4.9.2023 – 15.12.

2023

MANAGING DIGITAL TRANSFORMATION

Value creation and process perspective

Mira Holopainen, Doctoral Student and Project Researcher

DIGITAL TRANSFORMATION AS A PROCESS

Digital transformation “a process that aims to improve an

*is not organization-centric, contains entity by triggering significant
broader individual, organizational, and changes to its properties through
social context combinations of information,
*improvement is an expected outcome of computing, communication, and
DT connectivity technologies” (Vial,
*digital technologies may change over 2019, p. 121)
time
DIGITAL TRANSFORMATION AS A PROCESS
 USE OF DIGITAL TECHNOLOGIES

Are described as enabler of the business transformation

Could be divided into two categories:
Primary: social, mobile, analytics, cloud and Internet of Thing (SMACIT)
Secondary: still evolving technologies such as AI, wearables, virtual and augmented
reality and so on.

Digital transformation is not about exploiting

as many technologies as possible
 DISRUPTIONS
Consumer behavior and expectations
The development of digital technology are shaping customers' expectations and requirements, such as the
demand for digital service channels.

Competitive landscape
Digital technologies bring disruption in the markets: redefinition of existing markets,and also barriers to entry
become less significant.

Availability of data
digital technologies also foster the generation of data
companies must be able to utilize data for their own benefits

Creates requirements for companies to shape the

business and develop operations to remain
competitive.
 STRATEGIC RESPONSE

Digital technologies create opportunities and threats to companies

They need strategy to respond these

I.e., digital business strategy or digital transformation strategy

Digital business strategy = “organizational strategy formulated and executed by leveraging digital resources to
create differential value” (Mithas et al., 2013)
Digital transformation strategy = “is a blueprint that supports companies in governing the transformations that
arise owing to the integration of digital technologies, as well as in their operations after a transformation” (Matt
et al., 2015)

Focus on the transformation of products, processes and organizational aspects

A company utilizes digital technology to redefine and improve

its business models and operations.
 CHANGES IN VALUE CREATION PATHS
Value propositions Digital channels
Digital technologies enable the creation of new value The creation of the new customer-oriented channels, e.g.,
propositions using social, to reach and communicate with customers
▪ New digital products and services or enhancing existing ones
through digital features Agility and ambidexterity
Value networks Agility
▪ Digital technologies support companies to adapt to environmental
Digital technologies enable direct exchanges among changes
participants of a value network ▪ “ability to detect opportunities for innovation and seize those
competitive market opportunities by assembling requisite assets,
Digital technologies enable close collaboration and knowledge, and relationships with speed and surprise” (Sambamurthy
coordination among participants et al., 2003)

Digital technologies have granted customers with the Ambidexterity

ability to become co-creators of value within a value ▪ Digital technologies support companies to combine the exploration of
digital innovation with the exploitation of existing resources
network
▪ a firm’s ability to maintain both an operational backbone as well as a
digital services platform (Sebastian et al., 2017)
 STRUCTURAL CHANGES

Organizational structure Organizational culture Leadership Employee roles and skills

Fostering collaboration across Require cultural changes to innovative Ensuring the development of digital New roles for employees
business units and breaking functional and learning culture and digital mindset Developing digital skills
silos mindset Managing the implementation of digital
For example, the creation of a Willingness to take risks and technologies
separate unit or cross-functional experiment with digital technologies New management roles e.g., Chief
teams Learning through small changes Digital Officer
ORGANIZATIONAL BARRIERS

Inertia

• In incumbent firms the relationships and processes are often rigid and rely on
resources that cannot easily be reconfigure.

• Existing resources and capabilities (tangible and intangible) act as a barrier to

changes.

Resistance

• Employee, management, partners, or customers resist the introduction of digital

technologies and changes in organization.

• Can be explained by a lack of visibility on the potential benefits of digital technologies.

IMPACTS OF DIGITAL TRANSFORMATION

Organizational performance Organizational efficiency Industry & Society

Positive Innovativeness, financial performance, firm Automation, improvement of business improvements
growth, reputation, and competitive advantage processes, and cost savings
Potential for the improvement of
the quality of life of individuals

Negative Security & Privacy Something else?

Digital transformation can be seen “as a process where digital
technologies create disruptions triggering strategic responses from
organizations that seek to alter their value creation paths while managing
the structural changes and organizational barriers that affect the positive
and negative outcomes of this process.” (Vial, 2019, p. 188)
 VALUE CREATION PATHS OF ORGANIZATIONS UNDERGOING
DIGITAL TRANSFORMATION

Holopainen, M., Saunila, M., & Ukko, J. (2023). Value creation paths of organizations undergoing digital
transformation. Knowledge and Process Management, 30(2), 125-136.
The research framework: the use of
technologies to change the value
creation paths

Structural factors

Changes in value
Use of Technologies Goals
creation path

Barriers
VALUE CREATION PATH 1

Structural factors
• Digital skills
• Cooperation networks
• Continuous development

Use of Technologies Changes in value creation

• IOT and sensors, data usage, mobile
path Increase of the sales and
application, artificial intelligence,
algorithms machine vision, scanner • Digital product and connected services competitiveness
technology, automation, digital twin

Barriers
• customers' fear towards
information security
VALUE CREATION PATH 1

THOUGHTS OF COMPANIES

The goal is that our digital services

A digital strategy is a couple of different things for us: should increase our machine sales
on the one hand, it involves, of course, a traditional and increase our competitiveness
kind of IT, where we think about how we work in relation to our competitors
in-house, and on the other hand, it involves digital services (Chief digital officer, Company B).
relating to traditional products for our customers
(IT manager, Company C).

For us, IoT is a tool to sell better equipment and services

(Maintenance director, Company D).
VALUE CREATION PATH 1

Structural factors
• Digital skills
• Cooperation networks
• Continuous development

Use of Technologies Changes in value creation

• IOT and sensors, data usage, mobile
application (primary), artificial path Increase of the sales and
intelligence, algorithms, machine vision, • Digital product and connected services competitiveness
scanner technology, automation, digital
twin

Barriers
• customers' fear towards
information security
VALUE CREATION PATH 2

Structural factors
• Employee participation and
training during change

Use of Technologies Changes in value creation

• ERP, CRM, robotics, automation,
path Efficiency of internal
connection, engineering and design
programs, sensors, mobile tools and • Digital production and internal processes operations
applications

Barriers
• Change resistance
• Financial factors
• Technology ignorance
VALUE CREATION PATH 2

THOUGHS OF THE COMPANIES

Consider, for example, our federal beam

production. Last summer, it was
We will streamline production with these discovered that there was a bottleneck in
new machines and equipment. They the plasma phase of the production
speed up the production process and process. Now we have acquired a new
various work steps, as well as increase plasma [machine], and that bottleneck
accuracy, which then shortens the has shifted to design. Currently, we are
manufacturing lead time. This, in turn, acquiring more design resources and
frees up resources elsewhere (the leveraging digital technology by building
CEO, Company F). design automation. We have made these
types of changes to streamline internal
processes (the CEO, Company H).
VALUE CREATION PATH 2

Structural factors
• Employee participation and
training during change

Use of Technologies Changes in value creation

• ERP, CRM, robotics, automation,
path Efficiency of internal
connection, engineering and design
programs, sensors, mobile tools and • Digital production and internal processes operations
applications

Barriers
• Change resistance
• Financial factors
• Technology ignorance
VALUE CREATION PATH 3

Structural factors
• Desire to change and evolve
• Digital skills
• Cooperation with the customer

Use of Technologies Changes in value creation

• Artificial intelligence, data usage, path Better customer
mobile application, digital
• Digital sales and service experience
channels, digital platform
processes

Barriers
• Complex user interface
VALUE CREATION PATH 3

THOUGHTS OF THE COMPANIES

We have the best customer service
in the market that we are talking
about, so to deliver on that promise
Increasingly, we want to understand our customers' “earnings of service, we're working shoulder
logic” and their business environment. It opens up a whole to shoulder, and digitalization really
different world and the opportunity to understand different plays a major role in that. Because
business concepts that benefit the customer. That thinking we can’t put employees physically
doesn't end when the goods leave here and the invoice at every customer's site to help and
comes … For example, our digital store was designed together provide information, we need
with our three largest Central European customers digital tools to deliver on our
(Development director, Company J). promise (Factory manager,
Company K).
VALUE CREATION PATH 3

Structural factors
• Desire to change and evolve
• Digital skills
• Cooperation with the customer

Use of Technologies Changes in value creation

• Artificial intelligence, data usage, path Better customer
mobile application, digital
• Digital sales and service experience
channels, digital platform
processes

Barriers
• Complex user interface
 CONCLUSIONS
Companies had different goals relating to digital transformation
Increase of the sales and competitiveness, efficiency of internal processes, better customer service
The goals differ based on the motivation for and objectives of transformation
Related to the ways the products and services are produced, the types of product and services provided, and
the ways products and services are sold and marketed

The drivers/disruptions for digital transformation and use of the digital technologies varied and
caused different value creation paths
Customers or other stakeholders, employees, management

The main barrier were related to managing trust issue, the complexity of technology solutions,
and resource constrains
 CONCLUSIONS
Managing digital transformation is a learning process; experimenting and collaborating
through feedback and learning is a key

Digital business strategy

Managing digital
Competitive environment transformation and
Pressure from customers creating new value
Finding balance creation paths
 REFERENCES
Reading Materials:
Holopainen, M., Saunila, M., & Ukko, J. (2023). Value creation paths of organizations undergoing digital transformation.
Knowledge and Process Management, 30(2), 125-136..
Vial, G. (2019). Understanding digital transformation: A review and a research agenda. The journal of strategic
information systems, 28(2), 118-144
Others:
Matt, C., Hess, T., & Benlian, A. (2015). Digital Transformation Strategies. Business & Information Systems Engineering,
57(5), 339-343.
Mithas, S., Tafti, A., & Mitchell, W. (2013). How a firm's competitive environment and digital strategic posture influence
digital business strategy. MIS Quarterly, 37(2), 511-536.
Sambamurthy, V., Bharadwaj, A., & Grover, V. (2003). Shaping agility through digital options: reconceptualizing the role
of information technology in contemporary firms. MIS Quarterly, 27(2), 237-263.
Sebastian, I., Ross, J., Beath, C., Mocker, M., Moloney, K., & Fonstad, N. (2017). How big old companies navigate
digital transformation. MIS quarterly executive, 16(3), 197-213.