry to provide the new assets and skills required to
go digital. These new entrants are typically from the computer
and communications industry. Problems arise, first, if they challenge
profit allocation, and, second, if they do so by introducing
new strategic dynamics. As IS become more important--the factory--architectural
control emerges as a key strategic weapon. One example is taking
advantage of control of a software application interface in order
to also control interaction across the interface. Similar behavior can
be observed in other areas such as the U.S. cable television market.
Multiple systems operators (MSOs) leverage ownership of coaxial cable
infrastructure to gain control over access to content and programming.
In May 2000 Time Warner Cable temporarily removed seven Disney-owned
ABC stations in a dispute over fees.
Often, this leaves "content" firms to answer
the key question: To what extent should a content firm be involved in
Answers may appear obvious, but the struggle of merging
America Online with Time Warner suggests otherwise. This struggle presents
an opportunity for research.
My projects aim at theory building and the identification
of strategic responses to the challenge of digital business transformation.