Upgrading strategies for the digital economy

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.