industries use technology, deeply woven into their capabilities and core
competencies, as one of their factors of production, and, in many cases, as a
source of competitive advantage. However, the technology which they use –
concentrating on digital technologies here – is acquired from outside the
firm, and outside the industry. Although their demand conceivably has some
influence on the development of the technology they consume, it is
overwhelmingly exogenous.
A small minority of firms sell computers or networks, mobile devices or
network services, systems integration or technology support, and so on.
Depending on the definition of ICT and the geographic market, such ICT
services account for anywhere between 2% to 10% of domestic economies.
But even for most of these, they simply resell, adapt, integrate, commission
and support digital technologies which are discovered, developed, and in
many cases, manufactured elsewhere. In a narrow sense, digital
technological change is exogenous, even for these ICT firms.
It is only those firms that research new science or new applied science and
translate this into technologies and develop new ICT materials, components,
products, and new algorithms and data science techniques for whom digital
technological change is primarily endogenous.
Admittedly, it is not so clear cut. Is technological change endogenous to
Airbnb or Uber or Netflix? We would argue digital technological change is
indeed exogenous to them, but their new application of technologies into
their industries is endogenous to them, and exogenous to the legacy
industries they have disrupted.
From a demand perspective, digital technological change significantly
impacts customer demand, preferences, and the like. Although customers are
part of the industry system, as discussed in Chapter 6, we argue that the
technological change that influences their consumption behaviors do indeed
come from outside that system, and is hence exogenous.
Thus, we argue, digital technological change is exogenous for the
overwhelming majority of organizations. Later, this impacts the way that we
approach this issue from a strategic point of view.