Lecture 2
1. Verhoef, P. C., Broekhuizen, T., Bart, Y., Bhattacharya, A., Dong, J. Q., Fabian, N.,
and Haenlein, M. 2020. Digital transformation: A multidisciplinary reflection and
research agenda.
Digital transformation and resultant business model innovation have fundamentally altered
consumers’ expectations and behaviors, putting immense pressure on traditional firms, and
disrupting numerous markets.
1. Introduction
- many traditional firms have been surpassed by innovative fast-growing digital entrants and
suffered as a result of this (for eg. Fast growth of online retailers such as Alibaba)
- However, these new online retailers do not limit their reach to traditional retail industry, they
use their digital resources to enter markets that were previously thought to be completely
unrelated to retail, in search of further growth opportunities
- there has been no multidisciplinary discussion on digital transformation, which we define
as a change in how a firm employs digital technologies, to develop a new digital business
model that helps to create and appropriate more value for the firm
- important to understand how firms can gain a sustainable competitive advantage by building
on specific resources, which strategies they should adopt to win, and how the firm’s internal
organization structure must change to support these strategies
2. The need for digital transformation
- First, because of the worldwide adoption of the internet, an increasing number of
accompanying technologies appeared (e.g., broadband internet, smartphones, Web 2.0, SEO,
cloud computing, speech recognition, online payment systems, and crypto-currencies).
Although perhaps not each of these technologies will be as powerful as expected,
the wide entrance of new digital technologies clearly signals the need for firms to
transform their business digitally.
- Second, competition is changing dramatically.
Not only has the competition become more global, the intensity has also increased
as big, information-rich firms from the U.S. and China start to dominate industries
- Third, consumer behavior is changing
Market figures show that consumers are shifting their purchases to online stores,
and digital touchpoints have an important role in the customer journey affecting
both online and offline sales
3. The phases of digital transformation
- first two more incremental phases are needed to attain the most pervasive phase of digital
transformation
- Digitization is the encoding of analog information into a digital format, the action to convert
analog information into digital information.
- Typically, digitization mainly digitalizes internal and external
- Digitalization describes how IT or digital technologies can be used to alter existing business
processes
- Such a change often involves the organization of new sociotechnical structures with digital
artifacts, which were not possible without digital technologies
,- digitalization is not only focused on cost savings, but also includes process improvements
that may enhance customer experience
- Digital transformation is the most pervasive phase, and describes a company-wide change
that leads to the development of new business models, it rearranges the processes to change
the business logic of a firm or its value creation process
- Moreover, digital transformation utilizes digital technologies to enable interactions across
borders with suppliers, customers and competitors
- Hence, digital technologies can help to attain a competitive advantage by transforming the
organization to leverage existing core competences or develop new ones
- Digital transformation is particularly relevant for incumbent firms Incumbents will face
challenges and barriers when searching and implementing business model innovation for
digital transformation given their legacy
4. Strategic imperatives of digital transformation
4.1. Digital resources
- the most essential digital assets and capabilities needed for digital change:
- Digital assets. Firms require digital assets like the storage of data
- Digital agility concerns the ability to sense and seize market opportunities provided by
digital technologies
- firms must be flexible: (1) to allow for the repeated switching of organizational roles; (2) to
respond to the changing customer needs and introduction of new digital technologies; and (3)
to respond to the intensified competition due to the blurring of market boundaries and
removal of entry barriers.
- This capability becomes increasingly important when a firm shifts to more advanced phases
of digital transformation; that is, from digitization to digitalization, and from digitalization to
digital transformation.
- Digital networking capability. The capability of firms to select, attract, link and engage a
heterogeneous set of network stakeholders like customers, suppliers, and third parties strongly
stimulates the value creation and growth of platforms.
- Big data analytics capability the capability to acquire and analyze big data for decision
making is crucial.
4.2. Organizational structure
- Another key issue to consider is the organizational changes needed to adapt to digital change
- Separate business units - incumbents tend to be slow, new units allow experimentation and
quick learning
- Agile organizational forms – firms require flexible organization forms that allow for fast
responses to constant digital change
- Digital functional area - Firms often do not realize that apart from changing the functional
role of IT department, the employees’ digital skills in marketing and service operations also
need to be upgraded to enhance
- One key challenge for incumbents is to compete for talent with these skills with new digital
entrants.
,4.3. Digital growth strategies
- variety of digital growth strategies exist for digital firms, but the most prominent growth
strategy involves the use of digital platforms
- near ubiquitous characteristic of digital firms, and digital platforms is their impressive
growth figures
- While many factors could have contributed to these impressive numbers, two key drivers
behind such growth are the platform’s high scalability and reinforcing network effects.
Platforms can grow quickly and handle a growing number of users.
- To better understand how digital firms can grow using a platform business model, we rely
on the Ansoff matrix, which identifies four growth strategies.
- (1) market penetration and (2) (product-based) market development
- Platforms can leverage their digital technologies to achieve growth by attracting non-users,
who have never consumed before, into customers. This may lead to creating new markets
- (3) platform-based market penetration, introducing a platform consisting of various
existing products into a new market that are offered by external parties.
- (4) product development, can also be followed by digital firms. Digital firms can often
more efficiently develop and launch new products in a platform environment.
- (5) co-creation platform that allows external users to actively co-create value by giving
them the authority to perform certain activities themselves on the platform.
- (6) platform diversification, combine all approaches in a single strategy. This approach
consists of expanding the platform to serve new markets, update the product and service
assortment, and open the firm to cocreate value by partnering with sponsors
4.4. Metrics and goals
- To realize the full potential of digital transformation, digital firms need to measure the
performance improvements on key performance indicators (KPIs) to facilitate learning and
fine-tune the business model.
- incumbents stick to profitability as a financial metric, while many digital firms focus on
growth figure (e.g., growth in number of users, customers, and sales) instead of profitability
- For digitally transforming incumbents, achieving high growth is also important, but not at
the cost of profitability. Hence, such incumbents face a strong disadvantage when competing
against digital entrants.
, 5. Conclusion and research agenda
- it is imperative that researchers from different fields work together to not only expand our
knowledge on these five independent themes, but also actively establish linkages between
these themes and disciplines to develop a more holistic understanding of why, how and when
digital transformation works
- digital transformation will be a very relevant, multidisciplinary area for future research
given the recent developments of digital technologies
2. Dong, J. Q. 2019. Moving a mountain with a teaspoon: Toward a theory of digital
entrepreneurship in the regulatory environment
1. Introduction
- digitization of innovation and entrepreneurship allows rapid growth in free markets.
- digital startups grow by drawing on and adding to digital infrastructure
- three mechanisms leading to the success to entrepreneurially cope with the regulatory
environment: demand-driven digital disruption, fast digital adaption, and continuous digital
transplantation.
2. Literature and background
- organizational capabilities to innovate constantly in a fast-changing market are critical for
generating sustainable competitive advantage
- Dynamic capabilities refer to the firm's ability to integrate, build and reconfigure internal
and external competences to address rapidly changing environments
- key to sustain competitive advantage is the ability to reconfigure assets and organizational
structures as the firm grows and as the markets or technologies change
- digital startup = consisting of digital technologies and human agents, who are capable of
monitoring continuously the flow of their activities and expect others to do the same for their
own in the context of entrepreneurial actions
- digital technologies lead to disruption, offer flexibility and afford repurposed use
- digital technologies enable cross-boundary disruptions that trigger new dynamic cycles of
value creation opportunities this allows creative solution
- digital technologies infrastructure or platform to which new functionalities can be added
without a complete overhaul of the existing design
3. Methods
- In the Netherlands, healthcare organizations' recruitment of self-employed personnel is
highly regulated with complex, time-consuming paper work due to regulations
- Duobus is a company established in January 2015, offering a digital platform on its website
(duobus.nl) where healthcare organizations (e.g., hospitals and homecare companies) and self-
employed personnel (e.g., nurses) to find and work with each other in the Netherlands
