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 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.

Executives must pay attention to the ways in which their companies create value in the physical and virtual worlds alike. But the processes for creating value are...