Digital Transformation Strategy PDF

Stuvia - Koop en Verkoop de Beste Samenvattingen W1: Introduction to Digital Transformation Strategy Adner, R., Puranam, P., & Zhu, F. 2019. What is different about digital strategy? From quantitative to qualitative change. Strategy Science, 4(4): 253–261. The authors propose that digitization sh...

Stuvia - Koop en Verkoop de Beste Samenvattingen W1: Introduction to Digital Transformation Strategy Adner, R., Puranam, P., & Zhu, F. 2019. What is different about digital strategy? From quantitative to qualitative change. Strategy Science, 4(4): 253–261. The authors propose that digitization shifted from quantitative improvements to qualitative changes, requiring new strategic principles for technology transitions. Quantitative acceleration = rapid increase in the volume and speed of data processing and transfer enabled by digital technologies. It encompasses the exponential growth in digital capabilities, such as processing power, data storage, and network bandwidth, that facilitate faster and more efficient handling of large amounts of data. The authors identify 3 foundational processes underlying digital transformation: Representation: Digitization enables the algorithmic manipulation of digital information. The qualitative revolution in data representation is evident from converting physical data into digital format. The ubiquity of sensor technology expands digital representation, while machine learning represents data algorithmically, posing challenges for human-guided interpretation and bounded rationality. Connectivity: Digitization creates new connections and enhances existing connections among objects, individuals, and organizations, impacting network density and value. The transition from connectivity-on-demand to connectivity-by-default represents a qualitative change. This shift facilitates revolutions in search, monitoring, and control, moving from broadening search space to context-specific relevance and intensifying the constraints of deliberation and choice. How firms allocate their attention has become a crucial strategic decision. Aggregation: Beyond quantitative data growth, this qualitative shift arises from the ability to combine previously disjoint data to answer questions that were formerly impossible to address. This capability enables unique assessments in areas like health risks and financial soundness, influencing organizational understanding and management, while also raising concerns about privacy and control. Interaction: “As connectivity and aggregation erode transaction costs (and in turn accelerate as transaction costs erode), the resulting increase in transactions enhances the potential for new and more kinds of data; consequently, advances in data representation become ever more valuable in the effort to process these data and mitigate the constraints of human-bounded rationality.” There may also be strong complementarities between these processes, as the development in one increases the value of the other. Dramatic changes occur when representation, connectivity, and aggregation interact, forming the basis of new business models and value creation. Implications: RBV: data and algorithms as self-generating resources: Data and algorithms as self-generating resources are considered ultimate scale-free resources. Autogenic data generation: where interaction with data creates new data and challenges traditional resource value, rarity, and substitutability criteria. Fungibility (= replaceable) of data: A smaller decline in value indicates higher fungibility. Data, ownership, and factor markets: “Who should own the data? Ownership of data generated by digital devices, like cars, raises questions about consent and control. Enhanced connectivity challenges traditional boundaries of information flow and IP protection, underscoring the managerial challenges of differential information pathways (where to block Gedownload door: matsmolenberg | [email protected] ¤ 912 per jaar Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. extra verdienen?  Stuvia - Koop en Verkoop de Beste Samenvattingen its flow and where to enable it). Contracting challenges since data can be reused, repackaged, and resold ad infinitum. Digitization, replication, and super-scalable business models: Digital format allows error-free, costless replication, leading to scalable business models. Connectivity and aggregation enhance scalability, as seen in smart speakers that leverage user data to improve functionality and create barriers to entry. As you accumulate more data from each user, the product becomes more intelligent and attracts more users, enjoys higher scalability, this is results in a positive feedback loop. Digital transformation of firm scope: The digital transformation of firm scope, driven by the fungibility of digital assets like software capability and data analytics, creates opportunities across multiple markets, leading to blurred industry boundaries. This challenges traditional diversification theories and requires a re-examination of relatedness concepts, as firms face competition from outside their industries and leverage digital asymmetries. Corporate strategy researchers are encouraged to develop and test theories that reflect the extreme fungibility of data due to aggregation and algorithmic representation. Digital transformation and internal organization of firms: Digital transformation creates opportunities for "algorithmic management," augmenting or automating managerial work. Digital transformation challenges hierarchical control, as connectivity implies managers cannot rely solely on information access for authority, but on abilities to lead and manage. Extreme connectivity fosters alternatives to hierarchical organizing, like online communities for innovation, showing the potential of purely algorithmic solutions for organizational problems like division of labor and effort integration. Organizational sensemaking in an algorithmic world: Algorithmic extraction of actionable predictions represents a major shift in data use, moving from enhancing human perception to prediction, which may not involve human comprehension. Managers might need to prioritize predictive needs over understanding, balancing this against ethical concerns and regulatory constraints. There is an increased need for clear narratives in an environment of complex algorithmic decision-making but ultimate human responsibility. These developments raise philosophical and ethical issues, such as the implications of using algorithms for hiring, retention, and promotion, and the risks of institutionalized discrimination and coercion. Conclusion: The article concludes that while traditional strategic concepts remain valuable, a new framework is needed to understand digital transformation's impact. This includes a focus on representation, connectivity, and aggregation processes and their interactions, which are pushing firms to innovate in value creation, business models, and organizational management. The article highlights the nuanced shifts in digital strategy, emphasizing the qualitative changes brought about by digitization and its implications on firm strategy and organization. The interactions among representation, connectivity, and aggregation form the foundation of these strategic shifts, suggesting a need for a re-evaluation of traditional strategic principles in the digital era. Gedownload door: matsmolenberg | [email protected] ¤ 912 per jaar Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. extra verdienen?  Stuvia - Koop en Verkoop de Beste Samenvattingen Hanelt, A., Bohnsack, R., Marz, D., & Antunes Marante, C. 2021. A systematic review of the literature on digital transformation: Insights and implications for strategy and organizational change. Journal of Management Studies, 58(5), 1159–1197. Abstract: In this article, we provide a systematic review of the extensive yet diverse and fragmented literature on digital transformation (DT), with the goal of clarifying boundary conditions to investigate the phenomenon from the perspective of organizational change. On the basis of 279 articles, we provide a multi-dimensional framework synthesizing what is known about DT and discern two important thematical patterns: DT is moving firms to malleable organizational designs that enable continuous adaptation; and this move is embedded in and driven by digital business ecosystems. From these two patterns, (with the dimensions of context and process) we derive four perspectives on the phenomenon of DT: technology impact, compartmentalized adaptation, systemic shift, and holistic co-evolution. Linking our findings and interpretations to existing work, we find that the nature of DT is only partially covered by conventional frameworks on organizational change. On the basis of this analysis, we derive a research agenda and provide managerial implications for strategy and organizational change. We define DT as: “Organizational change that is triggered and shaped by the wide- spread diffusion of digital technologies.” DT differs from IT: 1. Technologies involved, such as big data analytics, social media, mobile technology, or cloud computing, seem very different from earlier IT. 2. Many digital technologies cannot be restricted to the boundaries of specific firms or industries but involve a wider ecosystem and the demand side, so not just companies but by anyone. 3. The consequences of DT – such as the emergence of new digital business models even in non- digital industries – seem to extend beyond those of previous phases of IT-enabled change, which were usually related to the practice level and rather incremental change within firms. DT seems to have a more intricate and encompassing connection to the topic of organizational change, requiring a broader view of and comparison with the literature on organizational change and innovation. Findings are particularly part of the distinction in organizational change literature between episodic & continuous change perspectives: o Episodic position: relates to infrequent and intentional organizational change. o Continuous position: assumes ‘ongoing, evolving and cumulative’ change. Although DT leads to an overall shift towards continuous change, this shift can be triggered and shaped by episodic bursts. Gedownload door: matsmolenberg | [email protected] ¤ 912 per jaar Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. extra verdienen?  Stuvia - Koop en Verkoop de Beste Samenvattingen Findings: Substantial increase in rise of interest between 2000 and 2018. Contextual conditions: o Contextual conditions define the onset of DT. o SMACIT technologies = social, mobile, analytics, cloud, and Internet of Things o Organizational antecedents are particularly organizational & managerial characteristics. o Obviously, material and organizational antecedents are embedded in and interact with environmental antecedents – particularly country characteristics, industry characteristics, and consumer characteristics. Mechanisms: o Input and output variables are in general linked via mechanisms. o Two main mechanisms are: o Innovation: application of resources, processes, and capabilities that are new to the organization. ▪ Involves novelty in both strategic & operational regards. o Integration: alignment of these with existing resources, processes, and capabilities. Outcomes: o Differentiation between: o Organizational set-ups: configuration of the constituents of the firm o Economics o Spillovers Gedownload door: matsmolenberg | [email protected] ¤ 912 per jaar Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. extra verdienen?  Stuvia - Koop en Verkoop de Beste Samenvattingen Discussion of findings: o We can identify a move towards malleable organizational designs. A malleable organizational design can be understood as one that is easily influenced and can be easily changed. The malleable organizational designs that are brought about by DT build on digital technologies and agile structures to adapt rapidly to environmental opportunities and threats. Firms support the move towards a malleable organizational design in several ways: o They gather the necessary new knowledge and capabilities. o The integration mechanisms of our framework show that firms fuse this new knowledge and capabilities with what already exists in their organization. o We can identify a move towards digital business ecosystems as the second thematic pattern of DT. Seen as the ‘alignment structure of the multilateral set of partners that need to interact in order for a focal value proposition to materialize’, or the networks of interconnected stakeholders (like suppliers, customers, competitors) that coexist and co-evolve in the digital environment. A key differential factor that sets digital business ecosystems apart is their ‘turbulent nature’. Generally, turbulence can be understood as ‘the conditions of unpredictability in the environment because of rapid changes in customer needs, emerging technologies, and competitive actions. In the context of business ecosystems, this turbulence becomes visible, especially through the vast number and heterogeneity of interdependent partners that shape competition, the widespread diffusion and adoption of interconnected generative technologies, and the constantly changing customer preferences. Context dimension: describes the forces/conditions existing in organization's environment. o Context: o Inner (i.e., structures, corporate cultures, and political context within firms) o Outer (i.e., the social, economic, political, and competitive environment of a firm) o Contextual scope (optical lens): o Narrow: focus on the relationship between specific elements from digital business ecosystems and particular aspects of the organizational design. o Broad: if the holistic confluence of multiple technological, organizational, and environmental elements in digital business ecosystems, as well as their interactions with organizational design as a whole, is considered. Process dimension: ‘the action, reactions, and interactions from the various interested parties as they seek to move the firm from its present to its future state’. o Intra-organizational process: the extent to which intra-organizational processes of change are accounted for in studies on DT, depending on the emphasis placed on an organization’s innovation and integration mechanisms. It is important to note that the two dimensions of the typology represent continuums, not discrete boundaries. That is, the four types and their associated attributes presented are general archetypes. The four dimensions should be combined, however. Gedownload door: matsmolenberg | [email protected] ¤ 912 per jaar Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. extra verdienen?  Stuvia - Koop en Verkoop de Beste Samenvattingen 4 dimensions: 1. Technology impact perspective: o Such studies describe direct technology impacts, typically focusing on a particular technology or system and describing its peculiarities and specific implications for organizations. 2. Compartmentalized adaption: o Concentrating on particular technologies, systems, or change drivers and specific outcomes. Important in tracing how organizations adapt to particular technologies or innovations in a discrete context. This perspective provides insights on how firms partially adapt their organizations to specific developments in their digital business ecosystems. 3. Systemic shift: o Describes how conditions within digital business ecosystems interact with organizational designs as a whole. Helps to understand the peculiarities and evolutions of digital business ecosystems as a whole and their impacts on organizational designs. 4. Holistic co-evolution: o Reveals how firms react to complex changes in their environment. yielding insights into how organizations transform their organizational design in accordance with the surrounding evolving digital business ecosystems. Gedownload door: matsmolenberg | [email protected] ¤ 912 per jaar Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. extra verdienen?  Stuvia - Koop en Verkoop de Beste Samenvattingen Lecture 1: Introduction to Digital Transformation Strategy Digitization = the process of making information digitally available and accessible Digitalization = the process of considering how digitized information can best be used to simplify certain operations Digital transformation = the process of devising new business applications that integrate all the digitized data and digitalized applications → Digitization and digitalizaiton are not necessarily conditions for digital transformation! You can also jump directly to digital transformation, e.g. through digital platforms (lec 2) The process of digital transformation To understand the impact of digital transformation, we need to reflect on firms’ business and operating model Business model consists of: - Value creation: innovation, efficiency - Value capture: competition, isolating mechanisms - Value delivery: sales channels, bundling and unbundling Operating model consists of: - Scale: volume, complexity, consumers - Scope: variety, range - Learning: R&D, continuous improvement, IP generation In the digital economy, firms’ operating and business models are being radically reshaped. 1 Gedownload door: matsmolenberg | [email protected] ¤ 912 per jaar Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. extra verdienen?  Stuvia - Koop en Verkoop de Beste Samenvattingen Transition to the digital economy: Running traditional and digital businesses requires different logics regarding organization, processes, and KPI’s Traditional vs. digital business logic Traditional business logic Digital business logic Organization: Organization: - Several products/product lines - One (integrated) software and data - Focused and dedicated teams platform - Heavyweight project management - Many application (internal and - Software/hardware optimized by external) product line - Functional structure, ad hoc teams - Data analytics embedded in products - Centralized hub and spoke data group - Distributed development, universal application programming interface Process: Process: - Top down waterfall/stage gate - App development iterative, agile, - Some agile sprints - Internal development - Core platform development top-down - Proprietary IP - Open APIs for internal and ecosystem development - Hackathons - Open domain, crowdsourcing KPIs: KPIs: - Profit and cost per product line - Total audience engagement - Satisfaction/quality per product line - Multi-sided monetization - Product features, innovation - Platform enablement - Data quality and completeness 2 Gedownload door: matsmolenberg | [email protected] ¤ 912 per jaar Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. extra verdienen?