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Digital is Strategy: The Role of Digital Technology Adoption in Strategy Renewal

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  • Nicolas van Zeebroeck
  • Tobias Kretschmer
  • Jacques Bughin

Abstract

As digital technologies emerge and improve rapidly, firms face changing tradeoffs in terms of their technology infrastructure and strategic direction. Hence, many of them adopt new digital technology and develop new business models and strategies. The literature on strategic alignment of IT suggests that firms need to synchronize these different domains of choice. We therefore, ask how far firms renew their strategy as they adopt new technologies. In this article, we study this question empirically by assessing if the adoption of new digital technologies is associated with, or even leads to, changes to firm strategy using a detailed survey-based dataset on firms’ strategy renewal and their adoption of digital technologies. We observe a strong positive association between the extent of strategy change and the stage of adoption of advanced digital technologies overall, suggesting a tight coupling between (technological) structure and strategy. Further, using instrumental variable regressions to disentangle the two effects, we find that the adoption of new technologies may lead to a large and robust effect on strategy change: the more extensive the adoption, the larger the change in strategy. This result is robust to various specifications and across industries. However, we notice substantial differences across technologies, potentially pointing at heterogeneity in their strategic nature or maturity level.

Suggested Citation

  • Nicolas van Zeebroeck & Tobias Kretschmer & Jacques Bughin, 2021. "Digital is Strategy: The Role of Digital Technology Adoption in Strategy Renewal," ULB Institutional Repository 2013/325553, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:ulb:ulbeco:2013/325553
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    References listed on IDEAS

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    Cited by:

    1. Jacques Bughin & Nicolas van Zeebroeck, 2021. "The Entrepreneurial Returns to Incumbents’ Digital Transformation," iCite Working Papers 2021-048, ULB -- Universite Libre de Bruxelles.
    2. Jacques Bughin & Tobias Kretschmer & Nicolas van Zeebroeck, 2021. "Digital technology adoption drives strategic renewal for successful digital transformation," ULB Institutional Repository 2013/328855, ULB -- Universite Libre de Bruxelles.
    3. Jacques Bughin & Francis Hinterman & Sybille Berjoan, 2022. "A Good Crisis (not) Wasted: How Exploiting and Expanding Dynamic Capabilities Shape Corporate Performance During the Covid Pandemic," iCite Working Papers WP2022-051, ULB -- Universite Libre de Bruxelles.

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    More about this item

    Keywords

    Cognition; Companies; Digital strategy; digital transformation; Industries; Insurance; Mobile applications; Space exploration; Steady-state; strategic organization design (SOD); strategic renewal; technology adoption;
    All these keywords.

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