It is generally agreed that the adoption of digital technologies, termed digital transformation, fundamentally alters organizations. And we hear a lot about organizations undergoing these digital transformations, so much so that the term has practically become synonymous with change in general. But the reality is that many organizations struggle to move beyond incremental optimizations of existing business operations and production processes when undertaking digitalization projects. What is digital transformation, anyway?
Some describe digital transformation as the power of digital technology applied to every aspect of an organization, while others refer to it as using digital technologies and advanced analytics for economic value, agility, and speed. Many definitions appear in the literature, for example:
These definitions are useful but perhaps it would be more insightful to consider what digital transformation is not. In his book, Digital Transformation: Survive and Thrive in an Era of Mass Extinction (2019), Thomas Siebel states that digital transformation is not simply a series of generational changes in information technology or just the migration of a company’s processes, data, and information onto a digital platform. He quotes industry analyst Brian Solis, who writes, “Investing in technology isn’t the same as digital transformation.”
Siebel further elaborates that true digital transformation demands revolutionary changes to key competitive corporate processes, going beyond simply digitizing existing functions. He views it as a “caterpillar-to-butterfly process, moving gracefully from one way of working to an entirely new one, replacing corporate body parts and ways of functioning completely in some cases to capture far more value than was possible using low-scale, low-leverage legacy business.”
In essence, Siebel defines digital transformation as a profound shift enabled by the convergence of cloud computing, big data, IoT, and AI, requiring fundamental changes in how organizations operate and aiming to generate significant economic value and agility, rather than just incremental technological upgrades.
In their study on digitalization tensions, Moschko, Blazevic & Piller (2020) find that many firms only achieve incremental improvements instead of radical innovation in what are referred to as digital transformation programs, despite digitalization’s potential. They found a significant gap between the perceived need for radical change and the often incremental outcomes of digitalization projects.
They further find that digital transformation initiatives trigger innovation but also a multiplicity of tensions in management. They categorized the identified challenges and barriers into general innovation and project management issues, IT management issues, and tensions specific to digital transformation. While some issues were familiar (“old wine in new bottles”), the tensions directly related to digital innovation projects were more comprehensive and required non-routine approaches.
In addition, they found that significant tension exists between the need for increased collaboration with external stakeholders and the companies’ unwillingness to make concessions and their striving for control in these relationships. Companies recognized the positive aspects of collaboration for creativity and fresh ideas, but they often imposed strict conditions and expected partners to adhere to their familiar habits. This was also evident in data sharing, where companies were hesitant to relinquish control over their data despite its necessity for cooperation. Internal collaboration also faced tensions due to resource competition and a “not-invented-here” mindset.
Another key finding is the tension between innovating business in an existing modus operandi. Companies acknowledged the far-reaching changes necessitated by digital transformation, but they often tried to implement these projects using their existing, traditional innovation processes. This included difficulties in justifying projects financially and adhering to accustomed ways of dealing with external stakeholders or showing risk aversion towards new technologies. This approach, according to the authors, often failed to adapt to the interdisciplinary nature, extensive collaboration requirements, and the need for a holistic perspective in digital innovation.
Digital transformation, at its core, is not simply about implementing new technologies. It’s more about redefining how organizations operate and create value. While the term has become ubiquitous, the reality is that many organizations fall short of true transformation, settling for incremental improvements rather than the radical reinvention Siebel describes. The findings from Moschko, Blazevic, and Piller underscore the tensions and challenges that arise when companies attempt to drive transformative change while clinging to legacy structures and processes.
True digital transformation requires more than technological upgrades; it demands a fundamental shift in mindset, culture, and business models. This means embracing new ways of working, fostering deeper collaboration both internally and externally, and adopting non-traditional approaches to innovation. Without this deeper shift, digital transformation risks becoming little more than digitization – a missed opportunity to unlock the full strategic and competitive potential that true transformation promises.
Notes:
1 – Vial (2019), Understanding digital transformation: A review and a research agenda, 118
2 – ibid., 120
3 – ibid., 121
Sources:
Chanias, S., (2017). Mastering Digital Transformation: The Path of a Financial Services Provider Towards a Digital Transformation Strategy. In: European Conference of Information Systems, Guimaraes, Portugal, pp. 16–31.
Morakanyane, R., Grace, A., & O’Reilly, P., (2017), Conceptualizing Digital Transformation in Business Organizations: A Systematic Review of Literature. In: Bled eConference, Bled, Slovenia, pp. 427–444.
Moschko, L., Blazevic, V. & Piller, F. (2020), “Managing Digital Transformation: Comprehending Digitalization Tensions for Driving Disruptive Change”, Academy of Management Proceedings, 2020(01).
Siebel, T.M. (2019), Digital Transformation: Survive and Thrive in an Era of Mass Extinction, Rosetta Books, New York.
Vial, G. (2019), “Understanding Digital Transformation: A Review and a Research Agenda”, Journal of Strategic Information Systems, 28(2), 118-144.
Zaoui, F. & Souissi, N. (2020), “Roadmap for Digital Transformation: A Literature Review”, Procedia Computer Science, 175(2020), 621-628.