The extraordinary technological developments of the last decade are spawning new rules of economic engagement. Fueled by worldwide information networks, the fundamentals of business are being transformed in every market, in every industry, in every nation. Those who understand how to create, manage, and leverage assets across boundary less organizations, using the tools of information technology and telecommunications, are the new barons of industry.

Unprecedented market forces and organizational forms have emerged. There are new structures of competition and alliances, sources of value and methods of asset valuation, strategies for touching and retaining customers in global markets, and new electronic channels and brokerage relationships.

The rapidity and volatility of technical, knowledge, and market changes require leaders of global businesses to be highly adaptive and receptive to new and complex information. These accelerating changes also necessitate the development of new theoretical models for understanding, evaluating, and affecting the efficient and fair practice of business in the “third industrial revolution.” In the digital economy, no position is secure or defensible for long, as the fast companies create new advantages by actually destroying the old.

The innovation of organizational processes and products has become a major business challenge. One key area of innovation has been the recognition that sophisticated organizational supply chains, as practiced by companies such as Wal-Mart, Dell, and Nokia, can be a strategic source of competitive advantage. With implementation of advanced supply chain management, the adversarial relationships between logistics providers, suppliers, and customers become more like partnerships, and the collective focus of firms begins to shift from optimizing each firm’s own internal value chain to optimizing the larger inter-firm extended value chain.

In this new business environment, corporations face many new challenges. Business has now become what is called the “24/7” affair. How does one manage customers, suppliers, and employees around the clock? Given the technological advancements, how does one move appropriate parts of the business online? Given the global reach created by technology, which business processes should be outsourced? How does the instant availability of information transform traditional organizational structures? How does one ensure that technological penetration into the workplace improves the productivity of employees? Wireless communications technology has also become so pervasive that most people can be on the road and yet be connected to everyone and have access to all the business intelligence they need. Success stories—and failures—of wireless business applications abound. The challenge is to know what mobile applications make sense from the point of view of business and organizational design.

Most companies now use the Internet as a new channel to their customers and a way to speed up the negotiations with their suppliers. A number of new issues are emerging in electronic marketplaces. How does one create electronic marketplaces that are profitable? What kind of online auctions are most useful for procurement? How does one ensure product quality from the suppliers while at the same time ensuring competitive prices? How does one create e-markets for time-sensitive goods? In dealing with customers, companies must use information intelligently to compete. The challenge is how to ensure that the best data are collected and that the most important data are presented to customers and companies for effective decision-making. New techniques in data mining and data delivery are needed to address these issues.

The digital economy also allows companies to use new ways of doing business. More and more companies like Dell are getting the customers to use the Internet to tell them exactly what features they need in a product. The issue is how to design these direct-to-customer systems. When one orders anything from Amazon, they like to tell you exactly when that order will be filled. Given that a supply chain has to work together to make this happen, it is important to know how confident one can be about the order fulfillment date. The issue is how to design available-to-promise systems that are more than 95% accurate. The new digital economy also allows much more collaborative decision-making when there are multiple agents (e.g., airlines working with FAA, or logistics and delivery systems). Again, the design of these systems requires very good domain knowledge as well as an understanding of the algorithms that can resolve the problems very quickly.

These are the challenges for today’s business schools, and only a few are making the transition to the new digital economy. At the Smith School, we are charting a course to advance business thinking and education for the digital economy. The world as we know it is changing rapidly, from the way we live our personal lives, our social and political activities and choices, to our approaches for conducting business and creating value. The impact of technology on the business environment has been felt in all aspects of business. Like businesses, business schools in the new millennium must transform their knowledge and research base, curricula, and modes of delivery. At the Smith School, we are in the midst of this transformation, with a vision of becoming a model for business education and knowledge advancement for the 21st century.

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