MIT Sloan Management Review Article on Three Questions to Ask About Your Digital Strategy

Leaders who are shaping digital strategy face a fundamental dilemma: Should they try to disrupt the market, using digital technologies to reshape both the value chain and performance expectations? Or should they try to adapt, using digital technologies to enhance the company’s existing value chain? This choice has critical implications for an organization’s performance, yet many leaders struggle to frame the decision.

It is tempting to think that a digital disruption strategy is always the best choice. Netflix famously redefined customer expectations in the movie rental market by making content accessible immediately and ended up rewiring the industry value chain by moving away from mail-order DVDs and toward platform streaming. But other examples illustrate the potential pitfalls of a disruption strategy, such as elusive or significantly delayed profits. For example, Peloton set out to disrupt the home fitness industry, but company performance plummeted as customers canceled subscriptions and logistics operations failed. And Uber — another poster child of digital disruption — had $32 billion in cumulative losses over 14 years before it finally turned a profit.

About the Author

Murat Tarakci is a professor and the chair of innovation strategy at the Rotterdam School of Management at Erasmus University. Fabian J. Sting is the chair of supply chain management — strategy and innovation at the University of Cologne and the chaired professor of digital supply chain innovation at the Rotterdam School of Management. Jan Recker is the Nucleus Professor for Information Systems and Digital Innovation at the University of Hamburg Business School. Gerald C. Kane is the C. Herman and Mary Virginia Terry Chair in Business Administration at the Terry College of Business at the University of Georgia.

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