Developing a Process for Formulating Digital Transformation Strategies- A Manufacturing Perspective

Abstract

The notion of digital transformation has gained attention in all industries across the globe. The emergence of new disruptive technologies has the potential to impact manufacturing companies’ value chains, to reshape manufacturing systems and to redefine their sources of competitive advantage. Whilst many firms are experimenting with it, recent studies of success stories have proved that their enhanced competitive positioning does not solely depend on the adopted technologies, but more importantly relies on the developed strategies. Yet, the digital transformation strategy literature has heavily focused on its context and content without giving sufficient attention to its process. Managers are therefore not equipped with a comprehensive digital transformation strategy process to help them navigate their digital transformation journey. This research aims at developing a process for formulating digital transformation strategies in manufacturing firms by developing an operationalisable framework entailing the essential constituents of a digital transformation strategy formulation process. This research was undertaken to answer the following research question: How do large manufacturing companies formulate a digital transformation strategy? In addressing the identified research question, three sub-questions were included to address (1) the strategic drivers, (2) the strategic intent and (3) the digital transformation strategy formulation practices in manufacturing. A five-phased approach was designed to develop, refine, validate and operationalise the process. A qualitative multi-case approach was adopted consisting of 22 exploratory, 8 supportive and 3 in-depth cases with several functions within the organisation. Data collection involved various interviews with multiple stakeholders within the companies supplemented with complementary data sources for triangulation purposes. The outcome of this research is a validated digital transformation strategy formulation process comprising 10 pillars for consideration: (1) Pain points, (2) Purpose, (3) Pivot strategy, (4) Point of entry, (5) Participants, (6) Performance measures, (7) Present capabilities, (8) Potential enabling capabilities, (9) Potential alignment capabilities and (10) Potential projects. This research contributes to the current discourse of digital transformation strategy literature by developing a framework addressing the constituents of the strategy process instead of the prevailing strategy context and content. By doing so, it provides a holistic and novel approach that is empirically grounded instead of offering prescriptive guidelines that are either overly generic, idiosyncratic in nature or lacking empirical evidence. It consolidates a number of suitable framework visualisations and classifies the different digital transformation initiatives based on the established classification of former It-enabled transformations. Moreover, it positions the digital transformation strategy within the established strategy literature. By delivering a new capability perspective, it provides a systematic way of breaking down firms’ current capabilities to identify digital transformation opportunities. Based on empirical results, this research provides an initial pragmatic process for managers to systematically deploy during their DT strategy formulation. This study deciphered the genetics of a strategy formulation process for practitioners by providing a modular framework that comprises 10 pillars embodied as a set of strategic considerations. These are deployable in a systematic way through operationalisable parts and suitable tools for industrial workshops. Further research should seek to further refine the framework’s operationalisation and investigate its wider applicability. The exploration of other theoretical lenses is also encouraged.