“Better together”: Right blend of business strategy and digital transformation strategies

Abstract

Despite the growth of digital transformation (DT) research, exactly how business strategy relationships lead to the successful implementation of digital transformation strategy (DTS) is not yet clearly understood. Although interest in investigating DT strategy in a broader manner is evident, little attention has been given to the dimensions needed to build DTS. To address this knowledge gap, our study offers a theoretical framework that explores how firms having different business strategies develop and successfully implement their own DTS. We position our proposed framework through the lens of strategic choice and dynamic capability theories and investigate how the four dimensions of DTS (the use of technologies, changes in value creation, structural changes and financial aspect) lead to open innovation, firm performance, and competitive advantage. The study validates our theoretical model using 215 responses from a survey with Bangladeshi organizations and tests the research hypotheses using structural equation modelling. Our results reveal that business strategy is a very important determinant of implementing DTS. Specifically, prospectors are associated with better use of technologies, changes in value creation, structural changes, and financial aspects, than defenders. Also, prospectors are associated with better implementation of DT than defenders. Lastly, DT implementation positively influences open innovation, firm performance, and competitive advantage. This study contributes to both theory and practice by carving out the dimensions of DTS that lead to enhanced performance outcomes.