NANT Competing in two worlds: the marketplace and the marketspace Reprinted from the New ways to create digital assets Beware: many of the old business axioms no longer apply Exploiting the virtual value chain Jeffrey F Rayport John J Sviokla E VERY BUSINESS TODAY competes in two worlds: a physical world of resources that managers can see and touch, and a virtual world made of information. The latter has given rise to the world of electronic commerce. a new locus of value creation. We call this new information world the marketspace to distinguish it from the physical world of the marketplace. A few examples illustrate the distinction. When consumers use answering machines to store their phone messages, they are using objects made and sold in the physical world, but when they purchase electronic answering services from their local phone companies, they are utilizing the marketspace-a virtual realm where products and services exist as digital information and can be delivered through information-based channels Banks provide services to customers at branch offices in the marketplace as well as electronic online services to customers in the marketspace; airlines sell passenger tickets in both the"place"and the"space"; and fast-food outlets take orders over the counter at restaurants and increasingly through touch screens connected to computers Jeffrey Rayport is an assistant professor and John Sviokla is an associate professor at the Harvard Business School. This article is reprinted by special permission from the November-December 1995 issue of the Harvard Business Review. Copyright o 1995 the President and Fellows of Harvard College. All rights reserved. THE McKINSEY QUARTERLY 1996 NUMBER I 21THE McKINSEY QUARTERLY 1996 NUMBER 1 21 EVERY BUSINESS TODAY competes in two worlds: a physical world of resources that managers can see and touch, and a virtual world made of information. The latter has given rise to the world of electronic commerce, a new locus of value creation. We call this new information world the marketspace to distinguish it from the physical world of the marketplace. A few examples illustrate the distinction. When consumers use answering machines to store their phone messages, they are using objects made and sold in the physical world, but when they purchase electronic answering services from their local phone companies, they are utilizing the marketspace – a virtual realm where products and services exist as digital information and can be delivered through information-based channels. Banks provide services to customers at branch oƒfices in the marketplace as well as electronic online services to customers in the marketspace; airlines sell passenger tickets in both the “place” and the “space”; and fast-food outlets take orders over the counter at restaurants and increasingly through touch screens connected to computers. Jeƒfrey Rayport is an assistant professor and John Sviokla is an associate professor at the Harvard Business School. This article is reprinted by special permission from the November–December 1995 issue of the Harvard Business Review. Copyright © 1995 the President and Fellows of Harvard College. All rights reserved. Jeƒfrey F. Rayport • John J. Sviokla Exploiting the virtual value chain Competing in two worlds: the marketplace and the marketspace New ways to create digital assets Beware: many of the old business axioms no longer apply Reprinted from the Harvard Business Review