Lecture Notes – Digital Transformation
Lecture 1 – digital disruption
Digital disruption
Digital transformation framework (WEF)
The fourth industrial revolution
→ many firms are still stuck in
the first/second revolution in the
way their business is organized
,4th industrial revolution: revolution of networks, platforms, people and technology that is blurring
the lines between the physical, digital, and biological spheres.
• Velocity: developments take place at an exponential rate rather than linear pace;
• Breadth and depth: combination of multiple technologies that are leading to unprecedented
paradigm shifts in the economy, business, society, and at the individual level;
• Systems impact: transformation of entire systems, across (and within) countries, companies,
industries, and society as a whole.
Impact of digital technologies and disruptions:
• 85% of customer/citizen engagement will be done without human interaction by 2020
• 65% of todays children will work in new job types that don’t exist yet
• 90% of employers anticipate more competition for talent
• 80% of digital leaders highlight new ways of working as the top enables of their success
• 57% of jobs are at risk of automation
will the digital revolution result in more jobs vs less jobs? → ongoing debate: some industies are
growing while others are declining due to increased automation.
Typical response of firms to digital disruptions: state of digital denial
→ they know things are going on but they do not think that it’s possible with the current skills and
opportunities to transform. If you look at the pictures of the hierarchical layer of the birds shitting
down: a debate between top management and lower level employees being seen as “shit” while they
see top management as “assholes”. From the bottom up state of denial mostly comes from the
board not taking action.
biggest transformation traps
desire, money and tools are the three biggest reasons organizations fail to use technology to make
their business better
• no “burning platform” – sense of urgency
• Not enough funding
• Limitation of IT systems
• Roles and responsibilities not clear
• Lack of vision
• Unclear business case
• Business units implementing independently in silos
• Culture not amenable to change
• Lack of leadership skills
• Regulatory concerns
, 78% believed achieving digital transformation will become critical to their organizations within
the next two years
→ but also 68% feels that the face of technology change in their organizations is too slow
Theories of transformation
Selection
firms are inert – and the larger therefore these firms become, the harder it is to change
• population ecology:
o Procedural and structural baggage
• institutional:
o comply to Industry norms and shared logic
• evolutionary:
o firms have practiced certain routines, and they can only look at doing these better
• resource-based theory: firms have certain resources and they can only further exploit these
o Exploitation of core competencies
adaption
• dynamic capability theory
o Latent abilities to renew core competence
• behavioral theory
o Slack and strategic intent
• learning theory (firms are able to learn or unlearn)
o Alignment based on learning, unlearning, relearning
• structural contingency theory
o dynamic process subject to managerial action
Why is digital transformation difficult? Back to theory
transformation outcomes
▪ Cognitive Change (Barr et al., 1992; Johnston, 2009; Eggers & Kaplan, 2009)
▪ Alignment Firm-specific Competencies
(Baden-Fuller & Volberda, 1997; Danneels, 2002; Crossan & Berdrow, 2003; Flier et al., 2003; Ravasi
& Lojacono, 2005)
▪ Alteration Path Dependence (Volberda et al., 2001)
Implications of transformation research:
• Most firms are selected out and/or intentionally managed to be selected out
• Findings illuminate many sources and causes of structural inertia
• Weak support for sources of competitive advantage
• Strong support for population ecology view that organizations cannot adapt and managerial
intentionality matters little.
• Most managers are mimetic not strategic
Collective mental process (in transformation)
Collective mental maps unconsciously developed by managers
owing to experience in “core business,” applied in other
“businesses” (Bettis & Prahalad, 1995)
→ mental maps: help us to do the jobs, why help to do the
, core business and asses critical tasks for success. But also they blind is to see potential danger that
you may not be looking for but is there.
→ people only change when confronted with crises, and the hard pressure gives rise to it. But quite
often this means it is already too late
Dominant logic is hard to change
• Temporary and incomplete
• Continuously changed when new business
• Inert
• Unlearning success formulas
• Change when confronted with crises
Why digital transformation:
Old:
Existing technology
routines
Fit
Improve
Existing customers
Innovator dilemma: if you want to innovate, then don’t listen to your customers.
New:
emerging technologies
dynamic capabilities
Stretch
Experiment
New customers
From stable competition to hyper competition
Low clock speed vs high clock speed industries
Two waves of digital disruption
1. Digitally enabled entrants swiftly create new competitive dynamics that threaten the profitability
of incumbents.
2. ‘Red queen competition’: incumbents engage in aggressive imitation…
Lecture 1 – digital disruption
Digital disruption
Digital transformation framework (WEF)
The fourth industrial revolution
→ many firms are still stuck in
the first/second revolution in the
way their business is organized
,4th industrial revolution: revolution of networks, platforms, people and technology that is blurring
the lines between the physical, digital, and biological spheres.
• Velocity: developments take place at an exponential rate rather than linear pace;
• Breadth and depth: combination of multiple technologies that are leading to unprecedented
paradigm shifts in the economy, business, society, and at the individual level;
• Systems impact: transformation of entire systems, across (and within) countries, companies,
industries, and society as a whole.
Impact of digital technologies and disruptions:
• 85% of customer/citizen engagement will be done without human interaction by 2020
• 65% of todays children will work in new job types that don’t exist yet
• 90% of employers anticipate more competition for talent
• 80% of digital leaders highlight new ways of working as the top enables of their success
• 57% of jobs are at risk of automation
will the digital revolution result in more jobs vs less jobs? → ongoing debate: some industies are
growing while others are declining due to increased automation.
Typical response of firms to digital disruptions: state of digital denial
→ they know things are going on but they do not think that it’s possible with the current skills and
opportunities to transform. If you look at the pictures of the hierarchical layer of the birds shitting
down: a debate between top management and lower level employees being seen as “shit” while they
see top management as “assholes”. From the bottom up state of denial mostly comes from the
board not taking action.
biggest transformation traps
desire, money and tools are the three biggest reasons organizations fail to use technology to make
their business better
• no “burning platform” – sense of urgency
• Not enough funding
• Limitation of IT systems
• Roles and responsibilities not clear
• Lack of vision
• Unclear business case
• Business units implementing independently in silos
• Culture not amenable to change
• Lack of leadership skills
• Regulatory concerns
, 78% believed achieving digital transformation will become critical to their organizations within
the next two years
→ but also 68% feels that the face of technology change in their organizations is too slow
Theories of transformation
Selection
firms are inert – and the larger therefore these firms become, the harder it is to change
• population ecology:
o Procedural and structural baggage
• institutional:
o comply to Industry norms and shared logic
• evolutionary:
o firms have practiced certain routines, and they can only look at doing these better
• resource-based theory: firms have certain resources and they can only further exploit these
o Exploitation of core competencies
adaption
• dynamic capability theory
o Latent abilities to renew core competence
• behavioral theory
o Slack and strategic intent
• learning theory (firms are able to learn or unlearn)
o Alignment based on learning, unlearning, relearning
• structural contingency theory
o dynamic process subject to managerial action
Why is digital transformation difficult? Back to theory
transformation outcomes
▪ Cognitive Change (Barr et al., 1992; Johnston, 2009; Eggers & Kaplan, 2009)
▪ Alignment Firm-specific Competencies
(Baden-Fuller & Volberda, 1997; Danneels, 2002; Crossan & Berdrow, 2003; Flier et al., 2003; Ravasi
& Lojacono, 2005)
▪ Alteration Path Dependence (Volberda et al., 2001)
Implications of transformation research:
• Most firms are selected out and/or intentionally managed to be selected out
• Findings illuminate many sources and causes of structural inertia
• Weak support for sources of competitive advantage
• Strong support for population ecology view that organizations cannot adapt and managerial
intentionality matters little.
• Most managers are mimetic not strategic
Collective mental process (in transformation)
Collective mental maps unconsciously developed by managers
owing to experience in “core business,” applied in other
“businesses” (Bettis & Prahalad, 1995)
→ mental maps: help us to do the jobs, why help to do the
, core business and asses critical tasks for success. But also they blind is to see potential danger that
you may not be looking for but is there.
→ people only change when confronted with crises, and the hard pressure gives rise to it. But quite
often this means it is already too late
Dominant logic is hard to change
• Temporary and incomplete
• Continuously changed when new business
• Inert
• Unlearning success formulas
• Change when confronted with crises
Why digital transformation:
Old:
Existing technology
routines
Fit
Improve
Existing customers
Innovator dilemma: if you want to innovate, then don’t listen to your customers.
New:
emerging technologies
dynamic capabilities
Stretch
Experiment
New customers
From stable competition to hyper competition
Low clock speed vs high clock speed industries
Two waves of digital disruption
1. Digitally enabled entrants swiftly create new competitive dynamics that threaten the profitability
of incumbents.
2. ‘Red queen competition’: incumbents engage in aggressive imitation…
