Classroom Companion: Business

 
Chapter 1 · The Digital Economy

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7
1
access to consumers in China. As we saw above, the six top businesses in 2021 all 
belong to the digital economy, and one of them (Tencent) has become the biggest 
company in China. How do companies in the digital economy get so big? How is it 
possible for companies in the digital economy to accumulate so much value in such 
a brief time? These are some of the questions we will shed light on in this book.
Several disruptive innovations have contributed to the scope and size of the dig-
ital economy. A disruptive innovation is an innovation that creates a new market, 
often leading to a change in market leadership and the emergence of new compa-
nies which become the new market leaders (Christensen, 
1997
).
 
► Failure to Accept Disruptive Technology
One of the most famous examples of disruptive innovations is the failure of the pho-
tography company Kodak. Kodak was one of the leading producers of chemical pho-
tography and camera films. Kodak failed to embrace digital photography in the 1990s 
and 2000s and lost the competition with Asian producers. Kodak filed for bankruptcy 
in 2012, and its patents were bought by a group of companies (including Google and 
Apple) for $525 million in 2013. Later that year, Kodak emerged from bankruptcy; how-
ever, with a vastly different market position compared to the market leader it once was 
in the 1990s.
◄
When ICT is at the core of a disruptive innovation, the market often changes from 
producing physical products to producing digital goods and services. Market sec-
tors that have been significantly affected by ICT-based disruptive innovations are 
media, telecommunications, and finance (Grossman, 
2016
).
An important part of the digital economy is e-commerce. E-ecommerce is the 
online trading of physical and digital goods. Some of the largest companies in the 
digital economy (e.g., Amazon, Alibaba, and eBay) are in the business of 
e- commerce. We will come back to e-commerce in 
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Chap. 
17
and explore it in 
more detail there. One important aspect of e-commerce is user feedback and rec-
ommendations. Since e-commerce offers consumers the ability to touch, feel, and 
test the merchandise to only a limited degree, feedback and comments from other 
consumers may add trust to the shopping experience as explained in 
7
Box 
1.1
.