Digital Economy Dispatch #226 -- The Evolving Interplay between Business and Technology

I worked as a software engineer, system architect, and technology specialist for many years. However, it wasn’t long before it became clear to me that my interests in how to create technology were being overtaken by my concerns for how large, complex organizations adopted those technologies in responsible ways to create value for all stakeholders. Perhaps it was the frustration with seeing many of the systems I helped to design or develop fail to be delivered into the hands of their users. Or perhaps it was watching the time tick away in endless meetings as we discussed seemingly insurmountable roadblocks stalling progress in needed reforms to operational practices to make the most of the new systems being deployed.

In any case, the result has been my intense on-going interest in understanding more about how digital technologies evolve, what impact they have on the organizations in which they are placed, and the practices required to accelerate their responsible scaled adoption.  

The relationship between business and technology represents one of the most consequential symbiotic partnerships in human economic development. Throughout history, technological innovation has consistently reshaped commercial practices, while business requirements have simultaneously driven technological advances.

It can be argued that this continual feedback loop has accelerated dramatically over the past two decades, as digital technologies have fundamentally transformed virtually every industry sector. I would even go as far as to say that now we have past the point where the boundaries between "business" and "technology" have blurred to be indistinguishable. When Marc Andreesen famously proclaimed, “software is eating the world”, I have no doubt that it was this disappearing boundary he had in mind.

What are the implications of this re-drawing of the relationship between business and technology in the digital age? I have come to think of this in terms of two distinct (but related) concepts.

1. The “technology of business”. How digital technologies are redefining all aspects of business, from the kinds of products and services they produce to the organizational structures and cultures required to succeed in delivering them.

2. The “business of technology”. How the companies building today’s pervasive digital technologies dominate large parts of the business landscape and why their role is critical to the political and economic debates deciding the future of society.

Welcome to the Digital Revolution

The relationship between business and technology extends back to humanity's earliest commercial activities. From simple tools enabling agricultural trade to industrial machinery powering mass production, technological capabilities have always defined the parameters of business possibility. However, the digital technology revolution of the past twenty years has catalyzed a transformation unprecedented in both scope and velocity.

Prior to the digital era, technology typically served as an operational enabler – enhancing efficiency, reducing costs, or expanding reach. The relationship was largely unidirectional, with businesses adopting technologies that offered competitive advantages within established frameworks. The internet's commercialization in the late 1990s initiated the shift toward a more complex interdependency. The resulting wave of e-commerce solutions demonstrated that digital technologies could fundamentally restructure business models rather than merely optimize existing ones.

The subsequent proliferation of smart mobile devices, cloud computing infrastructures, and social media platforms further accelerated this trend. By the 2010s, digital technologies had evolved from operational support mechanisms to core strategic assets. Organizations across sectors found themselves compelled to undergo "digital transformation" – not merely digitizing existing processes but reconceptualizing value creation through a digital lens.

This transition marks a crucial shift. Where digital technology once served business objectives within relatively stable paradigms, the relationship has evolved into a dynamic, co-evolutionary partnership. Today's business leaders have come to recognize that digital technological capability and business strategy cannot be meaningfully separated – they represent different facets of a unified organizational approach to creating and capturing value in a digital ecosystem.

The Technology of Business—Redefining Organizational Models and Dynamics

This increasing digital maturity has significantly altered "the technology of business". Digital capabilities have fundamentally reshaped organizational structures, value propositions, and competitive dynamics. Beyond simply enabling greater efficiency, technology has reconfigured the core of business operations across multiple dimensions.

First, technology has transformed organizational architectures. Traditional hierarchical structures have given way to more distributed, network-based models that leverage digital platforms to coordinate activities across dispersed teams. Cloud-based collaboration tools, enterprise resource planning (ERP) systems, and integrated digital workspaces have created organizational forms that would be impossible without underlying technological infrastructure.

Second, technology has revolutionized value creation mechanisms. Platform business models exemplify this shift, creating multi-sided marketplaces where value derives not from linear production but from orchestrating interactions between participant groups. Companies like Uber, Airbnb, and Amazon have demonstrated how technology enables entirely new value propositions predicated on connection rather than production.

Third, technology has redefined the boundaries of the firm. Digital capabilities facilitate unprecedented levels of specialization, allowing organizations to disaggregate traditionally integrated functions into networks of partners and service providers. This has given rise to "modular" business architectures where core competencies are retained internally while peripheral activities are externalized through API-enabled partnerships.

Finally, technology has transformed competitive dynamics through data-driven decision making. Advanced analytics capabilities enable organizations to identify patterns, predict trends, and personalize offerings at scales previously unimaginable. Companies that effectively harness data as a strategic asset can achieve substantial advantages through superior insight, agility, and customer responsiveness.

The Business of Technology—The Rise of Tech-Driven Market Dominance

While technology has transformed business models across sectors, equally significant is "the business of technology" – the emergence of technology provision itself as the dominant commercial paradigm of our era. The last decade has witnessed the unprecedented rise of technology giants whose market capitalizations now dwarf those of traditional industrial powerhouses. For example, in 2024 the top five Big Tech firms – Apple, Nvidia, Microsoft, Amazon, and Google – accounted for 25% of all US equity value.

Several factors explain this shift in economic gravity. First, technology businesses often benefit from powerful network effects, where each additional user increases the value for all participants. This creates self-reinforcing growth dynamics that can lead to market concentration. Second, digital products typically feature near-zero marginal costs, enabling exceptional scalability once initial development investments are recouped. Third, data accumulation creates virtuous cycles (the so-called “flywheel effect”) where improved services attract more users, generating more data that further enhances capabilities.

These structural advantages have enabled remarkable concentration of economic power. Beyond pure economic dominance, these entities exert unprecedented influence over public discourse, information access, and even political processes. This concentration raises profound questions about market competition, regulatory frameworks, and societal governance that extend far beyond traditional business concerns.

The business of technology has also rewritten the rules of value creation and capture. Traditional metrics like physical assets, revenue, or even profit have proven inadequate for assessing technology companies whose value derives largely from intangible assets, growth potential, and ecosystem positioning. This has driven new valuation approaches that can account for the unique economics of digital business models.

AI and the Future Convergence of Business and Technology

Artificial intelligence represents the next frontier in the evolving business-technology relationship, promising to further accelerate the convergence of these domains. AI technologies will simultaneously transform how business operates ("the technology of business") and create new commercial paradigms centred on the Big Tech platforms dominating many business domains ("the business of technology").

From the "technology of business" perspective, AI will drive unprecedented automation of knowledge work, augment human decision-making capabilities, and enable hyper-personalization of products and services. Organizations will increasingly operate as "intelligence-augmented" systems where human and machine capabilities are integrated in a wide variety of ways. This will require radical rethinking of organizational design, leadership approaches, and talent management to manage the transition to this new way of working and to evolve effectively to be successful in both the short and longer term.

Simultaneously, from the "business of technology" standpoint, AI capabilities have already become the central competitive battleground in the technology sector, led by the main Big Tech companies. Current trends toward concentration may accelerate as companies with superior data resources, computational infrastructure, and algorithmic expertise establish what appear to be insurmountable advantages. Alternatively, we may witness fragmentation into specialized AI ecosystems focused on particular domains or applications.

Most significantly, AI will continue to challenge the very distinction between business and technology. As intelligent systems increasingly automate and autonomously execute business functions, the boundaries between technological infrastructure and business operations will blur to virtual indistinguishability. Organizations will evolve toward "computational enterprises" where strategic direction remains human-guided while implementation increasingly occurs through autonomous technological systems.

A Business-Technology Tale

The relationship between business and technology has evolved from separate domains to becoming indistinguishable in today's digital economy. This can be viewed from two key perspectives: the "technology of business" (how digital technologies transform organizational structures and business operations) and the "business of technology" (how tech giants dominate markets through network effects and data accumulation).

In every domain, technology has evolved from an operational tool to a core strategic asset. AI represents the next frontier that will further blur these boundaries, potentially creating "computational enterprises" where human guidance and technological systems work together seamlessly. The interplay has evolved from a relationship of adoption to one of integration and now to one of fusion. This will undoubtedly drive our understanding of the appropriate ways of leading, managing, organizing and operating future enterprises.