Upgrading strategies for the digital economy

TLDR

Digital technologies are reshaping industry structure, reducing routine tasks, and transforming work organization, raising questions about strategic options for firms and policymakers in less‑developed economies. This study disentangles the old and new features of the digital economy, identifies three key strategies—modularity, open innovation, and platforms—and examines their benefits and risks for society. The authors analyze strategy and policy options for firms and policymakers in less‑developed economies, focusing on innovation and market positioning within the modularity, open‑innovation, and platform frameworks. Core platform owners can accelerate innovation and carve new market space without needing all global data, and the greatest opportunities lie in industrial applications where physical systems and domain knowledge enable adaptation and customization.

Abstract

Abstract Research Summary Although computerization has been enabling changes in the structure and economic geography of industries for decades, recent public discourse has become focused on a set of “new” advanced digital technologies and technology applications that appear poised to dramatically reduce demand for routine tasks and transform the organization and content of work. How are these changes shaping the strategic options for companies and policy‐makers in less‐developed economies? This paper disentangles the old and new features of the digital economy; distills three key business strategies underpinning its organization: modularity, open innovation, and platforms; and summarizes some of the benefits and risks for society. It explores the strategy and policy options available for firms and policy‐makers in less developed places, with a focus on innovation and market positioning. Managerial Summary How is the digital economy shaping strategic options for managers in less‐developed economies? This paper disentangles the old and new features of the digital economy and distills three key business strategies underpinning its organization: modularity, open innovation, and platforms. It then explores strategic options available for firms in less developed places, with a focus on innovation and market positioning. While core platform owners will have the capability and authority to accumulate, access, and analyze large pools of data, access to all of the world's relevant data is not required to speed innovation or carve out new market space in the digital economy. The opportunities may be greatest in industrial applications, where the continued importance of physical systems and industry‐specific domain knowledge drives adaptation and customization.