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Objective and main results

This article explores how incumbent firms in traditional industries build dynamic capabilities for digital transformation. The study emphasizes the senior leader’s point of view on the practice of strategic activities for digital transformation.

Main findings:

• Digital transformation in incumbent organizations often starts with the strategic renewal of the business model, which again tends to lead to wider changes in the firm's collaborative approach. If executed correctly, this will lead to deeper changes in organizational culture. The findings show that the scope of digital transformation varies along these dimensions.
• Digital sensing, seizing and transforming are central types of digital capabilities for digital transformation.  
• The authors identify several sub-capabilities that underpin development of sensing, seizing and transforming capabilities.
  • Sensing: Digital scouting, digital scenario planning, digital mindset crafting
  • Seizing: strategic agility, rapid prototyping, balancing digital portfolios 
  • Transforming: navigating innovation ecosystems, redesigning internal structures, improving digital maturity.  

Summary of practical implications

The authors argue that incumbents must build a system of dynamic capabilities for digital transformation.

Organizations need to build capabilities that enable them to quickly make sense of unexpected technological, customer, and competitor-based trends in fast-changing environments. Efforts aiming at acquiring and exploiting external knowledge is important in this regard.

Organizations should emphasize improving their abilities to rapidly respond to opportunities and threats, e.g. by use of digital scenario planning. Building strategic agility is important, including pacing of strategic actions and building a digital mindset that accepts/embrace constant redirection, rapid feedback and temporality of competitive advantage. They should be aware that rigid strategic planning and strong hierarchical structures could hinder development of capabilities for digital transformation.

Organizations should emphasize building IT competence, as improving the digital maturity of the workforce is important for ongoing digital transformations.

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Tags

Strategic flexibility IT capabilities Digital innovation Incumbent organizations Business models