1. Introduction
The need for a comprehensive corporate strategy in the digital era with swift technological advancement is exacerbated by continuous environmental changes. Achieving the desired outcome in establishing digital transformation is very challenging since the organizational transformation demands fundamental changes in organization strategy, structure, processes, technology, and, most importantly, culture (Eden et al., 2019). An integrated strategy is based on an overarching vision linking business outcomes, value creation, and competitive advantages in the organizational digital transformation endeavor (BCG, 2022). In today’s global market, organizational survival relies on transformation capabilities and continuous innovative initiatives (Lukito et al., 2022). Digital transformation is emerging globally as the fourth industrial revolution (Mahmood et al., 2019), given the disruptive innovations and changing demands in the market and processes.
Businesses must go through different levels of digital transformation, based on their digital readiness by implementing technological advances towards enhancing organizational performance and resilience to create sustainable value and competitive advantages. Digital transformation success depends on developing a comprehensive, multi-faceted strategy (Broekhuizen et al., 2021) incorporating business, IT/IS, and change management strategies.
The significant role of culture is underestimated by leadership since culture is an intangible concept (Hofstede, 1980) that requires different metrics for measurement (Chesterfield et al., 2019) and is away from standard management radars (Rowles & Brown, 2017: pp. 57-59). The problem is that culture is a double-edged sword that can be a roadblock or a catalyst (Capgemini Digital Transformation Institute, 2018) in digital transformation. According to a survey conducted by Capgemini Digital Transformation Institute, 62% of managers considered culture a significant aspect of a digital transformation and announced the lack of appropriate digital culture the top hindrance to digital transformation success (Capgemini Digital Transformation Institute, 2018). Without a solid foundation for a proper digital culture in line with digital strategy to increase digital awareness, employee engagement, innovation thinking, agility and flexibility, and customer-centricity, achieving sustainable change in digital transformations will be highly challenging. This paper reviews the significant role of corporate digital culture in digital strategizing through a systematic literature review.
2. Literature Review
In Recent technological advancements have transformed the marketplace, human behaviors, and mindsets into a new paradigm. Therefore, virtually all stakeholders need to keep pace, which translates into making necessary adjustments to apply efficient methods of comprehension and adaption to take advantage of short-lived opportunities and cope with significant environmental threats. In a turbulent workforce exacerbated by swift environmental changes, such as the Covid-19 pandemic, formulating and developing an adequate corporate culture is an integral part of digital strategizing (Walton, 2021). Corporate culture can determine the success or failure of strategy execution, especially when it comes to digitalization. Conventional beliefs and norms are no longer sufficient for today’s digital and innovative environments given the resulting uncertainty (Chen & Tian, 2022), disruptive technology (Chiang, 2021), and the need to balance alignment and autonomy.
According to a study of forty digital transformations by Boston Consulting Group (BCG), organizations with a strong focus on culture were five times more likely to achieve breakthrough performance than those that ignored the significant role of cultures (BCG, 2020). This review investigates recent scholarly articles and practitioner literature to explore the significance of corporate culture in digital strategizing using a literature review methodology.
This study will review the history of cultural evolution stemming from disruptive innovations and the increasing pace of changes. Then the double-edged sword role of culture in digital transformation strategy will be analyzed, followed by the general overview of the literature on digital transformation strategy failure due to the lack of appropriate culture in digital strategizing. The executives’ main concern through the lens of the fundamental cultural components of the digital transformation strategy is researched, in an effort to address an organization’s readiness for digital transformation. The investigation results may be essential as the prerequisite to determining if there is compelling evidence that supports aligning digital transformation strategy and digital culture is at the forefront of achieving higher productivity and resilience against constant environmental changes.
This study investigates scholarly articles and practitioner literature of the past three decades to explore the significance of corporate culture in digital strategizing. Even though there are numerous references available on the internet (roughly 1,200,000,000 results by a google search in researching the topic of this study), scholarly studies analyzing actual data in modern organizations (qualitatively or quantitatively) were comparatively scarce since most of them were more theoretical literature, looking at the subject from either ontological or epistemological perspective. Furthermore, some of these studies did not appear relevant and applicable to the contemporary definition of corporate digital culture.
2.1. Digital Transformation
In comprehending the contemporary market landscape, it is essential to understand the core concepts behind the digital transformation trend. The term digital transformation was initially coined by MIT Center for Digital Business and Capgemini Consulting as a result of analyzing fifty traditional enterprise corporations regarding their modern transformation processes. They defined digital transformation as the process of utilizing digital technologies to radically enhance organizational performance (Westerman et al., 2011). Through a proper digital transformation, businesses have the ability and capacity to exceptionally improve their productivity and competitiveness (Agarwal & Brem, 2015) to generate value and obtain competitive advantages. Studies have revealed that digital transformation facilitates business innovation improves performance (Ferreira et al., 2019), enhances consumer experiences (Zaki, 2019), and boosts the development of value activities (Martínez-Caro et al., 2020).
Digital transformation is a multifaceted phenomenon focused on healthy interactions between environmental uncertainty and resource orchestration which rely on the need for digital readiness (Hizam-Hanafiah et al., 2020) of any organization going through the digital transformation process to reap the benefit of key digital technologies. Three main development stages of digital transformation, namely, the embryonic stage, the development stage, and the thriving stage, have been identified in a comprehensive study of 865 papers from the Web of Science in the twenty years from 2000 to 2020 conducted by Zhu et al. (2021) through bibliometric and visual analysis methods.
Moreover, given the speed of this change, businesses need to become learning organizations to adapt quickly and be more resilient to environmental jolts. Therefore, an urgent need for bionic companies to integrate human and technological capabilities around business outcomes (Shevchenko, 2021) is an inevitable future for most corporations (BCG, 2022). In this context, developing a multi-dimensional strategy to execute the digital transformation process leading to higher organizational performance is the most crucial responsibility of leaders today.
2.2. Digital Strategizing
In the classical definition, strategy is the combined set of actions taken by leaders and executives to attain long-term goals (Mintzberg, 1978), outperform the company’s competitors, and achieve superior profitability (Whittington, 1996). However, in the modern business climate, where companies are required to be creative, adaptable, and faster, given the environmental uncertainty, complexity, and swift changes, the focus of corporate strategy has been changed to a more human-centric diverse concept (Hamel, 2011). Formulating a proper digital strategy is a non-linear process in the global marketplace considering numerous unpredictable determinant factors hypothesized by Benner & Tushman (2003) stemming from digitalization and disruptive innovations posited by Grimm et al. (2006).
Three decades ago, the IT strategy was a functional-level strategy that needed to be aligned with the company’s business strategy (Venkatraman, 1994). However, during decades (from 1980 to 2022), advances in technology, communication, and network have unleashed new functionalities transforming business infrastructure into digital entities. Companies in different industries are fundamentally transforming business strategies to adapt their business processes, and capabilities to the new norms brought about by the digital era. The new digital technologies have reshaped traditional business strategy as scholars have posited contemporary business strategy as modular (Sambamurthy et al., 2003), distributed (Wheeler, 2002), cross-functional, and global across boundaries of time and distance (Ettlie & Pavlou, 2006).
In today’s volatile market, strategy is seen more as an emergent and adaptive process (Hiekkanen et al., 2013). Organizations must constantly look for new strategies to maintain their competitive advantage (Thompson et al., 2020: pp. 165-164) or create new ones. Companies initiate the development of their digital strategy process by formulating their strategic objectives at all three corporate, business, and functional levels (Bharadwaj et al., 2013). Goerzig & Bauernhansl (2018) analyzed the content of digital transformation and noticed that a clear transformation strategy was integral to digital transformation. They defined digital strategy as a unique and agile approach to executing a digital transformation process to generate differentiated value that applies to digital resources. According to this definition, the digital strategy can be used for the digital transformation process as strategic steps to achieve digitalization (Antonucci et al., 2021) in the context of innovative products and services, increasing dynamic capabilities (Mikalef et al., 2020), value creation, and corporate organizational culture. In another study, Hafsi & Assar (2019) interviewed twenty-five IT and business projects managers from five different companies; and through the analysis of their interviews, they defined digital strategy as a set of actions to define digital transformation objectives, benefits, and organizational capabilities by analyzing customer needs, organizational structure, business model, digital readiness, market trends, and current digital technologies.
As technological innovation grows exponentially, the strategy itself must also change to meet the new challenges brought about by these changes; organizations that can learn faster than their competitors will survive and evolve.
2.3. Digital Corporate Culture: Bridging the Gap
Digitalization strategy requires appropriate digital culture, emphasized by the famous quote from Peter Drucker that “culture eats strategy for lunch” (Drucker, 2016: pp. 27-32). Leaders need to re-think their strategies for the changing relationship “between digital and the whole way of life” (Williams, 1976), which is essentially a cultural endeavor to strategize effectively amid the challenges brought about by instantaneous technological changes. Digital transformation is a strategic paradigm shift, and as a significant transformation, it demands instilling an appropriate culture aligned with the organization’s overarching strategy that supports the change. According to McKinsey’s analysis based on consultancy projects (Bucy et al., 2016), almost 70% of digital transformations fail due to the absence of clear digital cultures, such as insufficient employee engagement, inadequate leadership support, deficient effective cross-functional collaboration, misunderstanding of new digital strategic objectives, and lack of accountability (Morgan, 2019).
Each organization has its own unique corporate culture consisting of shared values, business principles, ingrained beliefs, ethical standards, and company rituals defining the firm’s norms, behavior, practices, and styles of the workforce (Deal & Kennedy, 1983). In another definition, corporate culture is defined as the organization’s automatic, self-replicating operating system (Chatman & Cha, 2003) that defines the organization’s psyche or organizational DNA (Loughead & Massengale, 2013). A company’s healthy corporate culture simultaneously translates into a high-performance and adaptive culture shaped by its core values aligned with the firm’s strategies that embrace execution-supportive attitudes (Thompson et al., 2020: pp. 354-358); and in the digital era, digital corporate culture can be considered one of the most crucial pillars of the digital transformation strategy next to infrastructure/technologies and ecosystems (Duma et al., 2020). However, in another classification, Prabhala (2020) believes that the vision and strategy pillar is at the heart of digital transformation. Even though overall perspectives support the significant role of corporate digital culture in digitalization’s success, there are still some contradictory perspectives. Parker (2000) disputes in his book that corporate culture, and corporate digital culture, can be considered fragmented unity that “individuals identify themselves as collective at some times and divided at others”.
Therefore, it is pivotal for any organization going through a digital transformation to develop a proper digital culture that fits the organization to help all stakeholders to comprehend, embrace, and foster the digital transformation.
3. Research Method and Analysis
Given the exploratory nature of this paper, the relevant existing research literature was investigated. A systematic literature review (SLR) approach to classifying the vast pool of research has been developed to ensure a harmonious selection process from the role of appropriate culture in digital transformation. Literature collection involved the selection of diverse electronic resources. The academic journals were screened for articles using the keywords “Digital transformation”, “Digital transformation Strategy”, “Digital Culture”, and “Corporate culture” in their title, keywords, or abstract. Additionally, specific qualifying criteria were considered in screening the electronic resources, such as choosing articles from business, management, and strategic management journals in the English language. Also, e-books, including some conference proceedings and working resources, were selected. Almost all applied publication time frame covers the period of the last three decades from 1990 to 2022.
Several steps were taken in the process of the literature analysis (Figure 1). In the initial screening phase, 108 online resources were gathered and organized as the first step, and duplications were identified. In the next step, the total number of resources was narrowed down to 57 resources based on the relevance to the
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Figure 1. Funnel Chart of literature screening.
topic. Eventually, 14 resources (including 12 scholarly articles and two practitioners’ surveys) were selected for the final review and analysis to set the foundation for the effectiveness of appropriate corporate culture in digital strategizing. The 12 selected scholarly articles out of 14 published between the years of 2019 to 2022 were either systematic literature reviews related to this paper’s topic or empirical studies with primary data.
The following table is the abbreviated classification of an overall review of 14 recent online resources related to digital transformation and corporate digital culture (Please refer to Appendix A for the expanded annotated table).
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In the digital transformation process, as Grimm et al. (2006) posited, as an initial step, effective leaders are required to formulate a clear digital strategy congruent with the organization’s core values and desirable behaviors with measurable performance metrics and incentive structures aligned toward digital culture objectives (Deloitte Editor, 2019). Failure of some well-known corporations, such as GE, Ford, and Procter & Gamble, in their initial digital transformation, is a clear testimonial to the lack of appropriate leadership roles regarding efforts needed to overcome cultural obstacles in digital transformation endeavors (Morgan, 2019). Similar to many others, these companies initially focused on utilizing and integrating the right digital technologies (Morgan, 2019) instead of preparing the organization’s structures, people (Rutihinda, 2019), and infrastructure (Duma et al., 2020) for such an endeavor toward their digital transformation.
Scholars like Kaniawulan et al. (2022) and Walton (2021) believe that the corporate digital culture appears to be one of the essential enablers of digital transformation strategy next to infrastructure/technologies and ecosystems (Duma et al., 2020). In today’s digital era, organizations are in need of shifting to a new paradigm by going through digital transformation in their life cycle. Boston Consultancy Group (BCG, 2020) as a leader in the IT consultancy industry, claims those businesses that have embraced digital corporate culture are more ready to achieve innovative performance than companies that neglected such culture. Martínez-Caro et al. (2020) study demonstrates that developing an appropriate digital organizational culture fosters the business digitization process and the value generation from digital resources ushering in enhancing organizational performance.
The digital corporate culture can be considered a double-edged sword (Capgemini Digital Transformation Institute, 2018) since, on the one hand, during corporate readiness toward digital transformation, a proper digital culture is an unknown phenomenon (Chen & Tian, 2022); and on the other hand, the primary characteristics of digital culture (Kiefer et al., 2021) include flexibility, digital awareness, ecosystem orientation, employee engagements, agility in organizational structures, risk-taking culture, internal knowledge sharing, customer orientation, open-mindedness, digital skills, and willingness to learn (Kiefer et al., 2021), making it challenging to identify and follow (Bucy et al., 2016). Volberda et al. (2021) believe that at the beginning of the digital transformation process, there is an urgent need to redesign organizational practices and structures to create competitive advantages; therefore, new values replace the traditional values, and new patterns and norms evolve and emerge. From leaders to operational employees, individuals at all organizational levels struggle to decipher new methods to deal with environmental uncertainty interwoven with new technologies (Chen & Tian, 2022). The study (Chen & Tian, 2022) illustrates that there is a high probability of misunderstanding and misinterpreting new emerging cultures in this stage, which can occasionally be against corporate strategy.
In a fast-paced, complex, and uncertain market environment, organizations need to be digitally agile meaning agile leadership, agile management, and agile culture (Theobald et al., 2020), to be more resilient (Saputra et al., 2022), which requires developing a digital organizational culture while strategizing. Studies show a significant relationship between the digital organizational culture in organizational readiness toward enabling digital innovation and capabilities (Zhen et al., 2021).
Many scholars, such as Broekhuizen et al. (2021) and Uhlig & Remané (2022), acknowledge that digital transformation is a multifaceted endeavor with various dimensions (Pietrzak, 2020). Organizations need to cultivate Critical Success Factors (CSF) such as digital skills, tools and applications, systems and infrastructure, and an appropriate digital corporate culture, as posited by (Soomro et al., 2020), to achieve digital readiness. Isensee et al.’ (2020) study has identified four main dimensions of digital corporate culture: strategic orientation, internal capabilities, management, and proper attitudes, as the most critical part of digitalization. Furthermore, Pedersen (2022) argues that the convoluted cultural aspects of digital transformation, if appropriately addressed, can foster the desired balance between cultural change and business continuity during the complicated digital transformation journey.
4. Conclusion
Today’s digital era, with constant technological advancements such as advanced artificial intelligence (AI), machine learning, and the internet of things (IoT), has shaped a new competitive landscape where organizational forms, structures, and business models are changing. Organizations need to respond to these environmental changes strategically. These forces, especially given the emergence of the recent unprecedented Covid-19 pandemic, have forced organizations to go through a digital transformation much faster than previously anticipated. However, digital transformation endeavors will face many challenges causing failure without a proper mindset for such changes. Based on the review of research and literature in this paper, the digital culture is an integral part of digital transformation and should be the foundation of any digital transformation strategy. Therefore, defining and building a proper digital culture from the very beginning of the digital transformation process as a part of digital strategy enables organizations to embrace, learn, adapt, and construct a digital culture. The negligence to align the strategic objectives of a digital transformation with organizational values and behavior will significantly increase the failure rate if managers and leaders focus solely on technology aspects in digital transformation.
Organizations are required to develop critical components of the corporate digital culture to balance the uncertainty of the digital age with business continuity and resilience. Leaders need to incorporate corporate digital culture characteristics such as team collaboration, employee engagement, digital awareness, agile governance, knowledge sharing, digital skill and training, customer/market/ecosystem orientation, entrepreneurship, commitment to change by the top and middle management, and continuous learning in their digital transformation strategies (Kiefer et al., 2021) to effectively leverage advanced technologies and boost organizational performance (Ferreira et al., 2019). This paper portrays the significance of corporate digital culture as an essential requirement in digital strategizing using a SLR methodology. One of the most significant limitations of this study was the scarcity of scholarly and peer-reviewed articles regarding the topic since most studies in digital transformation for organizations are conducted by practitioners rather than academic scholars. As such, further theoretical and empirical research is needed to evaluate organizational maturity better, considering the necessity of incorporating corporate digital culture and digital strategy during digital transformation.
Appendix A