Digital transformation: a review, synthesis and opportunities for future research

Technology as a major determinant of organizational form and structure has been well acknowledged by academics for a long time (Thompson and Bates 1957; Woodward 1965; Scott 1992). Following a significant decline of interest in this relationship until the mid-1990s (Zammuto et al. 2007), innovations in information technologies (IT) and the rise of pre-internet technologies have revitalized its relevance in the context of organizational transformation. Thus, the literature on IT-enabled organizational transformation, a concept which originates from the field of information systems (IS) that has caught considerable academic attention starting back in the early 1990s (Ranganathan et al. 2004; Besson and Rowe 2012), may be seen as one of the scholarly roots of digital transformation research. In his seminal book, Morton (1991) argued that companies must experience fundamental transformations for effective IT implementation. In the course of the years a shift of attention occurred from technological to managerial and organizational issues (Markus and Benjamin 1997; Doherty and King 2005). Non-technological aspects such as leadership, culture, and employee training were found to be equally important for successful IT-enabled transformation (Markus 2004). This is supported by Orlikowski (1996) who found empirical evidence from a 2-year case study that organizational transformation was in fact enabled by technology, but not caused by it.

Today, information technologies have become ‘one of the threads from which the fabric of organization is now woven’ (Zammuto et al. 2007, p. 750). Digital technologies are considered a major asset for leveraging organizational transformation, given their disruptive nature and cross-organizational and systemic effects (Besson and Rowe 2012). In order to achieve successful digital transformation, changes must occur at various levels within the organization, including an adaptation of the core business (Karimi and Walter 2015), the exchange of resources and capabilities (Cha et al. 2015; Yeow et al. 2018), the reconfiguration of processes and structures (Resca et al. 2013), adjustments in leadership (Hansen and Sia 2015; Singh and Hess 2017), and the implementation of a vivid digital culture (Llopis et al. 2004). Therefore, the scope of our review revolves around digital transformation at the organizational level only (in contrast to implications at the individual level).

In this study, we conceptualize digital transformation at the intercept of the adoption of disruptive digital technologies on the one side and actor-guided organizational transformation of capabilities, structures, processes and business model components on the other side. In other words, and in line with Hess et al. (2016), we define digital transformation as organizational change triggered by digital technologies. Hence, we argue that two perspectives of digital transformation within organizations must be captured: a technology-centric and an actor-centric perspective. To exploit the technology-centric perspective we include the literature on technological disruption (e.g. Tushman and Anderson 1986; Anderson and Tushman 1990) and merge it with research on digital transformation. For the actor-centric perspective, we derive essential implications from the field of corporate entrepreneurship (Guth and Ginsberg 1990), which we believe may add valuable insights regarding actor-driven innovation and renewal processes within firms. In the following, we offer a brief introduction to both concepts and their relationship with digital transformation.

Rice et al. (1998) define disruptive innovations as ‘game changers’ which have the potential ‘(1) for a 5–10 times improvement in performance compared to existing products; (2) to create the basis for a 30–50% reduction in costs; or (3) to have new-to-the world performance features’ (p. 52). Similarly, Utterback (1994) emphasizes this disruptiveness at the firm and industry level and provides a similar ‘game changer’ definition in terms of ‘change that sweeps away much of a firm’s existing investment in technical skills and knowledge, designs, production technique, plant and equipment’ (p. 200). Tushman and Anderson (1986) distinguish between product and process disruptiveness. Product disruptiveness encompasses new product classes, product substitutions, or fundamental product improvements. Process disruptiveness may take the form of process substitutions or process innovations which radically improve industry-specific dimensions of merit. Christensen and Raynor (2003) introduce a further form of disruptive innovations, namely disruptive business model innovations, which represent the implementation of fundamentally different business models in an existing business.

We argue that digital technologies may reflect in all of these definitions of disruptive innovation. They may represent new-to-the-world product innovations, dislocate existing processes, and open up entirely new business models. As resumed in a recent study by Li et al. (2017), e-commerce for instance is defined as a disruptive technology (Johnson 2010) which involves significant changes to an organization’s culture, business processes, capabilities, and markets (Zeng et al. 2008; Cui and Pan 2015).

Corporate entrepreneurship (CE) on the other side is a multi-dimensional concept at the intersection of entrepreneurship and strategic management in existing organizations (Zahra 1996; Hitt et al. 2001; Dess et al. 2003). We adopt the conceptualization proposed by Guth and Ginsberg (1990, p. 5), who argue that corporate entrepreneurship deals with two phenomena ‘(1) the birth of new businesses within existing organizations, i.e. internal innovation or venturing, and (2) the transformation of organizations through renewal of the key ideas on which they are built, i.e. strategic renewal.’ Particularly the aspect of strategic renewal in corporate entrepreneurship, also labelled as strategic change, revival, transformation (Schendel 1990), reorganization, redefinition (Zahra 1993), or organizational renewal (Stopford and Baden-Fuller 1994), provides a promising interface to digital transformation. As stated by Covin and Miles (1999, p. 50), corporate entrepreneurship ‘revitalizes, reinvigorates and reinvents’—processes also required for digital transformation. Various authors have stated that corporate entrepreneurship is a vehicle to improve competitive positioning and transform corporations (Schollhammer 1982; Miller 1983; Khandwalla 1987; Guth and Ginsberg 1990; Naman and Slevin 1993; Lumpkin and Dess 1996). Considering the disruptive nature of many current digital technologies, we believe that organizations need to fundamentally renew and redefine the key ideas of their business in order to fully exploit the potential of digitization and eventually achieve successful transformation. The literature places particular attention on the role of middle managers as the locus of corporate entrepreneurship (Burgelman 1983, Floyd and Wooldridge 1999). Concluding, we will review the research on corporate entrepreneurship and identify those contributions which we believe may offer valuable knowledge regarding actor-driven internal renewal and change processes in the light of digital transformation.

Our review of the literature on digital transformation, technological disruption and corporate entrepreneurship is conducted in a two-step approach. First, we review, analyze and synthesize existing articles on digital transformation. Then, in a second step we supplement these findings be simultaneously reviewing the literature stream on technological disruption and corporate entrepreneurship. We believe a separate analysis and contrasting of the research streams is appropriate for two reasons: first, it provides the reader with more clarity on the status quo of digital transformation knowledge and prevents the confusion of concepts emerging from different literature fields. Second, white spots and opportunities for future research regarding digital transformation become much more visible in such a structured approach.

A systematic review is a type of literature review that applies an explicit algorithm and a multi-stage review strategy in order to collect and critically appraise a body of research studies (Mulrow 1994; Pittaway et al. 2004; Crossan and Apaydin 2010). This transparent and reproducible process is ideally suited for analyzing and structuring the vast and heterogeneous literature on digital transformation. In conducting our review, we followed the guidelines of Tranfield et al. (2003) and the recommendations of Denyer and Neely (2004, p. 133)¹ as well as Fisch and Block (2018) in order to ensure a high quality of the review.

The nature of our review is both scoping and descriptive (Rowe 2014; Paré et al. 2015) as we aim to provide an initial indication of the potential size and nature of the available literature as well as to summarize and map existing findings from digital transformation research. By developing opportunities for future research, our review further contributes to the advancement of this field and stimulates theory development.

For the purpose of data collection, we exclusively limit our focus on peer-reviewed academic journals as recommended by McWilliams et al. (2005). Thus, we opted to exclude work in progress, conference papers, dissertations, or books. First, based on discussion among the authors and the reading of a few highly-cited papers, we designed our search criteria using combinations of keywords containing ‘digital* AND transform*’, ‘digital* AND disrupt*’, ‘digitalization’, and ‘digitization’. Then, we manually searched each issue of each volume of the leading journals in the management² and IS field (AIS Basket of eight).³ In addition, we run our search query against five different electronic databases: Business Source Premier (EBSCO), Scopus, Science Direct, Social Sciences Citation Index (SSCI), and Google Scholar. We used all years available and only included articles referring to business, management, or economics in order to exclude irrelevant publications. We abstained from including digital innovation in our search (the only exception in our sample is a recent literature review by Kohli and Melville (2019), in order to capture consolidated insights). Although we realize that it is a hot topic in IS research at the moment (e.g. Fichman et al. 2014; Nambisan et al. 2017; Yoo et al. 2010, 2012), we aim to concentrate our focus on papers dealing with digital transformation on a broader level (firm and industry), rather than with transitions within innovation management.

Our first search query was conducted mid 2017 and yielded an initial sample of 1722 publications. This very large sample was mainly due to the broad ambiguity of the terms ‘digital’ and ‘disrupt’. Given these broad search parameters, we anticipated that only a small fraction of this very large sample would prove to be of substantive relevance to us. To select these relevant articles for our final sample, we performed a predefined and structured multi-step selection process (similar to the approach of Siebels and Knyphausen-Aufseß 2012; Vom Brocke et al. 2015) and defined specific criteria for inclusion (Templier and Paré 2015). The filters during our selection process included (1) scanning the titles, (2) reading abstracts, (3) removing duplicates, (4) full reading and in-depth analysis of the remaining papers, and finally (5) cross-referencing and backward searching by looking through the bibliographies of the most important articles to find additional relevant work. The initial pool was split in half between two panelists who separately performed the scanning of titles, analysis of abstracts and removal of duplicates. After these early steps, the sample could be narrowed down to 155 articles. As we arrived at step 4 “full reading and in-depth analysis of the remaining papers”, both panelists read and independently classified each of the remaining 155 studies. During this process, papers qualified for the final sample if they satisfied three requirements: (1) articles were required to have their primary focus and contribution within digital transformation research or digitally-induced organizational transformation (e.g. a vast number of papers inadequately captured the topic of digital transformation as they primarily focused on business model innovation), (2) articles needed to be based on a sound theoretical foundation and therefore not primarily practitioner oriented (such as articles that offer popular recommendations to business leaders on how to survive digital transformation), (3) papers that were not addressing digital transformation at an organizational level (e.g. the rise of home-based online businesses by entrepreneurs) were dismissed. Whenever disagreements emerged regarding the inclusion or classification of an article, we engaged in discussion and tried to resolve the issue together to make our selection rules more reliable. We updated the review in the autumn of 2018 for any articles that had appeared between then. Following this approach, 58 studies passed all five selection steps and were included in our final sample.

Within this sample, conceptual articles (27) and case studies (20) are dominant. Roughly 60% of the articles stem from the IS literature, while 40% cover a broader management perspective of digital transformation. While the reviewed papers span a time frame from 2001 to 2018, approximately eighty-percent of articles were published within the past 5 years, indicating the relative novelty of digital transformation as a research discipline. The distribution of our sample according to journals is provided in Table 4 of “Appendix”.

Upon the recommendation of Webster and Watson (2002), our categorization and analysis of the literature was concept-centric. First, to facilitate analysis and build a basis for our initial coding, each selected paper was reviewed to determine the following database information.

(1) Article title, (2) outlet, (3) research methodology, (4) sample, (5) region, and (6) key findings (see full database in Table 5 of “Appendix”). Next, we started coding our sample, adopting elements of the approach introduced by Corley and Gioia (2004). We began by identifying initial concepts in the data and grouping them into provisional categories and first order concepts (open coding). Then, we engaged in axial coding (Locke 2001) and searched for relationships and common patterns between and among these provisional categories, which allowed us to assemble them into second order themes. Finally, we assigned these second order themes to aggregate dimensions, representing the highest level of abstraction in our coding. In sum, reviewing and analyzing the extant literature, 194 coded insights were generated within the field of digital transformation: 61 first order concepts, nine second order themes, and two aggregate dimensions. The nine second order themes represent core themes across the papers, which finally constitute two aggregate dimensions: technology and actor. In conclusion, we define digital transformation as actor-driven organizational transformation triggered by the adoption of technology-driven digital disruptions. The result of the coding process is a high-level inductive map of the core themes in digital transformation research (Fig. 1).

We assume that pre-existing knowledge on corporate transformation processes in general is partly already available and may provide implications for digital transformation. Therefore, at this point in our review, we aim to stimulate a theoretical discussion by identifying potential white spots abstracted from adjacent research fields. For this purpose, we additionally reviewed 28 studies from the literature on technological disruption (to gain technology-centric input) and 32 papers from corporate entrepreneurship (to expand the actor-centric view). By this, we supplement the pre-dominantly IS-based digital transformation literature with a broader management perspective. First, by reviewing the literature on disruptive innovations we hope to derive implications regarding technology adoption and integration. Burdened with the legacy of old technology, bureaucratic structures and core rigidities (Leonard-Barton 1992), incumbents may face major challenges in this respect during their digital transformation journey. Second, we expect corporate entrepreneurship to add a more holistic perspective on firm-internal aspects during the process of transformation, such as management contribution or the impact of knowledge and learning.

We rigorously conducted the same review and analysis process as for our digital transformation sample. A database and concept matrix (Webster and Watson 2002) for the sample on technological disruption and corporate entrepreneurship are provided in Tables 6 and 7 of “Appendix”. The data structures, which summarize the second order themes for both the actor-centric and technology-centric dimension of these additional research fields are illustrated in Figs. 5 and 6 of “Appendix”. Within the main body of this article, we only draw attention toward three key implications (Fig. 4). In the following, we provide a brief synthesis of these implications and their grounding in the respective literature. In a second step, we transfer and apply these implications to the context of digital transformation and integrate them into an agenda for future research opportunities.

Based on the cross-disciplinary perspectives from reviewing the literature on digital transformation, technological disruption and corporate entrepreneurship, we propose opportunities for future research on digital transformation. Using our thematic map as a lens to view future research opportunities, we focus on the two dimensions of technology and actor. For the technology-centric dimension we expand on the structural and operational integration of digital technologies and organizational transformation initiatives as well as gaining a deeper understanding of the pace of technological transformation. For the actor-centric dimension we address three topics: we start at the leadership level by emphasizing the relevance of middle management in digital transformation, after that we refer to the potential skills gap and threat of an employee divide in incumbent organizations induced by digital technologies, and finally we move beyond organizational boundaries to turn toward the potential benefits and drawbacks of cooperating with start-ups and pure digital companies to boost transformation. For each area, we propose a set of research questions. Altogether, the agenda is organized around five guiding topics (Table 3).

Our review is not without limitations. First, the specific objectives and nature of our filtering process applied during the review naturally come with a certain selection bias. For example, data collection, analysis and interpretation remain influenced by the subjective assessments of the researchers. Also, despite being the common rule within systematic literature reviews, searching exclusively in peer-reviewed academic journals might have omitted some relevant research contained in books or dissertations. However, by means of a rigorous and transparent search process, an as complete as possible review sample was collected and analyzed subsequently. Second, using a high-level thematic map for such a complex multi-dimensional phenomenon like digital transformation highlights particular connections while it potentially fails to capture others. Specifically, critics may point to the lack of analytical depth within each second order theme. However, we believe that within the limited scope of a review our broad thematic description nevertheless adds value to the advancement of this field and should rather be seen as a holistic starting point for future research to dive deeper into the characteristics of sub-themes of digital transformation. Finally, we are aware that our focus on the organizational level of digital transformation within the private sector does not fully capture the implications of digital transformation for our society, as it also occurs at various other levels, such as the individual level or public sector. As such, future researchers may apply alternative approaches to review and synthesize the existing literature on digital transformation. For example, in contrast to our inductive method to code and analyze our sample, it may also be interesting to apply a more deductive and pre-structured method, in particular when focusing on a deeper understanding of the sub-themes emerging from our analysis. Accordingly, future research could benefit from adopting a phenomenon-based research strategy as proposed by von Krogh et al. (2012).

Concluding, our paper contributes to the extant discussion by consolidating, mapping and analyze the existing research on digital transformation, sharing important macro- and microlevel observations in the literature and proposing corresponding future research directions. Emerging from our review of 58 studies, we develop a thematic map which identifies technology and actor as the two aggregate dimensions of digital transformation and that elaborates on the predominant contextual concepts (second order themes) within these dimensions. From a macrolevel perspective, we observe that the status-quo of digital transformation literature is rather diverse, in a sense that papers discuss topics across various clusters and concepts. Further, we find some degree of diversity in the theoretical foundations drawn upon as well as confirm that the existing literature in general is scarce regarding quantitative empirical evidence. Another important contribution of our paper is bringing different lenses together by integrating knowledge from related disciplinary areas outside IS management, such as technological disruption and corporate entrepreneurship. With our review, we hope to provide a comprehensive and solid foundation for the on-going discussions on digital transformation and to stimulate future research on this exciting topic.