The Drivers, Processes, And Outcomes Of The Digital Transformation Of SMES In Developing Countries

Abstract

ABSTRACT Digital technologies are reshaping the models, processes, culture, and customer experiences of organisations. This reshaping of organisations with fundamental changes resulting from the adoption of digital technologies and digitalisation is known as digital transformation (DT). Digital transformation tends to matter to all organisations, and small and medium enterprises (SMEs) are not left out. However, the review of extant literature concerning DT reveals SMEs' vulnerability, particularly those in developing countries (DCs). It shows that there is room for SMEs to gain more from DT, with three significant gaps that need research attention. First, there is a lack of agreement in the literature regarding what constitutes the DT drivers, processes and outcomes. Second, studies on DT, examine drivers, processes, and outcomes as independent constructs, and there is a paucity of research examining their interrelationships. Third, the current studies on DT in SMEs are silent on how the firms' managerial and organisational capabilities and capacities influence the drivers processes and outcomes. Lastly, in this regard, a theoretically grounded and practice-oriented framework for the DT of SMEs is lacking. Hence, most SMEs in DCs tend to trail the DT path arbitrarily. In response, this doctoral thesis seeks to address the above gaps and develop the framework by exploring the drivers, processes and outcomes of DT and the relationships among them while considering the influence of the capabilities and capacities of SMEs in DCs. To achieve this purpose, the following questions are asked: (i) What are the drivers, processes, and outcomes of the DT of SMEs in DCs? (ii) How do the drivers, processes, and outcomes influence one another, in the DT of SMEs in DCs? (iii) How do the SMEs capabilities and capacities influence the drivers, processes, and outcomes of the DT in DCs? Such a study would be a strategic assessment of how to approach DT and achieve the desired outcomes. This assessment is critical in the current era, where digital innovation proliferation and social, economic and health challenges (including the COVID-19 pandemic) are compelling organisations to embrace DT. Hence, developing a framework to guide DT research and SMEs' practice of DT in DCs is a timely endeavour. To respond to the research questions, the study utilised the Adaptive Structuration Theory (AST) to conceptualise the DT drivers, processes, and outcomes. AST is appropriate because it highlights drivers of DT from both technological and organisational perspectives while focusing on the technology and organisation interaction processes as structuration and appropriation, resulting in the outcomes. The study further considered other literature to conceptualise the capabilities and capacities of SMEs. To facilitate the exploration, the study’s research strategy utilised a qualitative Delphi methodology from a critical realism perspective, with responses from sixteen purposively selected DT experts from six DCs. DT is a contemporary phenomenon with structures that need to be unearthed and explored to clarify its understanding and applications. Coupled with the lack of agreement on DT factors and the incomplete knowledge of the DT phenomenon, the research strategy was justified. In responding to the first research question, the study unearthed typologies of the DT drivers, processes, and outcomes to offer new insight into studying DT. The study revealed six dimensions of the drivers of DT. Among them, the technological, organisational, and environmental-related drivers have been previously established in literature. However, the dimensions of work tasks, emergent outputs and new rules and resources were found as newly identified drivers of DT in this study, which hitherto were absent in literature. Again, the findings offer a novel classification of the technological-related drivers as dynamic (changing), steady (fixed), and spirit (goals and values) features. The steady features are the inherent and fixed structural attributes, such as comprehensiveness and accessibility. The dynamic features are the changing and improving attributes, like updatability, customisability and changing trends. The spirit features are the overall intentions regarding goals and values fundamental to the structural features, such as efficiency, effectiveness, and accuracy. The findings outline five DT processes: decision-making and adoption, implementation and use, changes in function and resources, adjustment and adaptation, and strategic shifts and positioning. Though application in practice may vary, most DT studies do not clearly define stepwise and sequential processes. The stepwise and sequential nature of the processes from this study is being advocated as an adaptable guide. Moreover, the findings reveal six DT outcomes: business image and value, work processes and functions, resources and abilities improvements, customer and stakeholder satisfaction, productivity and profitability, and undesirable consequences of technology use. However, embracing undesirable consequences as one of the possible outcomes is scarcely mentioned in DT literature. For the second research question, the study reveals the relationships and influences among the factors. These effects are the influence of drivers on processes, the influence of drivers on outcomes, the influence of processes on outcomes, and the influence of outcomes on drivers. These influences were hitherto not established in literature. For example, technological features drivers influence the decision-making and adoption, implementation and use, and adjustment and adaptation processes. In contrast, work-task drivers influence the changes in functions and resources alone. Regarding the third research question, the study determined four major dimensions of SMEs capabilities and capacities, which influences the DT drivers, processes, and outcomes. The study also identifies novel classifications of capabilities and capacities as intrinsic and extrinsic, and managerial capabilities as attributes and relationships. These findings offer the opportunity to know which capabilities and capacities to leverage and infuse and how they influence the drivers and processes to achieve the desired outcomes. For example, whiles the managerial capacities influence the decision-making and adoption, implementation and use, and adjustment and adaptation, the organisational capacity instead influences the changes in function and resources, adjustment and adaptation, and strategic shifts and positioning. The findings culminate into a theoretical and practice-based framework (DPOCC Framework), with simplified steps and two-pronged approaches: Driver-led approach is to identify the compelling drivers and optimise the matching processes to achieve corresponding outcomes while considering the capabilities and capacities influence. The outcome-led approach is to specify the desired outcomes and optimise matching processes with corresponding drivers while considering the effects of capabilities and outcomes. This framework offers SME owners, entrepreneurs, and managers the opportunity to critically examine and improve their DT practices. Its successful post-study evaluation affirmed this thesis’ contribution to practice. Policy-wise, the findings guide stakeholders such as government and industry to appreciate the DT of SMEs regarding the drivers, processes, outcomes, capabilities, and capacities. The study also inures itself as a guiding solution to the need for DT arising from the new normal of business stemming from the COVID-19 pandemic. Hence, this study is critical in providing strategic digital growth and sustenance directions. The study’s contributions have been published as two journal articles, three book chapters and two conference papers.