Information technology matters to business success because it directly affects the mechanisms through which they create and capture value to earn a profit: IT is thus integral to a firm's business-level strategy. Much of the extant research on the IT/strategy relationship, however, inaccurately frames IT as only a functional-level strategy. This widespread under-appreciation of the business-level role of IT indicates a need for substantial retheorizing of its role in strategy and its complex and interdependent relationship with the mechanisms through which firms generate profit. Using a comprehensive framework of potential profit mechanisms, we argue that while IT activities remain integral to the functional-level strategies of the firm, they also play several significant roles in business strategy, with substantial performance implications. IT affects industry structure and the set of business-level strategic alternatives and value-creation opportunities that a firm may pursue. Along with complementary organizational changes, IT both enhances the firm's current (ordinary) capabilities and enables new (dynamic) capabilities, including the flexibility to focus on rapidly changing opportunities or to abandon losing initiatives while salvaging substantial asset value. Such digitally attributable capabilities also determine how much of this value, once created, can be captured by the firm-and how much will be dissipated through competition or through the power of value chain partners, the governance of which itself depends on IT. We explore these business-level strategic roles of IT and discuss several provocative implications and future research directions in the converging information systems and strategy domains.
In this research note, we examine the design, development, validation, and use of virtual worlds. Our purpose in doing so is to extend the design science paradigm by developing a set of design principles applicable to the context of virtual environments, particularly those using agent-based simulation as their underlying technology. Our central argument is that virtual worlds comprise a new class of information system, one that combines the structural aspects of traditional modeling and simulation systems in concert with emergent user dynamics of systems supporting emergent knowledge processes. Our approach involves two components. First, we review the characteristics of agent-based virtual worlds (ABVWs) to discern design requirements that may challenge current design theory. From this review, we derive a set of design principles based on deep versus emergent structures where deep structures reflect conventional modeling and simulation system architectures and emergent structures capture the unpredictable user-system dynamics inherent in emergent knowledge processes, which increasingly characterize virtual worlds. We illustrate how these design challenges are addressed with an exemplar of a complex mirror world, a large-scale ABVW we developed called Sentient World. Our contribution is the insight of partitioning ABVW architectures into deep and emergent structures that mirror modeling systems and emergent knowledge processes respectively, while developing extended design principles to facilitate their integration. We conclude with a discussion of the implications of our design principles for informing and guiding future research and practice.