Digital transformation strategy making in pre-digital organizations: The case of a financial services provider

Highlights

• Digital strategy making is different from upfront strategic planning.

• A digital transformation strategy is continuously in the making.

• The crafting of a digital transformation strategy is a highly dynamic process.

• We propose a process model for pre-digital organizations in traditional industries.

Abstract

The formulation and implementation of a digital transformation strategy (DTS) has become a key concern for many pre-digital organizations across traditional industries, but how such a strategy can be developed remains an open question. We used interpretive in-depth case study research to study how a European financial services provider has formulated and implemented a DTS. By focusing on the underlying processes and strategizing activities, we show that digital strategy making not only represents a break with the conventions of upfront strategic information systems (IS) planning, but reveals a new extreme of emergent strategy making. Specifically, we conclude that a DTS is continuously in the making, with no foreseeable end. By building on theory from IS strategizing and strategy-as-practice literature, we theorize an integrated process/activity model that characterizes DTS formulation and implementation in pre-digital organizations. Our model shows that the crafting of a DTS is a highly dynamic process involving iterating between learning and doing.

Introduction

The formulation and implementation of a digital transformation strategy (DTS) has become a key concern for many pre-digital organizations, given the transformative impacts of digital technologies on almost all aspects of an organization’s inner and outer environment. Pre-digital organizations are established companies belonging to traditional industries, such as retail, automotive, or financial services, that were financially successful in the pre-digital economy, but to which the digital economy poses an existential threat (Ross et al., 2016). Unlike born-digital organizations such as Alphabet, Amazon or Tencent, pre-digital organizations often need to change their entire organization, business model and processes as they adopt digital technologies (Bharadwaj et al., 2013, Sebastian et al., 2017, Tumbas et al., 2017a). Digital technologies can transform an organization’s products, services, operations, and business models, as well as its competitive environment (Fichman et al., 2014, Hess et al., 2016, Lucas et al., 2013, Yoo et al., 2012). For pre-digital organizations, digital transformation is a holistic form of business transformation enabled by information systems (IS) that is accompanied by fundamental economic and technological changes at both the organizational and industry-level (Besson and Rowe, 2012, Crowston and Myers, 2004, Venkatraman, 1994).

The introduction of a DTS is thus a response to the challenges of managing the growing landscape of digital initiatives and related infrastructures (Henfridsson and Bygstad, 2013). A DTS is supposed to coordinate, prioritize, and implement a pre-digital organization’s transformation efforts and, as a long-term objective, to govern its journey to achieve the desired future state of being digitally transformed (Matt et al., 2015). Its scope goes beyond the digitization of resources and involves the transformation of key structural and organizational aspects, the use of advanced information technologies (IT) or aspects of value creation including key products and services, leading to adjusted or completely new business models (Kane et al., 2015). However, although DTS formulation and implementation is a key concern for many pre-digital organizations, it remains an open question how such a strategy can be developed. In a recent survey by SAP (2017) it was found that 84 percent of global companies regard digital transformation as critical to their survival in the next five years, yet only three percent have completed organization-wide transformation efforts.

Hence, the purpose of this paper is to theorize an integrated process/activity model showing how pre-digital organizations can develop a DTS. Our research question is: What processes and strategizing activities are underlying DTS formulation and implementation in pre-digital organizations? Our objective is in line with the shift in interest from deliberate managerial planning to emergent strategies (Mintzberg and Waters, 1985) in contemporary IS strategy research – leading to increased attention to informal planning processes and actual strategy making activities (Henfridsson and Lind, 2014, Marabelli and Galliers, 2017, Peppard et al., 2014, Teubner, 2013).

To answer our research question, we conducted an interpretive in-depth case study (Klein and Myers, 1999) of a mid-sized European financial services provider (AssetCo) over a period of approximately 12 months. We began our research project just as the organization was beginning to initiate DTS formulation and implementation, hence we were able to accompany its development from initiation to publication of the “final” version. Our theoretical model was developed by iterating between the empirical data, insights from our narrative analysis, and (IS) strategizing literature. We believe that our findings may be of interest to all those pre-digital organizations that are considering developing their own DTS.

This paper is structured as follows: In Section 2 we explain the study’s theoretical background. In Section 3 we describe the research method, the case selection, and the data collection and analysis process. In Section 4 we describe the case study. In Section 5 we theorize an integrated process/activity view on DTS formulation and implementation. The final section is the discussion and conclusions.