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 have referred to this new information world as the marketspace to distinguish it from the physical world of the marketplace. (See “Managing in the Marketspace,” HBR November–December 1994.) 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.
A version of this article appeared in the November–December 1995 issue of Harvard Business Review.