The Future of Competitive Strategy

Introduction

13

©2022 MIT. This excerpt is from The Future of Competitive Strategy by Mohan Subramaniam, published by The MIT Press.

that orchestrate exchanges among various third parties. Facebook, for example, orchestrates news- and information-sharing among friends and groups. Uber, the ridesharing platform, orchestrates exchanges between drivers and riders. Ecosystems Run on Data Data thus are the common thread running through digital ecosystems, whether they are the production kind or the consumption kind. Data are harnessed within digitally connected value chains in production ecosystems and through digitally connected complementary entities in consumption ecosystems. Both approaches expand a firm’s competi- tive scope beyond products to the data generated by products. Both engender new opportunities for a firm to transform its interactions with customers. Taken together, they help a firm envision the full scope of its data’s potential. However, it is important to analyze the ecosystem types separately as they require different business models—value chains versus platforms—that demand very different capabilities. Recognizing their differences also helps a firm envision more strategic options and consider a wider set of approaches to shaping its digital strategy. Digital ecosystems understood as a combination of production and consumption ecosystems are thus at the crux of how a legacy firm deploys its data to shape its digital competitive strategy. Digital ecosys- tems represent the most significant force empowering firms to unlock the full potential of the data they acquire. How a legacy firm constructs and engages with its digital ecosystems significantly influences how effectively it can harness the power of data for a digital strategy. Data and Digital Ecosystems Drive Digital Transformation Depending on the kind of data a legacy firm elects to generate and the type of digital ecosystems it chooses to deploy, the firm can unlock the value of data in four progressive tiers. 15 Advancing through these tiers, the legacy firm will also confront increasing challenges to transforming its prevailing business models. In other words, these four tiers corre- spond to four echelons of digital transformation (see figure 0.2).