Not So Different After All: The Role of Dynamic Capabilities and Heuristics in Navigating the Uncertainty of Digital Transformation

Abstract: Artificial Intelligence has caused excitement and concern in general society and knowledge-generating businesses in particular. Especially the value-offering of management consultancies, which is creating and providing the latest expertise, is disrupted by the democratization of knowledge. Hence, the importance of Artificial Intelligence and Data Analytics in this industry is undisputed. We consequently set out to understand how management consultancies deal with the increasing uncertainty brought by Digital Transformation. Through the Dynamic Capabilities framework lens, we investigate the topic from two contradicting perspectives: Digital Dynamic Capabilities and Heuristics. Based on a multiple case study, including five management consultancies from four European countries, we conduct qualitative interviews and collect archival data. The results highlight that digitally transforming companies need Digital Dynamic Capabilities and Digital Heuristics to capture opportunities from Digital Transformation and manage related uncertainties. Our central contribution emphasizes that both concepts are interconnected, bridging their contradicting perspectives in the literature. We suggest an empirically grounded framework based on three levels of Dynamic Capabilities, offering required, theoretical structure, and unity. In addition, our results show that Digital Dynamic Capabilities should increasingly be regarded as a key component that allows for the Digital Transformation of businesses. Secondly, when communicating with internal and external stakeholders, expertise in the form of Digital Heuristics can serve as a source of value creation.