The Future of Competitive Strategy

Introduction

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

of the cost savings of airline companies through new annuities from “outcome-based” revenues. Firms go beyond using data for efficiency gains to new ways of generating revenue. This requires making even more significant changes to prevailing business models compared to the earlier two tiers. Finally, Tier 4 entails extending product or value chains into digi- tal platforms by using interactive data acquired from product users to connect users to third-party entities. An example is Peloton that uses interactive data from its exercise equipment to create a community of users and to match individual users with suitable trainers. This is the most challenging tier for industrial-era legacy firms operating with value-chain–driven business models and little experience with digital platforms. The first three tiers entail the deployment of production ecosystems. The fourth tier entails the deployment of consumption ecosystems. Subsequent chapters of this book elaborate on how legacy firms can move through these four tiers by amplifying the value of data acquired through their digital ecosystems. The conception of digital ecosystems as a combination of produc- tion and consumption ecosystems is the central frame of this book’s discussion. Digital ecosystems that are tailored to the needs of legacy firms critically underpin such firms’ digital competitive strategies and are the cornerstone of the ideas introduced in this book. A digital competitive strategy is a set of choices that a firm employs to build competitive advantage by harnessing data in its digital eco- systems. Such a strategy differs from traditional competitive strategy, which is rooted in building advantage through products within a firm’s industry. Shifting the competitive focus to data and digital ecosystems also requires revisiting and reconfiguring many of the foundational premises associated with products and industries. Tenet 3: Develop New Mindsets for a Digital Strategy