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DIGITAL IS DISRUPTING/ TRANSFORMING INDUSTRIES – AND THIS IS WHY

Business strategy has always been premised on assumptions about technology, those assumptions are changing, and this will drive us to a different concept of what we mean by business strategy. – Phillip Evans

In his talk at TED Phillip Evans argues why digital is transforming business strategy and business(1). And especially which forces are at work creating what we today perceive as asymmetric competition(2) and mutating industries. (3)

Business strategy is built around Porter’s idea of value chains (4):

An organization is essentially a string of components forming a vertical value chain welded together by transaction costs.

A business’ competitive advantage is the sum or the average of its transaction costs. Companies usually wield large advantages in some components and are lagging in others.


business strategy_value chains_PDF

Companies are founded on the idea of a sustainable competitive advantage (4), seeing continued improvement in efficiency and standardization as a main ingredient in order to lower transaction costs in chosen components (5).

And this is why digital is carving out a new business landscape:
With digitization we can achieve zero marginal cost in some components – meaning that the transactional costs plummet to a level where there is less or nothing to economize on (zero marginal cost meaning that the cost of producing more than one instance is essentially zero(6)).