The Digital Transformation and Innovation Nexus

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Table of Contents

Abstract
Introduction
Problem Statement
Research Questions
Literature Review
Research Methodology
Conclusions
References

Abstract

The proposal revolves around the idea of the nexus between digital transformation and innovation. This idea has acquired particular importance in the current landscape, as enabled by rapid technological progress. In the digital economy, organizations are expected to raise the degree of innovativeness and introduce new, revolutionary concepts into the framework. However, many companies fail to attain the optimal level of digital innovativeness. This study theorizes that the underperformance may be conditioned by the lack of understanding of the profound connection between innovativeness and digital transformation. The proposal includes a synthesized review of literature, which provides insight into the history of the notion of digital transformation, its current understanding, and existing research voids. This information conditions the direction of further research, which is to explore barriers, enablers, and strategies of digital transformation in underrepresented industries through a multi-level, mixed-methods case study. The practical orientation of the study ensures its applicability in the current economic environment characterized by the increasing complexity of the organizational landscape.

Introduction

The 21^st century has marked the beginning of a new era – the era of advanced technology widely applied across various settings. While science saw considerable progress and breakthrough inventions in the previous decades, it is by the 2010s-2020s that humanity manages to increase its pace by manifold. The Internet has become universally applied, which marked its transition from military and scientific tools and niche entertainment products to an instrument of immense practical potential. Grubor and Jakša (2018) refer to Web access as a basic necessity in a range of situations, including advanced business practices. Furthermore, the importance of the Internet has been highlighted in other spheres of both professional and personal activities.

Its vital status has become particularly obvious in the fallout of the recent Covid-19 pandemic, causing a global collapse. Students attending educational institutions saw their learning reoriented toward a remote model, which revealed both opportunities and challenges of the digital environment (Garbe et al., 2020). While the Internet possesses immense potential in terms of worldwide communication, the utilization of its instruments lacked general proficiency due to an insufficient level of digital literacy (Ali, 2020). A similar situation can be observed on higher levels, including various professional fields. In the United States, the work-from-home model became prevalent during the peak of the pandemic, which required advanced digital solutions (Brynjolfsson et al., 2020). Evidently, the process was unplanned, which is why it lacked the required smooth transition (McGuinness& Fulton, 2019). As a result, the inability of companies and institutions to utilize modern digital potential has been proved to be a major impediment.

On the other hand, the necessity of digital transformation is not a recent concept, as its importance has been actively discussed within professional communities. Manita et al. (2020) states that the world has passed the threshold of the digital era, which altered various industries’ landscapes. Consequently, organizations exude an increasing interest in the digitalization of their operations, relying heavily on the advanced potential of modern technology (Nambisan et al., 2019). The range of potential solutions, which can be incorporated into a company’s activities, is vast, and it continues to expand exponentially. Nanotechnology, robotization, augmented and virtual reality, mobile applications, and artificial intelligence form merely a portion of envisaged means of enhancing efficiency in the digital age (Nambisan et al., 2019). They are no longer viewed as science fiction or narrow-niche concepts. Instead, state-of-the-art technology has seen increasing recognition from professional communities (McKenna, 2021). In fact, their potential use can be considered an integral requirement for quality innovation rather than an additional, non-prioritized instrument. The current proposal envisages research intro digital transformation from a new angle, viewing it as an indispensable condition of positive innovation in the contemporary environment.

Problem Statement

On the other hand, recognizing the need for digital transformation per se does not suffice. Relevant ideas have been widely theorized, but, as the Covid-19 pandemic revealed, there remain crucial aspects, which often remain uncovered by modern organizations. In many cases, the existing operational frameworks proved to be incapable of meeting the requirements of the process. First, optimal digital transformation needs a suitable technical foundation in the form of hardware and equipment (Tekic & Koroteev, 2019). Digital products are widely available for the general population, but their effective use, monitoring, and maintenance require considerable computing capacities (Gimpel et al., 2018). Second, the implementation of digital transformation is highly demanding in terms of operational literacy. In other words, those who work with new solutions should have a sufficient degree of knowledge. This way, they would be able to ensure a precise assessment of organizational needs for transformation, taking optimal routes to new digital solutions. Nevertheless, as it can be inferred from the recent experience, the aforementioned aspects are often not fully covered by existing strategies.

In fact, one may observe a certain void between the theoretical findings, which acknowledge the vital status of digital transformation, and the practical implementation of the said concept. Simultaneously, innovation is a well-established notion in the corporate environment, as it has been considered to drive the progress and development of organizations (Vial, 2019). According to Bell et al. (2019), entrepreneurial innovation is a self-propelling process, as the exposure to it is observed to promote the innovativeness of an individual. Spoken differently, those who interact with innovative products become more likely to acquire a similar spirit, thus contributing to global progress. The three levels of the process comprise incremental, breakthrough, and transformational innovation. Historically, organizations have been encouraged to focus on the first level, while the transformational stratum received little attention due to perceived risks and expenses.

Nevertheless, the current environment dictates a stronger emphasis on revolutionary digital solutions as the primary means of obtaining a competitive advantage. Consequently, the nexus between digital transformation and effective innovation becomes evident and crucial. As such, the global business environment faces a substantial problem in the form of the necessity to ensure quality development in the digital sphere (Nambisan et al., 2019). The severity of the issues varies across industries, becoming particularly acute in certain settings. However, the problem requires additional research, as particular aspects, goals, and conditions must identified within each specific industry. Identifying the sectors in which the need for better-digitalized innovation is particularly vital will be instrumental in enabling the sustainable development of the global economy, responding to the needs of both service providers and customers.

Research Questions

Based on the observed issues, it appears possible to formulate the following research questions:

How strong is the link between digital transformation and the innovative capacity of an organization?
How does the innovative digital transformation establish an organization’s competitive advantage?
What sectors demonstrate a smaller degree of innovative digital transformation capacity?

Literature Review

Despite the practical orientation of the discussed issue, potential solutions are to be based on rigorous research reflected in the existing literature. Puthiyamadam (2017) explores the evolution of the term’s meaning for the global business environment. As far back as a decade ago, the idea of digital transformation comprised aspects, which would be seen as basic nowadays: effective search engines, data mining, and virtual-space collaboration (Puthiyamadam, 2017). Subsequently, the perception of digital transformation has transformed along with the progress of scientific thought and now focuses on such advanced ideas as artificial intelligence, Big Data, and virtual reality. Bloomberg (2018) encourages researchers to distinguish between the concepts of digitalization and digital transformation. The first notion refers to a business strategy, which aims at enhancing an organization’s operations through the implementation of information technology. The idea of digital transformation prompts decision-makers to venture beyond the point of digitalization, as it implies a profound, comprehensive reorganization of all operations (Bloomberg, 2018). In other words, digital transformation is a global concept with the potential to change entire industries on a global scale.

Therefore, one may infer that the concept in question extends beyond its general perception and requires more profound changes. Teichert (2019) argues that the proper implementation of digital transformation practices requires a certain degree of digital maturity from an organization. Its inner structure, corporate culture, technical literacy, and innovative capacity are to be on par in order to ensure that all criteria are met. Sousa and Rocha (2019), with the idea, suggesting that nurturing digital literacy should be a matter of utmost priority with innovative organizations. Findings presented by Reis et al. (2018) demonstrate that digitalization is a widely accepted strategy of innovativeness within the business environment. Nevertheless, as discussed above, true digital transformation extends beyond its conventional understanding. Under the described circumstances, innovative organizations are expected to perform a greater leap toward advanced technological solutions, which would enhance the limits of the industry and introduce a new dimension to it.

However, as discussed earlier, the innovativeness and digital transformation capacity are not consistent across industries. In addition, Warner and Wäger (2019) observe another inconsistency, which is reflected in the way managers use the term, which relates back to the ideas presented by Bloomberg (2018). When investigating the existing literature related to the topic of digital transformation, Hausberg et al. (2019) discovered a lack of balance in terms of sectors, which are covered by rigorous research. While the concept is widely used, the majority of studies concern such technologically advanced industries as finance, marketing, and innovation management. At the same time, there appears to be a significant research gap in less digitalized spheres, including tourism, hospitality, accounting, and human resources management (Hausberg et al., 2019). These sectors may serve as the primary point for subsequent studies, which would observe undeveloped enablers and systemic barriers to digital transformation as a key avenue of innovation. The presented data suggests that some industries remain uncovered by active research, forming a considerable research gap. As most studies focus on just a few advanced areas, it appears appropriate to redirect the focus of attention to the industries, such as hospitality, tourism, and human resource management, which remain out of spotlight.

Research Methodology

The proposed research methodology will utilize a mixed approach. This form is chosen specifically to review the issue from both theoretical and practical perspectives. During the first stage, an extended review of literature will yield the theoretical basis for the subsequent parts in the form of a synthesized conceptual framework, reflecting the perceived nexus between innovation and digital transformation. Another critical theme will comprise a categorized list of industries in which digital transformation is underrepresented as compared to other sectors. These categories will enable the selection of relevant industries, in which theoretical and practical research gaps are present.

Based on these findings, the second stage will follow the qualitative approach in the form of interviews with representatives of prominent companies within these sectors. Each interview will be transcribed for the further analysis of the scripts, which will result in the evaluation of the frequency of specific digital transformation related-terms in the speech. Next, the data will be coded and synthesized using appropriate software to determine key notions related to enablers and impediments of digital transformations in respective organizations. Ultimately, this stage will yield a coded list of terms and concepts of digital transformation and innovation as perceived by representatives of specific companies.

Finally, a quantitative statistical analysis will be conducted to determine correlations between the current perception of the digital transformation of critical innovation techniques and the company’s performance. The uses of specific terms and policies will be compared to the general performance of each company. These statistics will be collected from open sources, using the organizations’ financial statements. This way, the research will examine the correlation between digital transformation philosophies and actual performance of the companies. Consequently, the correlations will be observed leading to further recommendations. Data obtained through these phases will enable final conclusions, which will reflect potential effective strategies for continuous digital innovation within underrepresented sectors.

Conclusions

Ultimately, the world has entered the era of the digital economy. Modern technology develops at an increasingly rapid pace, which introduces a new reality in which organizations are to adjust their operations accordingly. Digitalization is not a recent concept, as its prevalence in contemporary companies has been on a steady increase (Loonam et al., 2018). However, experts prompt managers to appraise the distinction between digitalization and digital transformation. The second concept implies more profound changes, which have the potential to redefine the image of an industry. Research suggests that it is the digital transformation that presents vast opportunities for quality innovation and sustainable development when applied precisely.

The proposed research design focuses on the industries in which the nexus between digital transformation and innovation appears underrepresented. The outlined study has the potential to ensure a better understanding of challenges and opportunities, thus bridging the research gap and introducing new avenues for further development. This way, the inter-industrial inconsistencies may be potentially alleviated, which will positively contribute to the global economy.

References

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Bell, A., Chetty, R., Jaravel, X., Petkova, N., & Van Reenen, J. (2019). Who becomes an inventor in America? The importance of exposure to innovation.The Quarterly Journal of Economics, 134(2), 647-713. Web.

Bloomberg, T. (2018). Digitization, digitalization, and digital transformation: Confuse them at your peril. Web.

Brynjolfsson, E., Horton, J. J., Ozimek, A., Rock. D., Sharma, G., & TuYe, H. Y. (2020). COVID-19 and remote work: An early look at US data. National Bureau of Economic Research. Web.

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Puthiyamadam, T. (2017). How meaning of digital transformation has evolved. Harvard Business Review. Web.

Reis., J., Amorim, M., Melão, N., & Matos, P. (2018). Digital transformation: A literature review and guidelines for future research. In A. Rocha et al. (Eds.), Trends and advances in information systems and technologies (pp. 411-421). Springer.

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Warner, K. S. R., & Wäger, M. (2019). Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal.Long Range Planning, 52(3), 326-349. Web.

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