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Many ways lead to digital transformation

Datum:25 november 2022
How can firms best build the necessary digital competence?
How can firms best build the necessary digital competence?

Digital transformation is becoming a key area for firms to stay competitive. Firms must adopt new digital technologies to improve their operations, products and services. Those technologies can refer to the use of various social media channels to get closer to customers, backend systems to improve order flow, but also more sophisticated ones such as artificial intelligence or blockchains to automate parts of the business. However, at that point lies the difficulty for firms. Because digital transformation requires the adoption of digital technologies, the question remains: how can firms best build the necessary digital competence?

In our latest study, we examine competence at various levels of the organization. We looked at different combinations of competence and their interplay with organizational and environmental factors. Digital competence is key to implementing digital technologies, which subsequently fuels digital transformation efforts. We examine (1) leadership competence in the form of having digital competence in the firm’s board or at its top (CEO, CDO), (2) firm competence and digital knowledge as well as outside-bought digital knowledge, and (3) consider organization size and industry turbulence (number of start-ups in the industry). Many of these factors have been addressed in previous research in isolation, without considering their complex interplay. Subsequently, we apply a configurational method that allows shedding light on different paths that lead to the same outcome of digital transformation.

Our study shows that several configurations lead to digital transformation and that many competence elements are interchangeable. On the leadership level, we show that firms only need one of the competence elements. Having a Chief Digital Officer can be fruitful, but not having one does not equal to failed digital transformation. In fact, a digitally savvy CEO or a digital board can substitute its influence. Thus, leadership competence in digital does not need to cover all bases but rather have one knowledgeable base. The same goes for digital competence at the firm level. We find that firms can either draw on “internal” competence or substitute that through “externally” bought competence. Lastly, we found that most of the configurations are characterized by higher levels of environmental turbulence. Indicating that digital transformation may be facilitated under pressure.

With these findings, our study shows how different elements are necessary to use digital technologies. Firms do not need to add “digital elements” at all dimensions to benefit, several carefully picked elements in combination already lead to a significant impact.

Author: Nicolai Fabian – n.e.fabian