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      Paula KleinCreated by Paula Klein on Feb 26, 2015 in Public Site: MIT IDE

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      Digital transformation is typically the domain of technologists: those fluent in the intricacies of software and app development, data analytics and machine languages. Occasionally, when business users are brought into the conversation, mobile-savvy social-media visionaries and IT leaders may be included.


      Increasingly, however, business executives are taking the reins and recognizing that digital transformation affects every aspect of their operations. At BMW, for instance, “marketing is really embracing digital” and becoming a key part of the corporate transformation under way, according to Steven Althaus, Senior Vice President, Director, Brand Management and Marketing Services.


      Althaus (pictured), who joined the German luxury carmaker in 2013, has a business degree and was CEO of a communications firm before he arrived at BMW. That background lets him take a wide-angle, integrated view of the auto industry and the current state of digital technologies. He isn’t thinking of digital transformation as a one-off communication strategy where ad dollars are spent on different media than in the past.



      “We think about how digitization affects our business model” and the future of the auto industry. “We are no longer just car sellers,” he said at a recent MIT IDE annual meeting, “People think differently about getting from point A to Point B; they consider cost, comfort, the environment and lifestyle. This requires new business models.”


      For example, BMW now is considering new ways to provide mobility services, not just producing cars—a revolutionary idea for a 100-year-old company. That includes rethinking basics like R&D, manufacturing, sales, design and classic supply-side product development. “There is a transformation of marketing” taking place, too, Althaus said, where the definition of customers and their role has changed dramatically.


      For instance, BMW is selling directly to customers for the first time, which Althaus calls a “game-changer” precipitated by the Internet. Customers pre-shop on the Web and have huge expectations and knowledgeability which are “redefining retail.”


      And while BMW is taking aggressive, bold actions with its the BMW i3 all-electric car and i8 hybrid cars, a corporate restructuring and revamped sales plans, it must keep pace with competitors that are also taking swift actions to hold onto profits in a fickle marketplace. BMW has long been in a horse race with its two German rivals, Daimler’s Mercedes Benz and Volkswagen’s Audi for the high-end market. But new competitors, such as Tesla, and even Cadillac and Volvo, are luring customers with features like semi-autonomous driving, safety sensors and smart apps, that are often more appealing to customers today than leather headrests and reclining seats. IT’s what one New York Times blog calls a new tipping point in


      Althaus noted that demographic shifts-- such as the resurgence in urban living, emergence of car-sharing and the idea of car ownership as a burden—are causing some of the disruption to traditional car companies.


      So is digital technology. The goal is to use these technologies and Web services—such as twitter and personalization—to connect directly with customers; car producers, like most other producers, are rapidly becoming service providers. How quickly they get there will be the difference between driving competitive advantage rather than lagging behind the curve.


      (Also see this recent interview with Althaus and here for more background information.)

      Some 700 economists, IT executives, academics and business leaders have signed an Open Letter on the Digital Economy, originated by IDE co-directors and  Second Machine Age authors, Erik Brynjolfsson and Andrew McAfee. The letter is based on the notion that while "the digital revolution is the best economic news on the planet," the evidence is also "clear that this progress is accompanied by some thorny challenges."


      The letter proposes a three-pronged call to action--in public policy, organizations models and research-- to alter and better distribute the effects of technological change on the labor force. So far, it is building a large community of supporters--including five nobel laureates--who agree that "we can only create a society of shared prosperity if we update our policies, organizations and research to seize the opportunities and address the challenges brought by these [technological] tools."


      Read the full text and sign on here.


      The Second Machine Age: Challenges for CXOs

      Erik Brynjolfsson, co-author of the book The Second Machine Age, discussed with I-CIO the profound impact of automation on every industry and how CXOs must play a key role--now.

      Andrew McAfee on Technology and the American Workforce

      On the PBS NewsHour last April, Andy McAfee spoke about how increased use of technology does play a role in the current disappointing job growth statistics.