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total nominal global revenuebase across all industry sectorsof roughly $240 trillion in2020. Though this value is bynature highly speculative today,the estimate is in line withthe effects of previous majortechnological transformations.But the virtuous impact ofdigitization won’t be felt solelyin the economic realm. Aspeople depend increasingly onthe virtual world, the effect onthe environment will be real:The greenhouse gases thatcontribute to global warming willbe reduced, and scarce naturalresources will be consumed moresparingly. People will cut backon unnecessary air travel, datacenters will use energy moreefficiently, and newer machineswill make wiser use of water andother commodities. The benefitsof digitization will be broadlyfelt and will extend to all partsof the human footprint.Inevitable Trade-OffsDigitizing a company does notcome cheaply, and the larger thelegacy aspect of the business,the more disruptive the processof digitization is likely to be.Furthermore, in most industries,even the largest enterprises willnot be able to afford to invest inevery aspect of digitization all atonce. The CEO and the executiveteam will have to make difficultchoices about building andacquiring critical capabilitiesin order to capture the comingopportunities. And they willbe confronted by requests forcapital and resources acrossalmost every part of thecompany. R&D, innovators, andnew business owners withinthe company will demandcapital and resources for newdigitization initiatives. Managersof established business unitswill want to make much largercapital investments to transformtheir existing businesses throughnew, digitized business modelsand approaches. The executiveteam itself will want to makebold investments, includingacquisitions and partnershipswith promising or rapidlygrowing businesses. And everyfunction in the company willbe asking for the resourcesneeded to enable new businessprocesses and labor practiceswith new technologies. Thechoices the executive teammakes will require a deepunderstanding of how and wheredigitization will add value tothe businesses or disrupt thestatus quo. The key questions allCEOs and their executive teamsmust answer center on fourthemes:How will digitizationimpact • my current businessmodel and positioning withinmy industry’s value chain?Howcan I best identify and enterareas where value is beingcreated, both inside and outsidemy industry? What areas ofmy business offer new entrantsclear opportunities to disruptmy current business model, andhow can I best fight back?Whichcapabilities do I need to buildto be a leader in the field?Theanswers to these questions willguide CEOs and their executiveteams to decisions about whereand how to prioritize theirdigitization investments amongthe many competing options.A Question of TimingTo gauge which investmentsare most critical and in whatsequence they should be made,top executives must first judgewhere in their industry theearliest impacts will be felt.The speed of digitization willnaturally vary from market tomarket, and its adoption—andthe level of investment requiredto respond fully—will varyfrom sector to sector withineach market. Thus, executivesmust gauge their responseaccording to their industry,sector, markets, and currentcompetitive positioning in thosemarkets. We have developed amethodology for determiningwhich industries will be affectedfirst. In general, we expect tosee digitization move fastestin industries where barriersto entry are low, those whereinformation in some form oranother is the primary productor a key success factor indownstream activities, and thosewhose upstream activities arethe most information- or capitalintensive,providing dramaticopportunities for digitizationto reduce capital intensity andincrease returns to capital (seeExhibit 6).Consider the case of themedia sector. Since its waresare essentially informationgoods, distribution via onlinechannels has already becomemainstream—from CDs andDVDs to MP3s and streamingmusic and video, and fromnewspapers and magazinesto websites and apps forsmartphones and iPads. Thathas lowered the barriers toentry even more, as evidencedby the constant stream ofstartups looking to profit fromthe aggregation and distributionof content. And though thesector is not especially capitalintensive,the intensity of itsuse of human capital is veryhigh. That makes the sectorripe for cost cutting throughthe digitization of humanbusiness processes—a trendthat has already happened inthe automated aggregation ofnews content through crowdapproaches. Then considerthe manufacturing andinfrastructure sectors. Thebarriers to entry are typicallyhigh, and few companies ineither sector will be able tovirtualize the goods they makeand sell. Furthermore, givenDecember 2011www.teletimesinternational.com51