Digital transformation is forcing traditional companies, such as those in mechanical engineering, to develop fundamentally new digital capabilities in order to remain successful in the market. But why are some companies more successful at this than others? When do investments in digital capabilities pay off, and how can these be reliably measured? These questions were explored by Prof. Christina Kühnl from the University of Stuttgart as well as Dr. Dominik Wielgos and Prof. Christian Homburg from the University of Mannheim. The findings were published in the Journal of the Academy of Marketing Science, which is one of the most renowned specialist journals in the field of marketing.
According to International Data Corporation 2019 figures, companies worldwide are expected to invest the staggering sum of USD 7.4 trillion in the digital transformation of their businesses by 2023. Yet more than 80 percent of digital business transformations result in losses or fail to deliver the expected performance improvements. Examples from industry show that some companies are more successful than others, because they have an above-average degree of “digital business capability”, which creates added value through effective management of the digital transformation.
How does “digital business capability” show?
Surprised by these major differences, the authors first conducted 15 in-depth interviews with representatives of companies and clarified what they meant by “digital business capability”. “We were able to determine that digital business capability manifests itself in the three fields of action digital strategy, digital integration and digital control, and that successful companies have a high degree of these,” explains Prof. Christina Kühnl, who holds the Chair of General Business Administration and Marketing at the University of Stuttgart and is the senior author of the study.
Managers should therefore have a corporate-level digital strategy that spans multiple business functions and focuses its transformation efforts on the development of new, value-adding digital products, services, and business models. To facilitate a successful implementation of the strategy, they should also link their business processes across the entire value chain and extend organizational activities beyond company boundaries to value-adding networks. Finally, managers should implement control mechanisms to monitor and evaluate the progress of the transformation.
Under what conditions are the investments profitable?
A key component of the research project is to better understand the impact of digital business capability on business and customer success. To this end, the authors conducted two quantitative cross-industry studies with more than 270 companies and 3,212 customers. In the first study, they were able to demonstrate that digital business capability can increase business success as measured by return on sales and return on assets. In the second study, the authors looked at the impact of digital business capability on customer perceptions and behavior. They were able to demonstrate that customers perceive companies that have a high degree of digital business capability as more innovative, and also that there is a higher level of customer satisfaction towards the company. So it pays for companies to invest in these capabilities.
“Our findings show that managers shouldn’t see digital business capability as a universal, uniform solution to the challenges posed by the digital transformation,” Kühnl emphasizes. Because, she says, digital business capability is more rewarding when companies operate in a specific environment. For one thing, digital business capability is increasingly driving business performance after the company has reached a critical level of corporate dynamics (frequent internal changes in structure, rules and regulations, personnel, and processes). For another thing, digital business capability pays off, in particular, at a moderate level of technology dynamics, i.e. when technological changes occur frequently. Finally, digital business capability is more valuable for business-to-consumer companies than for business-to-business companies.
Prof. Dr. Christina Kühnl, University of Stuttgart, Institute of Business Administration, Chair of General Business Administration and Marketing, phone: +49 711 685-82940, E-Mail