Demystifying Dynamic Capabilities - Exploring development & evolution of Dynamic Capabilities for Digital Transformation in a Multinational SME

Abstract: The business environment is changing at a fast pace. One of the important ways in which the firms respond to these challenges is by employing digital technologies to create new value for their customers. However, despite the motivation and efforts by the firms to digitally transform the companies fail in their efforts. Since Digital transformation is more about strategy than technology hence, the dynamic capability framework is growing in importance as a framework to study this process. However, there is dearth of literature examining this topic and with most of them focused on large enterprises leaving a gap in the literature. Based on this, the purpose of this study is to get a deeper understanding of the how the process of dynamic capability development transpires and evolves in a multinational SME. Drawing on past literature on the concepts of Dynamic capabilities this single case study investigates a multinational SME headquartered in Sweden undergoing a transformation process. The findings bring forward the most common activities and sub-capabilities performed by a SME in the context of Digital transformation and the associated outcomes & challenges. The diverse literature on sub-capabilities is combined to present a summary to link all of sub-capabilities & activities to the broad dimensions of Dynamic capabilities. I also propose an improvised model for the Dynamic capability development process and evolution for an SME. The model suggests the evolution of Dynamic capabilities as an overlapping process rather than linear, faster renewal process and development of sensing and seizing capabilities than transforming and dual role of sub-capabilities. Furthermore, the study highlights the role of agility, absorptive, CRM and product portfolio management capabilities. Additionally, the importance of deliberate learning and individual managerial abilities to instigate change are also emphasized. Thus, this study not only contribute to the empirical base but also has theoretical contributions.