Design Capital and Design Moves: The Logic of Digital Business Strategy

Forthcoming, MIS Quarterly, Special Issue on Digital Business Strategy: Toward a Next Generation of Insights

56 Pages Posted: 25 Feb 2012 Last revised: 9 Jun 2014

C. Jason Woodard

Franklin W. Olin College of Engineering

Narayan Ramasubbu

University of Pittsburgh - Katz Graduate School of Business

F. Ted Tschang

Singapore Management University - Lee Kong Chian School of Business

Vallabh Sambamurthy

Michigan State University - Department of Accounting & Information Systems

Date Written: October 4, 2012

Abstract

As information technology becomes integral to the products and services in a growing range of industries, there has been a corresponding surge of interest in understanding how firms can effectively formulate and execute digital business strategies. This fusion of IT within the business environment gives rise to a strategic tension between investing in digital artifacts for long-term value creation and exploiting them for short-term value appropriation. Further, relentless innovation and competitive pressures dictate that firms continually adapt these artifacts to changing market and technological conditions, but sustained profitability requires scalable architectures that can serve a large customer base and stable interfaces that support integration across a diverse ecosystem of complementary offerings. The study of digital business strategy needs new concepts and methods to examine how these forces are managed in pursuit of competitive advantage. We conceptualize the logic of digital business strategy in terms of two constructs: design capital (i.e., the cumulative stock of designs owned or controlled by a firm), and design moves (i.e., the discrete strategic actions that enlarge, reduce, or modify a firm’s stock of designs). We also identify two salient dimensions of design capital, namely option value and technical debt. Using embedded case studies of four firms, we develop a rich conceptual model and testable propositions to lay out a design-based logic of digital business strategy. This logic highlights the interplay between design moves and design capital in the context of digital business strategy and contributes to a growing body of insights that link the design of digital artifacts to competitive strategy and firm-level performance.

Keywords: Digital business strategy, design capital, design moves, digital options, technical debt, IT architecture

Suggested Citation

Woodard, C. Jason and Ramasubbu, Narayan and Tschang, F. Ted and Sambamurthy, Vallabh, Design Capital and Design Moves: The Logic of Digital Business Strategy (October 4, 2012). Forthcoming, MIS Quarterly, Special Issue on Digital Business Strategy: Toward a Next Generation of Insights. Available at SSRN: https://ssrn.com/abstract=2010935 or http://dx.doi.org/10.2139/ssrn.2010935

Charles Jason Woodard (Contact Author)

Franklin W. Olin College of Engineering ( email )

Olin Way
Needham, MA 02492-1200
United States

HOME PAGE: http://www.olin.edu/faculty/profile/c-jason-woodard/

Narayan Ramasubbu

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

Ted Tschang

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Vallabhajosyula Sambamurthy

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States

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