DTS READINGS
1 – VERHOEF ET AL. (2021)
DIGITAL TRANSFORMATION: A MULTIDISCIPLINARY REFLECTION &
RESEARCH AGENDA
3 stages of digital transformation (DT): digitization, digitalization & digital transformation
Identify 2 delineate growth strategies for digital firms + assets & capabilities required to successfully
transform digitally
digital transformation requires specific organizational structures & bears consequences for metrics
used to calibrate performance
3 OBJECTIVES OF PAPER:
1. Identify external factors that have strengthened the need for DT
2. Discuss strategic imperatives that result from DT regarding
a. Required digital resources
b. Required organizational structure
c. Growth strategies
d. Required metrics
3. Present a research agenda that guides future (inter)disciplinary research on DT
MODEL FOR DISCUSSION ON DT
(numbers relate to chapters of the notes)
1. External 2. Phases of DT 3. Strategic
Drivers of DT Imperatives of
DT
Digital Tech Digitization Digital
Digital Comp. Digitilization Resources
Digital Customer DT Organizational
Behaviour Structure
Growth Strategy
Metrics & Goals
1) THE NEED FOR DT
1. Increasing number of technologies (broadband internet, smartphones, Web 2.0, cloud com-
puting, speech recognition, online payments, crypto currencies) have strengthened e-com-
merce
Big data (AI, blockchain, internet of things (IoT), robotics)
Affect firms’ cost structure through replacing costlier humans during service delivery with the
help of robots/ virtual agents OR optimizing logistic streams & reducing supply chains costs
through the use of AI & blockchain
2. Competition is changing dramatically
more global
intensity has also increased as big, info-rich firms from the US & China to dominate numer-
ous industries
1
, 3. Consumer behaviour is changing as a response to digital revolution
through new search & social media tools, consumers have become more connected, in-
formed, empowered & active
digital tech allow consumers to co-create value by designing & customizing products, per-
form last-mile distribution activities & help other customers by sharing product reviews
2) THE PHASES OF DT
incumbents may start with minor changes (digitization, digitalization) to gradually transform firm to
digital one
STRATEGIC IMPERATIVES ACCORDING TO PHASES OF DT
DIGITIZATION
Digitization = action to convert analog info into digital info e.g. digital forms in ordering processes, use
of digital surveys, use digital applications for internal finance declarations
DIGITIZATION
= how IT/ digital tech can be used to alter existing business processes e.g. creation of new online/ mo-
bile communication channels that allow all customers to easily connect with firms and which change
traditional firm-customer interactions
requires new socio-technical artifacts
IT as key enable to seize new business possibilities by changing existing business processes, such as
communication, distribution or business relationship management
optimize existing business process by being more efficient/ by creating additional customer
value through enhancing UX
DIGITAL TRANSFORMATION (DT)
= company-wide change that leads to development of new business models which may be new to the
focal firm/ industry
Introduces new business model by implementing a new business logic to create & capture
value
Affects the whole company & its way of doing business rearranges processes
Use of IT is transformative fundamental changes to existing business processes, R&C, and allow
business to enter new/ exit current markets
Utilized digital tech to enable interactions across borders with suppliers, customers & competition
DT is inherently linked to strategic changes in the business model as a result of the implement-
ation of digital technologies
Relevant for incumbent firms BECAUSE they will face barriers when searching & implementing
business model innovation for DT given their legacy. Incumbents often forced to deal with conflicts &
trade-offs between existing & new ways of doing business
2
,3) STRATEGIC IMPERATIVES OF DT
DIGITAL RESOURCES
Resource = firm’s ownership & control of assets & capabilities
Asset = firm’s resource endowments in physical & intellectual assets
Capability = reside in firm’s human, info or organizational capital & glue assets together to enable
their successful deployment
The following are the digital assets & capabilities needed for digital change:
- Digital assets
- Digital agility
- Digital networking capability
- Big data analytics capability
DIGITAL ASSETS
e.g. storage of data, info & communication infrastructure & accompanying tech to effectively compete
in the digital era
allow for AI, Machine Learning, IoT, robotics
Endowments made in tech & data provide basic ingredients to leverage existing firm know-
ledge & other resources to create more value for customers
DIGITAL AGILITY
= ability to sense & seize market opportunities provided by digital tech
Firms (especially incumbents) must be flexible BECAUSE
1. To allow for the repeated switching of organizational roles
2. To response to the changing customer needs & introduction of new digital technologies
3. To respond to intensified competition due to the blurring of market boundaries & removal of
entry barriers
Necessary to achieve DT BECAUSE need to recombine digital assets with other organizational re-
sources in order to change the way of doing business
more important in advanced phases of DT
DIGITAL NETWORKING CAPABILITY
= firm’s ability to bring together & match distinct users to address their mutual needs via digital means
Firms need to take a network-centric view & co-create value with a set of digitally connected firms
Capability for firms to select, attract, link & engage a heterogeneous set of network stakeholders like
customers, suppliers & 3rd parties strongly stimulated the value creation & growth of platforms
BIG DATA ANALYTICS CAPABILITY
Ability to acquire & analyze big data is crucial for decision making
ORGANIZATIONAL STRUCTURE
Separate Business units
3
, to overcome the often conflictive & competence-destroying nature of digital technologies is critical
BUs allow for experimentation & quick learning + avoiding cannibalization perils & conflicts
Agile organizational Forms
Firms require flexible organization forms that allow for fast responses to constant digital change
Digital Functional Areas
IT function itself needs to transform from a line function focused on enabling communication/ data
flows into a more proactive & orchestrating role supportive to digital value creation via fast & explorat-
ive responses
For HRM perspective: attract employees with digital & analytical skills that may replace existing work-
force
DIGITAL GROWTH STRATEGY
Most prominent: use of digital platforms
Key drivers behind growth:
1. Platform’s high scalability BECAUSE the costs of serving additional users are low & in case of
digital platforms sometimes negligible
2. Reinforcing network effects BECAUSE growth in the number of users on one side (e.g. cus-
tomers/ suppliers) attracts user from the other side as they receive higher utility from using the
platform
Ansoff’s growth strategies related to platform firms to assess the growth of opportunities that
may emerge
Horizontally (= growing across
markets/ industries) 3 stages
1. Market penetration
2. (Product-based) market
development
2 traditional dimensions
of Ansoff
platforms can leverage
their digital (& disruptive)
tech to achieve significant
growth by attracting non-
suers, who have never con-
sumed the product/ tradi-
tional substitute before, into customers
3. Platform-based market penetration (=introducing a platform consisting of various existing
products into a new market that are offered by external parties)
Vertically:
4. Product development: digital firms can efficiently develop & launch new products in a platform
environments as platforms allow for stronger synergies among products
5. Co-creation (= allows external users to actively co-create value by giving them the authority to
perform certain activities themselves on the platform)
Combining all approaches in one:
4
1 – VERHOEF ET AL. (2021)
DIGITAL TRANSFORMATION: A MULTIDISCIPLINARY REFLECTION &
RESEARCH AGENDA
3 stages of digital transformation (DT): digitization, digitalization & digital transformation
Identify 2 delineate growth strategies for digital firms + assets & capabilities required to successfully
transform digitally
digital transformation requires specific organizational structures & bears consequences for metrics
used to calibrate performance
3 OBJECTIVES OF PAPER:
1. Identify external factors that have strengthened the need for DT
2. Discuss strategic imperatives that result from DT regarding
a. Required digital resources
b. Required organizational structure
c. Growth strategies
d. Required metrics
3. Present a research agenda that guides future (inter)disciplinary research on DT
MODEL FOR DISCUSSION ON DT
(numbers relate to chapters of the notes)
1. External 2. Phases of DT 3. Strategic
Drivers of DT Imperatives of
DT
Digital Tech Digitization Digital
Digital Comp. Digitilization Resources
Digital Customer DT Organizational
Behaviour Structure
Growth Strategy
Metrics & Goals
1) THE NEED FOR DT
1. Increasing number of technologies (broadband internet, smartphones, Web 2.0, cloud com-
puting, speech recognition, online payments, crypto currencies) have strengthened e-com-
merce
Big data (AI, blockchain, internet of things (IoT), robotics)
Affect firms’ cost structure through replacing costlier humans during service delivery with the
help of robots/ virtual agents OR optimizing logistic streams & reducing supply chains costs
through the use of AI & blockchain
2. Competition is changing dramatically
more global
intensity has also increased as big, info-rich firms from the US & China to dominate numer-
ous industries
1
, 3. Consumer behaviour is changing as a response to digital revolution
through new search & social media tools, consumers have become more connected, in-
formed, empowered & active
digital tech allow consumers to co-create value by designing & customizing products, per-
form last-mile distribution activities & help other customers by sharing product reviews
2) THE PHASES OF DT
incumbents may start with minor changes (digitization, digitalization) to gradually transform firm to
digital one
STRATEGIC IMPERATIVES ACCORDING TO PHASES OF DT
DIGITIZATION
Digitization = action to convert analog info into digital info e.g. digital forms in ordering processes, use
of digital surveys, use digital applications for internal finance declarations
DIGITIZATION
= how IT/ digital tech can be used to alter existing business processes e.g. creation of new online/ mo-
bile communication channels that allow all customers to easily connect with firms and which change
traditional firm-customer interactions
requires new socio-technical artifacts
IT as key enable to seize new business possibilities by changing existing business processes, such as
communication, distribution or business relationship management
optimize existing business process by being more efficient/ by creating additional customer
value through enhancing UX
DIGITAL TRANSFORMATION (DT)
= company-wide change that leads to development of new business models which may be new to the
focal firm/ industry
Introduces new business model by implementing a new business logic to create & capture
value
Affects the whole company & its way of doing business rearranges processes
Use of IT is transformative fundamental changes to existing business processes, R&C, and allow
business to enter new/ exit current markets
Utilized digital tech to enable interactions across borders with suppliers, customers & competition
DT is inherently linked to strategic changes in the business model as a result of the implement-
ation of digital technologies
Relevant for incumbent firms BECAUSE they will face barriers when searching & implementing
business model innovation for DT given their legacy. Incumbents often forced to deal with conflicts &
trade-offs between existing & new ways of doing business
2
,3) STRATEGIC IMPERATIVES OF DT
DIGITAL RESOURCES
Resource = firm’s ownership & control of assets & capabilities
Asset = firm’s resource endowments in physical & intellectual assets
Capability = reside in firm’s human, info or organizational capital & glue assets together to enable
their successful deployment
The following are the digital assets & capabilities needed for digital change:
- Digital assets
- Digital agility
- Digital networking capability
- Big data analytics capability
DIGITAL ASSETS
e.g. storage of data, info & communication infrastructure & accompanying tech to effectively compete
in the digital era
allow for AI, Machine Learning, IoT, robotics
Endowments made in tech & data provide basic ingredients to leverage existing firm know-
ledge & other resources to create more value for customers
DIGITAL AGILITY
= ability to sense & seize market opportunities provided by digital tech
Firms (especially incumbents) must be flexible BECAUSE
1. To allow for the repeated switching of organizational roles
2. To response to the changing customer needs & introduction of new digital technologies
3. To respond to intensified competition due to the blurring of market boundaries & removal of
entry barriers
Necessary to achieve DT BECAUSE need to recombine digital assets with other organizational re-
sources in order to change the way of doing business
more important in advanced phases of DT
DIGITAL NETWORKING CAPABILITY
= firm’s ability to bring together & match distinct users to address their mutual needs via digital means
Firms need to take a network-centric view & co-create value with a set of digitally connected firms
Capability for firms to select, attract, link & engage a heterogeneous set of network stakeholders like
customers, suppliers & 3rd parties strongly stimulated the value creation & growth of platforms
BIG DATA ANALYTICS CAPABILITY
Ability to acquire & analyze big data is crucial for decision making
ORGANIZATIONAL STRUCTURE
Separate Business units
3
, to overcome the often conflictive & competence-destroying nature of digital technologies is critical
BUs allow for experimentation & quick learning + avoiding cannibalization perils & conflicts
Agile organizational Forms
Firms require flexible organization forms that allow for fast responses to constant digital change
Digital Functional Areas
IT function itself needs to transform from a line function focused on enabling communication/ data
flows into a more proactive & orchestrating role supportive to digital value creation via fast & explorat-
ive responses
For HRM perspective: attract employees with digital & analytical skills that may replace existing work-
force
DIGITAL GROWTH STRATEGY
Most prominent: use of digital platforms
Key drivers behind growth:
1. Platform’s high scalability BECAUSE the costs of serving additional users are low & in case of
digital platforms sometimes negligible
2. Reinforcing network effects BECAUSE growth in the number of users on one side (e.g. cus-
tomers/ suppliers) attracts user from the other side as they receive higher utility from using the
platform
Ansoff’s growth strategies related to platform firms to assess the growth of opportunities that
may emerge
Horizontally (= growing across
markets/ industries) 3 stages
1. Market penetration
2. (Product-based) market
development
2 traditional dimensions
of Ansoff
platforms can leverage
their digital (& disruptive)
tech to achieve significant
growth by attracting non-
suers, who have never con-
sumed the product/ tradi-
tional substitute before, into customers
3. Platform-based market penetration (=introducing a platform consisting of various existing
products into a new market that are offered by external parties)
Vertically:
4. Product development: digital firms can efficiently develop & launch new products in a platform
environments as platforms allow for stronger synergies among products
5. Co-creation (= allows external users to actively co-create value by giving them the authority to
perform certain activities themselves on the platform)
Combining all approaches in one:
4
