Digital Business Strategies and the Duality of IT

The Duality of IT There’s a duality to IT that creates dilemmas for business leaders. This duality, manifest in the following five forms, gives IT the power to reshape the strategic agenda of organizations. First, IT enables both sustaining and disruptive innovation. Thus, a key strategic issue for digital business strategists involves discerning whether an IT innovation is sustaining, disruptive, or potentially both.1 To the extent that managers’ perceptions shape their actions and can become selffulfilling prophecies, viewing every technology-enabled change as potentially disruptive can be equally as distracting as being completely oblivious to change or not recognizing the sustaining potential of technology. Second, IT often creates new opportunities to fundamentally reshape markets while at the same time enabling faster and more efficient adaptation. Thus, a key strategic issue for digital business strategists is deciding whether to leverage IT to attempt to shape their environment, or to use IT to adapt to the environment instead.2 Third, stemming from the first two dualities, IT offers firms new sources of competitive advantage while concurrently offering more transparency in the sources of those advantages, allowing rivals to quickly identify, imitate, and even undermine efforts to introduce an innovative product or technology.3 Thus, a key strategic issue for digital business strategists is deciding whether to make the first move in leveraging IT-enabled opportunities or to be a fast follower, free riding on the pioneering costs and risks borne by the first mover. Note that this strategic issue is related to, but distinct from, the issue of deciding whether to shape or adapt to the environment, because a “shaper” doesn’t have to be a first mover. Fourth, IT advances have dramatically reduced transaction costs and the economics of organizing business activities, pointing to a need to rethink conventional transaction costs and other “theory of the firm” concepts in strategic management. In particular, IT lets firms monitor partners and collaborate virtually, driving vertical disaggregation in many industries. At the same time, IT advances facilitate horizontal aggregation, so investments in IT infrastructure can be leveraged across multiple product lines, geographic markets, and customer segments. In other words, IT has tended to drive both disaggregation (especially throughout the vertical value chain) and aggregation (especially horizontally) at the same time. The choice facing digital business strategists then is how best to exploit IT capabilities to both “aggregate” and “disaggregate” the firm. Finally, the rapid pace of ITenabled change overall creates immense uncertainty for business strategists while providing powerful new tools and data sources to better understand that uncertainty and the range and relative likelihood of alternative outcomes. A digital business strategy should help determine how to manage these five elements of duality by outlining plans for exploiting the strengths of IT, mitigating its threats, and using digital uncertainty as a competitive advantage.