Digital transformation in traditional companies

Abstract

Organizations that do not embrace digital transformation may find themselves falling behind on competitors and losing out on potential innovation and growth opportunities. As the business environment is changing at an unprecedented pace, it is becoming increasingly important to balance continuity and change to achieve long-term success. By employing a qualitative case study design including semi-structured interviews with twelve employees across different hierarchical levels and business units, this thesis aims to serve a threefold objective. Firstly, it aims to determine the main barriers to digital transformation for traditional organizations. Secondly, it will elaborate on how ambidexterity and dynamic capabilities can be applied in the context of digital transformation. Lastly, the research integrates both perspectives and derives success factors that can guide traditional organizations towards successful digital transformation. The following main research questions has been formulated to guide the research:
What are the barriers to digital transformation in traditional organizations such as COMPANY and how can ambidexterity and dynamic capabilities be applied to overcome these barriers and thus pave the way for successful digital transformation?
The barriers to digital transformation are categorized based on their level of origin and their barrier category. Levels of origin include intra-level, inter-level, and meta-level. The intra-level refers to interactions that occur inside an organization, inter-level interactions refer to interactions between an organization and external actors, and meta-level interactions are high level and involve policy-makers and governments. Findings show that the most prominent barriers for COMPANY are knowledge and skills, organizational, and cultural barriers on the intra-level and technological and environmental barriers on the inter-level. 
Ambidexterity and dynamic capabilities provide two powerful lenses to approach the challenge of digital transformation for traditional companies. Ambidexterity refers to "an organization's ability to be aligned and efficient in its management of today's business demands (exploitation) while simultaneously being adaptive to changes in the environment (exploration)" \parencite{raisch2008organizational}. Although there are multiple ways to balance exploration and exploitation activities, it is argued that structural separation of exploring and exploiting activities is the best form of ambidexterity for an organization seeking to engage in digital transformation. According to \textcite{eisenhardt2000dynamic}, companies must develop sensing, seizing and reconfiguring capabilities to take full advantage of digital transformation. For the sensing capability, it is important to involve people that are the closest to the market. The sensing capability should not be limited to one market, because there might also be interesting developments in adjacent markets. The reconfiguring capability can be considered a higher-order capability. As reconfiguring includes "consistently implementing renewal activities by assigning responsibilities, allocating resources, and ensuring that the workforce possesses the newly required knowledge" \parencite{kump2019toward}, the management team should play a prominent role in the reconfiguring capability.
While these approaches on their own provide valuable insights, integrating both approaches point to three success factors that should take center stage in digital transformation. To deal with environmental barriers, organizations should take customers by the hand in the process of change. During the sensing process, customer can be a useful source of information, whereas in the seizing process, it is really important to acquire feedback from customers. The second identified success factor is an innovation funnel that is a tool to guide the innovation process to overcome organizational, environmental, and technological barriers. The last success factor is a steering group that oversees the whole process, including exploration and exploitation. This is also a way to involve internal stakeholders and thereby resolving cultural barriers.