PDF of this tutorial| We used to think that revolutions are the cause of change. Actually it is the other way around: change prepares the ground for revolution. —Eric Hoffer |
With information technology moving toward electronics and digitization, the structural transformation of the information industry has become inevitable. Industry structure is driven by the definition and extension of certain core competencies. A critical core competence for most companies is a mastery of the enabling technologies that help them create, produce, and distribute their products and services. In the traditional definition of information industries by media, enabling technologies were different for each medium (voice, text, image, video/audio, and data). Firms could thus specialize by devoting resources to developing distinctive competencies in those technologies.
The underlying principle of vertical integration of these industries around the form of the content was logical. However, digitization transforms all content to the same base units. In the face of this transformation, it is no longer logical to integrate each industry vertically by the form of the content. All information companies now harness essentially the same technologies, and these technologies are rapidly becoming multimedia. Therefore, the underlying logic by which companies participate in the information industry must reflect this new reality. There will be a fourfold structural impact of the migration of the entire information industry toward digital electronics: the industry will reorient itself along the horizontal axis depicted in Figure 3 (i.e., based on capabilities). As Figure 3 shows, there will be a series of within-industry and cross-industry consolidations as major players position themselves for the future based on a functional specialization. The transformation will result in only three major industries (not five), which suggests that it is going to become more efficient in the process. The three industries will be digitized content, multimedia devices, and convergent networks. Today's computer industry will largely disappear and will primarily become the provider of processing, memory, and storage capabilities to the three main industries (see Topic 16).
Figure 3. How the Information Industry Will Realign
The impact of the information industry will be pervasive throughout other industries, given the extent to which electronic technologies can fuse with other technologies. For example, the automotive and appliance industries use significant and growing amounts of information technology. The logic of this change is simple and is based on the well-known theory of comparative advantage. Each form of information has been dominated in the past by an industry that focused on one or two functional core competencies (entertainment and publishing on content, consumer electronics and personal computing on devices, telephone companies on transportation). However, each form-based industry had to perform all five basic functions. This kind of vertical integration is not sustainable, as each form industry was highly inefficient in some areas and efficient in other areas. As they focus on their core competence, industries will have to divest noncore functions to specialist providers.
Some companies from each form-based industry will become the new incumbents in the functionally defined industries of the future. They will be best positioned to extend their functional core competence and broaden their base across all the different media, as depicted in Table 2.
| Type of Information Business | Examples of Needed Core Competencies | Current Industries Mapping to It |
| information content | fostering and managing creativity, information gathering, and programming skills | publishing and entertainment |
| information appliances | global presence (for volume sales), strategic sourcing, design and manufacturing expertise, concurrent engineering and marketing, portability, and high storage capacity battery power | consumer electronics and PC manufacturers |
| information transport | network management, interactive communications, billing systems, and IT platforms | public telephone networks, cable TV, broadcast media, and private networks |
Table 2. Core Competencies in the New Information Industry
