The Art of Digital Transformation: A Conceptual Paper Advocating Better Integration of Steps, Processes and Value Disciplines as Support for SMEs Engaging in Digital Transformation

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

Introduction:

Digital Transformation (DT) is bringing rapid change to the focus and functioning of enterprises of all sizes, with profound shifts often required in both strategy and operation (Sebastian et al., 2017). Yet for Small and medium sized enterprises (SMEs), there is still a lack of understanding as to how to successfully apply DT strategy whilst maintaining appropriate business logics. It is therefore critical to consider feasibility in terms of business models based on the ‘value disciplines’ that will offer strategic focus through such disruption (Treacy and Wiersema, 1993). The literature in the field of DT is relatively young but most certainly in significant growth, yet the framing of DT in this more holistic manner relating the underpinning strategic business logics which focus SMEs is somewhat limited (Rêgo et al, 2021).

Design/methodology/approach:
Through the process of literature review, this paper explores the current state of DT in terms of definition, steps and processes of successful business model and organisational transformation, where DT is the driving factor. The review highlights an opportunity to better integrate theory underpinning the business logics impacting SMEs, as core business principles derived from consideration of the value disciplines (Treacy and Wiersema, 1993; Andreassen et al. 2018). These are identified and contextualised providing an opportunity to better integrate 2 distinct yet significant strands of theory in a new conceptual model of strategic DT.

Findings:
At a macro level, DT is considered as a disruptive shift at industry or sector level with variance in potential for organisations. In competitive and more dynamic markets it can be considered even more significant and as such has also been defined more broadly as transformation encompassing business processes and digital technologies in ever more digitised economies (Müller & Hopf, 2017). From that perspective, DT can be considered as a process with a focus on significant organisational change and business improvement through changes in an organisation’s business model, by integrating and exploiting information, communications, computing and other integrative technologies (Vial, 2019).
These types of fundamental operational change require a rethink of organisational processes toward sustaining competitive advantage and as such firms need to be clear on the value propositions that are most likely to succeed where high-tech platforms are the focus of a more collaborative economy (Andreassen et al. 2018). What can offer this differentiation remains somewhat constant through what Treacy and Wiersema (1993) present as the value disciplines (product leadership, operational excellence or customer intimacy), which offer an important underpinning to framing the process of DT. Indeed, a more recent extension of research on the managerial impacts of this typology “provide empirical evidence of its validity and positive relationship with performance in the marketplace (Zacharias et al., 2016, p.4129)”. Marketplace excellence in consideration of the value disciplines relates to important capacities to create and capture value toward increased customer loyalty. In order to achieve impact on the important measure of loyalty, firms with focus on product leadership are technology driven and must explore new and radical innovations to introduce to the market. They have less focus on customising or personalising for market segments (Slater & Olson, 2000). A focus on ‘customer intimacy’ on the other hand, offers a more individualised approach to solutions and adapts products/services to specific needs or provides personal attention for deeper relational value, often through optimising existing processes (Fuchs, Prandelli, & Schreier, 2010). Operational excellence on the other hand, is an approach more focused on improving existing products/services toward extending and expanding relationships through effectiveness and efficiency and more incremental rather than applied as disruptive innovation (Andriopoulos and Lewis, 2009). As such, clarifying the underpinning logics driving the value creation efforts of an organisation is critical at the outset. Integrating these logics in a proposed future business model through strategic management considerations is a subject which, according to Rêgo et al. (2021), is not yet well explored.

DT is a company-wide and highly complex activity requiring a systematic approach to the development and implementation of strategy in delivering a new or much developed digital business model where such change presents a high level of uncertainty (Hess and Matt, 2016). Sebastian et al. (2017) consider DT to be underpinned by 3 things. First, a digital strategy (focused on leveraging a value proposition emerging from technologies e.g., social, mobile, analytics, cloud and IoT). Secondly, operational competence or 'backbone' that supports operational excellence and finally a digitised service platform to enable rapid responsiveness and innovation support toward new market opportunities.

A succinct framing of such innovation is shared by Nambisan et al. (2017, p.224) who posits DT as the “creation of (and consequent change in) market offerings, business processes, or models that result from the use of digital technology.” This is an important positioning of DT as innovation strategy; however, literatures are less clear on the underpinning value disciplines impacting SMEs strategic management of DT in the context of stages of implementation.

The literature reviewed in this paper points to more than 3 steps in effective DT and as such highlights the need for a more holistic framing. Indeed, warrant for this future research approach was highlighted in the recent literature review by Rêgo et al. (2021). The article goes further to highlight the lack of linking of strategic management literature with that of DT and as such could point to challenges in the effectiveness of successful DT were advances are more tactically appropriate than strategically aligned.

Thus, the development of a new conceptual model supporting SME’s in exploring DT and its implications to those underpinning and foundational business logics is presented and conceptualised. The Acronym EASEL is used to visualise the steps and process of the art of DT and the model integrates the underpinning logics derived from the value disciplines.


Figure 1. EASEL Conceptual Model: Integration of Focus, Stages and Underpinning Value Disciplines Impacting DT.

Research limitations/implications:

This paper thus contributes through advocating for a better integration of DT theory in terms of steps and process, but critically integrating the underpinning value disciplines that strategically focus SMEs on growth and/or scaling pathways.
Practical implications:

This research proposes an SME focused DT model supporting practitioners, stakeholders and academics in assessing and approaching the opportunities presented by DT in SME contexts that will enable better understanding of DT as process and the value disciplines which underpin the business logics applied.

Social implications:
The model provides an opportunity to support better application of DT in third sector SME’s where there are often resource scarcities which inhibit understanding of DT processes impacting operations in the non-profit sector.

Originality/value:
This research offers an important framing through which to consider the impact of the processes and underpinning business logics which are impacting SMEs through DT. The proposed model offers a more holistic perspective of DT through a clearer understanding of the underpinning value creation strategies and processes that represent DT in SME contexts.


References:
Andreassen, T.W., Lervik-Olsen, L., Snyder, H., Van Riel, A.C., Sweeney, J.C. and Van Vaerenbergh, Y. (2018) Business model innovation and value-creation: the triadic way. Journal of Service Management.

Andriopoulos, C. and Lewis, M.W. (2009) Exploitation-exploration tensions and organizational ambidexterity: Managing paradoxes of innovation. Organization science, 20(4), pp.696-717.

Fuchs, C., Prandelli, E. and Schreier, M. (2010) The psychological effects of empowerment strategies on consumers’ product demand. Journal of marketing, 74(1), pp.65-79.

Hess, T., Matt, C., Benlian, A. and Wiesböck, F. (2016) Options for formulating a digital transformation strategy. MIS Quarterly Executive, 15(2).

Muller, E., and Hopf, H. (2017) Competence center for the digital transformation in small and medium sized enterprises. Procedia Manufacturing, 11(June), 1495–1500.

Nambisan, S., Lyytinen, K., Majchrzak, A., & Song, M. (2017) Digital innovation management: Reinventing innovation management research in a digital world. MIS Quarterly, 41(1), 223–238.

Rêgo, B.S., Jayantilal, S., Ferreira, J.J. and Carayannis, E.G. (2021) Digital transformation and strategic management: A systematic review of the literature. Journal of the Knowledge Economy, pp.1-28.

Saarikko, T., Westergren, W. H., & Blomquist, T. (2020) Digital transformation: Five recommendations for the digitally conscious firm. Business Horizons, 63(6), 825–839.

Sebastian, I. M., Ross, J. W., Beath, C., Mocker, M., Moloney, K. G., & Fonstad, N. O. (2017) How big old companies navigate digital transformation. MIS Quarterly Executive, 16(3), 197–213.

Sebastian, I.M., Ross, J.W., Beath, C., Mocker, M., Moloney, K.G. and Fonstad, N.O. (2020) How big old companies navigate digital transformation. In Strategic information management pp. 133-150. Routledge.

Slater, S.F. and Olson, E.M. (2000) Strategy type and performance: the influence of sales force management. Strategic management journal, 21(8), pp.813-829.

Treacy, M. and Wiersema, F. (1993) Customer intimacy and other value disciplines. Harvard business review, 71(1), pp.84-93.

Vial, G. (2019) Understanding digital transformation: A review and a research agenda. Journal of Strategic Information Systems, 28(2), 118–144.

Zacharias, N.A., Nijssen, E.J. and Stock, R.M. (2016) Effective configurations of value creation and capture capabilities: Extending Treacy and Wiersema's value disciplines. Journal of Business Research, 69(10), pp.4121-4131.

Original languageEnglish
Title of host publicationIrish Academy of Management Conference 2022
Publication statusAccepted/In press - 30 Apr 2021
EventIrish Academy of Management (IAM) Annual Conference - Trinity College, Dublin, Ireland
Duration: 24 Aug 202225 Aug 2022

Conference

ConferenceIrish Academy of Management (IAM) Annual Conference
Country/TerritoryIreland
CityDublin
Period24/08/2225/08/22

Keywords

  • Digital Transformation
  • Value Disciplines
  • EASEL
  • SME
  • Strategy
  • Strategy and Management

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