A dynamic capability approach to Digital transformation: A focus on key foundational themes

Digital transformation requires an enterprise mind-set and impacts every function and business unit of an organization. In the digital environment, digital technology needs to become central to how the business operates, and organizations effectively need to re-think and possibly re-invent their business models, so that they continually learn from interactions with customers, suppliers, and partners in the business ecosystem in order to remain competitive. These changes require a distinct evolution from traditional thinking - changes that some organizations are undoubtedly struggling with. For effective digital transformation, organizations need to expand their focus beyond solely considering technology in isolation, to include the underlying organizational capabilities necessary to be successful with technology. In fact, there is growing acceptance that adopting a capability approach as opposed to a process-based approach to management can result in greater value generation for an organization. Successful digital transformation requires an organization to develop a wide-range of capabilities which will vary in importance depending on the business context and the specific organization's needs. Time and resource constraints, however, will undoubtedly challenge organizations that attempt to develop multiple capabilities simultaneously, and ultimately may impede the success of the digital transformation. Framed in the context of adopting a capability-based approach to digital transformation, this paper presents a review of pertinent literature, and discusses core learnings in relation to a number of key capabilities that are the foundation for digital transformation. The authors argue that instead of focusing on a holistic set of required capabilities, organizations should initially focus on developing these foundational capabilities, as they serve as a starting point for digital transformation and lead to the development of additional digital capabilities over time. The paper makes a number of contributions. From an academic stance, it conceptualises key foundational digital capabilities. From a practitioner perspective it provides practical guidance to organizations in overcoming key challenges when embarking on a digital transformation journey.