There is currently a fundamental transformation of services, a transformation central to the growth of productivity and competition in the global economy. This transformation, a response to commodification generated by decomposition of production and intensified competition in global markets, is driven by developments in IT tools, the uses they are being put to, and the networks they run on. The service transformation is changing how firms add value, affecting the underlying economic activity in countries around the world.
This article introduces the notion of the services transformation, placing it in the historical context of production and competition, noting the advent of the Internet as a critical building block. Second, we consider national strategies for capturing value in this new era. The experiences of Japan and Korea, successful in deploying high-speed IT networks, but facing unexpected challenges in using them to capture value, highlight several features of the services transformation.