If there is one lesson that we can all learn from the continuing evolution of work and competition in the new economy, it's this: Change the question, and you change the game.

The last revolution in business thinking was spurred when innovative companies changed the question that they were asking themselves. The old question was, "What business are you in?" In the early 1990s, the question changed, prompted by the emergence of widespread entrepreneurial competitiveness and the blurring of boundaries between companies, industries, and countries. The new question became, "What is your business model?"

That change has defined competition for the past decade. New challengers using new business models have risen to take on almost every leading company in almost every industry. Compaq reinvented the business model for computer companies -- to the dismay of IBM. (Then Dell reinvented the model again -- to the dismay of Compaq.) Southwest Airlines reinvented the business model for air carriers -- to the dismay of American Airlines. Nucor reinvented the business model for steelmakers -- to the dismay of U.S. Steel. In almost every instance, the new business models produced cost advantages of 10% to 20% for the innovators.

But today competing on the basis of your business model is hardly cutting-edge thinking. And so the question is changing again. The question today is not, "What is your business model?" The new question -- the question that is the basis for the next great revolution in business thinking -- is, "How digital is your company?"

The question derives from Nicholas Negroponte's insight that the fundamental distinction in the new economy is between atoms and bits: What work do you do that involves atoms -- whether paper and pencil, people, or other tangible assets? And what work do you do that involves bits -- whether email, e-commerce, e-communication, or e-manufacturing? But this is not a question only about the e-hype of the moment. Neither is it about launching a Web site, nor is it about e-commerce. It is not, in short, a matter of embracing technology just for technology's sake.

Before you get caught up in the prevailing winds of e-hype, it's important to stop and consider some cautionary questions: What issues are fundamental to your business? Which of the many available digital technologies can help? And when is it the right time to make the investment to digitize your company? Intel is one company that has long had a keen appreciation of these questions. In 1986, following a $203 million loss, Intel decided to digitize its product-development process by investing roughly $300 million in computer-aided design and computer-aided manufacturing -- CAD/CAM. That investment wasn't a reflection of Intel getting caught up in the CAD/CAM hype. CAD/CAM was the digital answer to a purely competitive question: How could Intel create a two-year lead over its competitors? Becoming more digital in the design and production of chips was key to improving competitive performance. Wal-Mart made a similar investment at about the same time, digitizing its logistics system. By installing sophisticated communications and technology systems to provide real-time sales-and-ordering information, the company moved from atoms to bits. As a result, Wal-Mart outperformed its competitors by offering the right products at the right stores, by cutting costs, by integrating its operations with its suppliers, and by capturing valuable information about its customers. Fifteen years ago, Wal-Mart and Intel were already digitizing their way of doing business -- and winning.