W1: Plekhanov et al. (2023) Flashcards
(27 cards)
Article’s purpose
Seeks to review and analyse the existing literature on digital transformation (DT) in firms. The authors note the increasing complexity and scope of DT research, which spans multiple disciplines. The authors developed a novel multi-layered framework to help categorise and analyse the various ways DT affects organisations
Organisational core
Layer that involves how firms capture value and integrate digital technologies into their structures and culture. It consists of business models, organisational structures, and organisational culture
Organisational periphery
Layer that focuses on how firms create value at the micro-level through digital improvements in their products and processes. It examines how DT reshapes operationala ctivities, emphasising three interconnected themes; organisational processes, digital servitisation, and digital platforms
External environment
Layer that examines how digital technologies affect a firm’s interactions with external partners, suppliers, intermediaries, and customers, as well as the resulting outcomes like competition and digital ecosystems. DT extends beyond firm boundaries and influences sustainability
Digital transformation (DT)
When firms use digital technologies to create new or modify existing business models and processes or to support the transformation of organisational structures, resources, or relationships with internal and external actors. The adoption of digital technologies influences almost all areas of modern firms. It transforms firms from standalone entities into participants in digital ecosystems and enables shifts in power and resources among organisational layers. The authors also consider how firms redefine their internal and external boundaries in response to DT. It can also be defined as “strategic transformations targeting organisational changes implemented through digitalisation projects, with the goal of enabling major business improvements”
DT history
Goes back to the 1980s and early 1990s. It evolved with the proliferation of the Internet and global events like the COVID-19 pandemic
Transaction cost theory
Suggests that firms exist to minimise the costs of coordinating activities
Knowledge-based view
Emphasises knowledge management capabilities as the basis for firm boundaries
Multi-layered model of the firm
Distinguishes between the firm’s core and periphery. The core is conceptualised as a centralised control zone, while the periphery is a decentralised control zone.
Digitalisation
Refers to “the manifold sociotechnical phenomena and processes of adopting and using [digital] technologies in broader individual, organisational, and societal contexts
Digitisation
That one can understand the transition from analog to digital information
Business models
DT requires fundamental changes in business models, driven by factors such as accelerated value creation, changes in resource management, and shorter innovation cycles. Digital innovation is becoming more collective and interconnected, with firms relying on each other’s business models
Organisational structures
DT influences organisational structures through both top-down and bottom-up approaches. Top-down approaches involve corporate headquarters initiating changes, while bottom-up approaches originate from business units. DT can lead to both centralisation and decentralisation of power within organisations. Centralisation can occur as firms implement digital platforms and standardise processes, while decentralisation can be driven by the need for agility and responsiveness in different business units
Organisational culture
Plays a significant role in DT, acting as both an accelerator and inhibitor. A successful DT requires a culture that embraces change, learning, and openness. Such a culture fosters experimentation, collaboration, and knowledge sharing, which are essential for adopting and utilising digital technologies effectively. However, challenges such as resistance to change, inertia, and the emergence of subcultures can hinder the DT process
Resistance to change
May stem from employees’ fear of job displacement or a lack of understanding of the benefits of DT
Inertia
Refers to the tendency of organisations to stick to established routines and practices, making it difficult to adapt to new digital ways of working
Subcultures
Within an organisation may have conflicting values and priorities, leading to inconsistent implementation of DT initiatives
Organisational processes
DT drives significant changes in operational workflows, particularly in marketing, supply chain management, and R&D. By leveraging digital tools, firms achieve faster decision-making and enhanced automation, replacing traditional hierarchical structures with agile methodologies. These iterative processes allow firms to respond swiftly to technological shifts and market demands. However, the transition is often complex, as legacy systems coexist with new technologies, necessitating ambidextrous management to balance stability and innovation
Digital servitisation
A key outcome of DT. It is the shift from standalone physical products to integrated software-service systems. This transformation enables mass customisation and deeper customer engagement, as firms harness data to tailor offerings. Yet, it introduces challenges such as the “servitisation paradox”
“Servitisation paradox”
Where initial performance dips occur due to resource allocation. Firms increasingly rely on external collaborations to co-create value, emphasising interoperability and data-sharing across ecosystems
Digital platforms
Redefine value creation by facilitating resource exchange and fostering multisided markets. They thrive on network effects, where value grows with user participation. While the offer opportunities for global expansion, they also demand strategies to manage interdependencies and user incentives. The rise of platform ecosystems challenges traditional organisational hierarchies, as firms must navigate decentralised governance and dynamic pricing regimes
Supply chain management
DT enhances supply chain transparency, agility, and sustainability through real-time data analytics and predictive algorithms. It shifts linear supply chains toward distributed, collaborative networks, enabling localised production and reduced waste. However, this transformation disrupts traditional power structures, often sidelining intermediaries and creating imbalances where technologically advanced firms dominate value chains. Opportunistic behaviours and profit migration emerge as risks, necessitating new governance models
Digital ecosystems
Dynamic networks of interdependent actors co-creating value through shared technologies and standards. They blend firm and market dynamics, relying on orchestration and self-governance. Technological interoperability and common standards determine relationship intensity, while data-driven insights enable real-time collaboration. They challenge conventional industry boundaries, fostering convergence and hypercompetition
Interaction with customers
DT redefines customer roles, transforming them into active co-creators or “prosumers.” This shift redistributes power, as customers contribute to product design and innovation through feedback and data sharing. Firms must cultivate trust and loyalty to sustain these relationships, leveraging intangible assets like reputation and reciprocity
