The Digital Transformation of Incumbent Firms
Authors:   , Hanel Erik 
Published: October 2023

Digital capability gaps in traditional industries: Influencing factors and strategic responses This paper introduces the concept of digital capability gaps (DCG); the relative difference of a focal firm’s ability to design and control products, services, and processes by utilizing digital technologies in relation to customers. These capability differences matter as they affect incumbents’ strategic response and the value-creating relationship between firms and customers. First, our findings reveal that strategic responses differ according to the magnitude of DCGs: Large DCGs may offer the opportunity for ‘digital diversification’ by using the capabilities developed to enter new domains. In cases of moderate DCGs, firms aim to bridge gaps by adopting the role of a ‘digital parent’ and innovate on behalf of customers. Finally, in the cases of small DCGs firms may respond by forming ‘digital collaborations’ in order to jointly develop digital capabilities. Second, our study also unpacks the influencing factors that affect DCGs: the consolidation or fragmentation of customer portfolio and competitive landscape and the extent to which players have a similar digital pressure for adopting digital capabilities. Overall, our study contributes to the growing literature on the digital transformation of incumbents. Digital Transformation of Incumbents via Structural Ambidexterity: A case study of escalating tensions Strategizing for digital transformation has become a focal point for incumbent firms due to the transformative and disruptive nature of digital technologies. This paper investigates how incumbent firms attempt to overcome the challenges of their digital transformation through structural ambidexterity. I address this through an extended case method design by drawing on a longitudinal case study of an incumbent firm. This study reveals the potentially negative impact of escalating tensions, which are the product of three interrelated underlying mechanisms, in structural ambidextrous solutions. It thereby contributes to the literature on digital transformation by showing how tensions in the context of DT emerge, evolve, shift, pervade, and consequently escalate over time. Furthermore, it highlights the complexity incumbents face in the context of their DT and thus contributes empirically to the question of how DT is actually different. The Digital Readiness Matrix: Being ready is half the battle to master digital transformation Awareness about different attitudes or perceptions between managers and employees positively impacts the establishment of ‘digital readiness’, which is seen as a precursor and underlying condition for a successful implementation of DT projects. However, there is only little knowledge as to what extent perceptions within (managers and employees) and across (buyer and supplier) organizations impact digital readiness. The findings in this paper reveal that digital readiness perceptions of managers and employees as well as buyers and suppliers are crucial for a firm’s digital readiness. The development of the Digital-Readiness-Matrix supports managers in spotting potential gaps between perceptions and anticipating obstacles in the course of their DT initiatives.