Responding to a Fast-Changing World: Dynamic Capabilities for Digital Transformation

Abstract: Incumbent companies are facing a fast-changing world characterized by technological developments that are reshaping and even disrupting industries. In times like these, incumbent's core competencies turn into its core rigidities hindering its ability to respond to the rapid developments. In order to continue competing and maintaining their advantageous position in the market, incumbents must build and employ dynamic capabilities for sensing and seizing new opportunities and transforming themselves accordingly. The purpose of this study is to understand how teams in incumbent companies develop and maintain dynamic capabilities for digital transformation, using a world leading provider of transport solutions, Scania, as an empirical case study. The study identifies key micro-foundations that formed the basis of dynamic capabilities that the team developed and employed on their journey and main challenges they faced and how they dealt with them along the way. The study finds that dynamic capabilities can be observed at levels of analysis other than the firm-level, that they are built over time through the employment of micro-foundational activities, processes, routines, and skills, and that they contribute to the renewal of the organizational structure, business model development, and organizational culture in order to enable company's digital transformation. In particular, on their journey towards digital transformation, teams manage incumbency-related and entrepreneurial challenges and employ different dynamic capabilities at different stages of the process to deal with the hindrances and enable change.