Enabling Digital Transformation - a Dynamic Capabilities Approach

Abstract: This report is built on a theoretical literature study within the areas of digital transformation and dynamic capabilities. An empirical study has been made on the provider of the mission of this study, Propia, and a case study has been made on the case company Tekniska verken, in order to verify the theoretical findings and results. The study was performed by two master students of Industrial Engineering and Management at Linköping university during the period from January to May 2019. The study was performed as a master thesis within the master's orientation Strategy and Management Control, and aims to explore how organizations can develop a dynamic digital capability, which is seen as the key to success when it comes to managing digital transformation in a successful way. The study was performed iteratively, by first examining the area of digital transformation, defined as the transformation of business and strategy through digital technology and organizational changes. Three areas where organizational changes are needed were identified, namely the areas of Leadership & Vision, Culture & People and Corporate Processes & Structures. Further, three factors within each area were defined as critical in order to succeed with digital transformation. These nine critical factors laid the foundation for the second part of the study, where the area of dynamic capabilities was studied and applied onto the findings on how to manage dynamic transformation in a successful way. Dynamic capabilities can shortly be described as routines for change and can be further disaggregated into three capacities: Sense – the ability to know what opportunities exist and can be matched with the internal prerequisites; Seize – the ability to capture the right opportunities and successfully integrate them into the business; Reconfigure – the ability to, when needed, perform changes of structures and resources. Within these three capacities, microfoundations to build the previously mentioned critical factors in a dynamic way were identified. The result of the study was a generalizable framework, consisting of these nine critical factors and 31 microfoundations required to build the factors in a dynamic way. By developing the dynamic capability microfoundations and, thereby, continuously work with all factors, the development of a dynamic digital capability in the organization will be facilitated. The framework can thereby be used as a checklist of what is already in place in the organization, and what is lacking and must thereby be obtained. Worth noticing is that factors and microfoundations as well as dynamic digital capability in itself is perishable, hence “checking the box” of a factor or microfoundation once does not mean it is obtained forever, but it requires continuous work and development of all parts of the framework. Dependencies and interrelationships between the factors have been identified, as well as the effect of other organizational aspects such as size, industry and how far the organization has proceeded in their digital transformation journey. These dependencies are discussed in the report, but no relative importance or order of how and when the factors and microfoundations should be obtained and developed has been further explored or confirmed. This is due to the desired generalizability of the framework.