more fundamental reason is that companies conduct business on-line and use digital are still not clear how the Internet adds value technologies to streamline operations, the In this article we look at how nternet is helping them develop new value are leveraging the unique features of digital propositions. Fig. 1 illustrates four related technology to create competitive advantages value-adding activities that are being revo- Two aspects of this approach stand out. First, lutionized by the Internet-search, evalua- there are several strategies that Internet- tion, problem-solving, and transaction. In based businesses can use to improve their this section, we address how companies value propositions. These include four Inter- can use these capabilities to add value and net-specific activities that are providing firms create competitive advantages with new capabilities-search, evaluation problem-solving and transaction. These value-adding activities are enhanced further Search Activities by managing three different types of Internet Search refers to the process of gathering content--customer feedback, expertise, and information and identifying purchase entertainment programming. Second, these options. The Internet has enhanced both value-adding strategies are best understood the speed of information gathering and the in the context of business models that are breadth of information that can be accessed specific to the Internet environment. Thus, This enhanced search capability is one of the we will consider seven internet business key reasons the Internet has lowered switch- models that have emerged and proven suc ing cost--by decreasing the cost of search cessful, and outline how value-adding activ. These efficiency gains have greatly benefited ities and content are best used in the context buyers. Suppliers also have benefited. Small of each of the internet business models suppliers that had difficulty getting noticed can more easily be found. Large suppliers can publish thousands of pages of informa- INTERNET ACTIVITIES THAT tion for a fraction of the cost that hard-copr ADD VALUE catalogs once required. Additionally, on-line search engines have accelerated the search In his article, Strategy and the Internet, process to incredible speeds Michael Porter has emphasized that Internet Consider the example of Google,a technology becomes strategically significant search engine developed as a project by only when its practical application creates two graduate students, which became the new value. How w are firms using the Internet number-one search service in just four years to add value? By allowing companies to Why? Because it is capable of incredible FIGURE1 NTERNET ACTIVITIES THAT ADD VALUE Product-Related Evaluation Transaction Service-Related Problem-Solving 162 ORGANIZATIONAL DYNAMICSmore fundamental reason is that companies are still not clear how the Internet adds value. In this article we look at how companies are leveraging the unique features of digital technology to create competitive advantages. Two aspects of this approach stand out. First, there are several strategies that Internet￾based businesses can use to improve their value propositions. These include four Inter￾net-specific activities that are providing firms with new capabilities—search, evaluation, problem-solving and transaction. These value-adding activities are enhanced further by managing three different types of Internet content—customer feedback, expertise, and entertainment programming. Second, these value-adding strategies are best understood in the context of business models that are specific to the Internet environment. Thus, we will consider seven Internet business models that have emerged and proven suc￾cessful, and outline how value-adding activ￾ities and content are best used in the context of each of the Internet business models. INTERNET ACTIVITIES THAT ADD VALUE In his article, ‘‘Strategy and the Internet,’’ Michael Porter has emphasized that Internet technology becomes strategically significant only when its practical application creates new value. How are firms using the Internet to add value? By allowing companies to conduct business on-line and use digital technologies to streamline operations, the Internet is helping them develop new value propositions. Fig. 1 illustrates four related value-adding activities that are being revo￾lutionized by the Internet—search, evalua￾tion, problem-solving, and transaction. In this section, we address how companies can use these capabilities to add value and create competitive advantages. Search Activities Search refers to the process of gathering information and identifying purchase options. The Internet has enhanced both the speed of information gathering and the breadth of information that can be accessed. This enhanced search capability is one of the key reasons the Internet has lowered switch￾ing cost—by decreasing the cost of search. These efficiency gains have greatly benefited buyers. Suppliers also have benefited. Small suppliers that had difficulty getting noticed can more easily be found. Large suppliers can publish thousands of pages of informa￾tion for a fraction of the cost that hard-copy catalogs once required. Additionally, on-line search engines have accelerated the search process to incredible speeds. Consider the example of Google, a search engine developed as a project by two graduate students, which became the number-one search service in just four years. Why? Because it is capable of incredible FIGURE 1 INTERNET ACTIVITIES THAT ADD VALUE Evaluation Problem-Solving Search Transaction Service-Related Product-Related 162 ORGANIZATIONAL DYNAMICS