Designing a Comprehensive Understanding of Digital Transformation and its Impact

Abstract

Many researchers, managers, and companies are currently dealing with digital transformation. Yet, there exists a research gap on the exact meaning and scope of this transformation. In this paper, an in-depth literature study was performed and synthesized to inductively construct a conceptual framework that reconciles the distinct definitions and aspects of digital transformation. From the framework, we derived a novel and comprehensive definition of digital transformation which was validated against the literature and shown to be exhaustive. Furthermore, our definition explicitly explains why digital transformation is happening and accelerating. Researchers and practitioners can use the framework to position their work and to gain a better understanding of its wide scope and impacts. This work can be among the first steps towards a unified understanding of digital transformation.

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32ND BLED ECONFERENCE
HUMANIZING TECHNOLOGY FOR A SUSTAINABLE SOCIETY
JUNE 16 – 19, 2019, BLED, SLOVENIA, CONFERENCE PROCEEDINGS
A. Pucihar (ed. et al.)
Designing a Comprehensive Understanding of Digital
Transformation and its Impact
ZIBOUD VAN VELDHOVEN & JAN VANTHIENEN
Abstract Many researchers, managers, and companies are currently
dealing with digital transformation. Yet, there exists a research gap on the
exact meaning and scope of this transformation. In this paper, an in-depth
literature study was performed and synthesized to inductively construct a
conceptual framework that reconciles the distinct definitions and aspects
of digital transformation. From the framework, we derived a novel and
comprehensive definition of digital transformation which was validated
against the literature and shown to be exhaustive. Furthermore, our
definition explicitly explains why digital transformation is happening and
accelerating. Researchers and practitioners can use the framework to
position their work and to gain a better understanding of its wide scope
and impacts. This work can be among the first steps towards a unified
understanding of digital transformation.
Keywords: • Digital transformation • Definition • Business
Transformation • Digitalization • Digital Transformation Framework •
CORRESPONDENCE ADDRESS: Ziboud Van Veldhoven, PhD, Researcher, KU Leuven, Faculty of
Economics and Business, Leuven, Belgium, e-mail: ziboud.vanveldhoven@kuleuven.be. Jan
Vanthienen, Professor, KU Leuven, Faculty of Economics and Business, Leuven, Belgium, e-mail:
jan.vanthienen@kuleuven.be.
DOI https://doi.org/10.18690/978-961-286-280-0.39 ISBN 978-961-286-280-0
Dostopno na: http://press.um.si
For the extended journal version, please visit https://link.springer.com/article/10.1007/s12525-021-00464-5

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1 Introduction
In recent years, the increasing use of digital technologies has had a major impact
on many aspects of our civilization. This rapid change is frequently called digital
transformation (DT). Academic research on DT has mainly focused on two
aspects. First, a significant body of research exists on the different impacts and
changes DT has on society and business. Secondly, many papers provide
guidelines, models, and lessons for companies to aid with their transformation.
Despite the sheer amount of research, there is still no clear, well-agreed upon
definition for DT (Goerzig & Bauernhansl, 2018; Haffke, Kalgovas, & Benlian,
2016). There exist significant semantic differences in the terminology used and
several authors have suggested delimiting the various definitions (Morakanyane,
Grace, & O’Reilly, 2017; Vial, 2019). Furthermore, this vagueness in
understanding demonstrates the lack of a coherent theoretical frame that
reconciles all aspects of DT (Henriette, Feki, & Boughzala, 2015).
This study seeks to address these research gaps by organizing the extant literature
around a theoretical framework and by proposing a novel, and exhaustive
definition. For that reason, three research questions are formulated:
• How is DT defined in the existing literature?
• How can the various aspects of DT be organized around an integrative
framework?
• How can DT be defined in a comprehensive way?
To do so, this paper performs and synthesizes an in-depth terminology study to
inductively develop a framework and definition of DT. The results of this study
provide new insights into the nature of DT and can aid researchers and
practitioners with framing their work. This work further highlights new research
avenues and can be among the first steps towards a unified definition of DT.
The paper proceeds as follows: the next section discusses the methodology. In
section 3, we give an overview of the literature study and analysis which are used
in the next section as the basis for the construction of the DT framework. The
framework is then used to introduce a sound and comprehensive definition of
DT in section 5. The next section validates our work against the literature before
giving the conclusion and future work in section 7.

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2 Methodology
In line with the research questions, an inductive approach was conducted
wherein observations from the literature, i.e. DT definitions, were analyzed for
patterns which were used to develop a conceptual framework. This methodology
is commonly used to build a construct of a phenomenon (Lodico, Spaulding, &
Voegtle, 2010; Vial, 2019). First, we performed an in-depth terminology study in
search of DT definitions. We started by reviewing the top results for ‘digital
transformation’ in two databases (Scopus and Google Scholar) and extended this
through a backward and forward search up to 115 articles. The articles include
conference and journal papers but also highly cited professional papers, e.g.
industrial reports, since we are interested in both sides. The papers were analyzed
and their definitions, in total 13, were extracted. Then, the results were compared
and completed with the findings of previous systematic DT literature reviews
(Morakanyane et al., 2017; Vial, 2019) which resulted in a total of 17 unique
definitions. Only original definitions, which do not paraphrase others, were kept.
Secondly, we decomposed the definitions into frequent key components to
identify the essential aspects of DT. Thirdly, we developed a DT framework
which reconciles all the key components and from it, a novel and exhaustive DT
definition was derived. Lastly, the definition and framework were validated
against the existing definitions in the literature by positioning them on the
framework.
3 Conceptual Groundwork
The terminology study resulted in 17 different DT definitions, as summarized in
Table 1. A striking observation is the wide scope range: from using technology
to improve the performance of a company (Westerman et al., 2011) to the
changes in all aspects of people’s life (Stolterman & Fors, 2004). This seems to
confirm the lack of a universal definition.

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Table 1: Definitions of Digital Transformation
#
Year
Authors
Definition of Digital Transformation
[1] 2004
Stolterman &
Fors
‘Changes that the digital technology causes or
influences in all aspects of human life’
[2] 2011 Liu et al.
‘Organizational transformation that integrates
digital technologies and business processes in a
digital economy’
[3] 2011
Westerman
et al.
‘Use of technology to radially improve the
performance or reach of enterprises’
[4] 2012 White
‘Arises from the blending of personal and
corporate IT environments’
[5] 2013 Fitzgerald et
al.
‘The use of new digital technologies (social
media, mobile, analytics or embedded devices)
to enable major business improvements (such
as enhancing customer experience,
streamlining operations or creating new
business models)’
[6] 2015 Schuchmann
& Seufert
‘The realignment of technology and new
business models to more effectively engage
digital customers at every touchpoint in the
experience lifecycle’
[7] 2015 Solis
‘The realignment of, or new investment in,
technology, business models, and processes to
more effectively compete in an ever-changing
digital economy’
[8] 2016 Berghaus &
Back
‘Technology-induced change on many levels in
the organization that includes both the
exploitation of digital technologies to improve
existing processes, and the exploration of
digital innovation, which can potentially
transform the business model’
[9] 2016
Demirkan,
Spohrer &
Welser
‘The profound and accelerating transformation
of business activities, processes, competencies,
and models to fully leverage the changes and
opportunities brought by digital technologies

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and their impact across society in a strategic
and prioritized way’
[10] 2016 Hess et al.
‘The changes digital technologies can bring
about in a company’s business model, which
result in changed products or organizational
structures or in the automation of processes’
[11] 2017 Morakanyane
et al.
‘An evolutionary process that leverages digital
capabilities and technologies to enable business
models, operational processes and customer
experiences to create value’
[12] 2017 Reddy &
Reinartz
‘In traditional sense, digital transformation
refers to the use of computer and internet
technology for a more efficient and effective
economic value creation process. In a broader
sense, it refers to the changes that new
technology has on the whole; on how we
operate, interact, and configure, and how
wealth in created within this system’
[13] 2017 Parviainen et
al.
‘Changes in ways of working, roles, and
business offering caused by adoption of digital
technologies in an organization, or in the
operation environment of the organization.
This refers to changes at process, organization,
business domain and society level’
[14] 2018
Ebert &
Duarte
‘Technology-driven continuous change process
of companies and our entire society’
[15] 2018 Goerzig &
Bauernhansl
‘A fundamental change process in enterprises
initiated by new competitive advantages
through the evolution of IT into an essential
part of the value creation’
[16] 2018 Hinings et al.
‘The combined effects of several digital
innovations bringing about novel actors,
structures, practices, values and beliefs that
change, threaten, replace or complement
existing rules of the game within organizations,
ecosystems, industries or fields’

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[17] 2019 Vial
‘A process that aims to improve an entity by
triggering significant changes to its properties
through combinations of information,
computing, communication, and connectivity
technologies’
By analyzing the DT definitions, it is possible to decompose them into the most
frequent (f) key components: use of digital technologies (f:17), new business models (f:9),
internal operations (f:8), customer experience (f:4), society transformation (f:4), change process
(f:4), organizational transformation (f:3), digital innovation (f:3), digital economy (f:3),
organizational transformation (f:3), value creation (f:2), and products and services (f:2).
4 Constructing the Digital Transformation Framework
To reconcile the various characteristics of DT, all the key components above are
organized around a conceptual framework, illustrated in Figure 1. The framework
summarizes the key components and the DT literature in three axes, their
segments, and the interactions between the axes. The axes represent the three
transformations that can be extracted from the components: business
transformation (internal operations, products and services, organizational transformation,
and new business models), digital technologies transformation (digital innovation), and
society transformation (society transformation).
Digital technologies
SocietyBusiness
Internet
Integration
SMACIT
Advanced AI
Tasks
Connectivity
Usage
Structure
People
Internals
Structure
Business model
Connectivity
Offerings
IT
Figure 1: The Digital Transformation Framework

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Digital technologies transformation, i.e. digital innovation, is represented by the
vertical axis in Figure 1. Many digital technologies that are steering DT can be
accredited, of which five important waves in the past 50 years are mentioned
chronologically (Carter, 2018; Porter & Heppelmann, 2014; Singh & Hess, 2017).
While the last wave, advanced artificial intelligence (AI), is still in its early stages,
it is included because many businesses see it as a potential technology for DT in
the near future (Carter, 2018; HM Government, 2017).
• IT: automation of isolated activities, and problem calculations
• Internet: inexpensive, ubiquitous connectivity and information sharing
• Integration: more affordable, widespread computing power and
possibilities
• SMACIT: social media, mobile, analytics, cloud computing, and Internet
of Things
• Advanced AI: tasks that normally require human intelligence
Business transformation, the left axis, can be understood as the changes in
organizations to bring about significant performance improvements or value
creation (McKeown & Philip, 2003). A growing number of aspects of the business
are changing, which we summarize in 5 categories inspired by the keywords and
related work (Kane et al., 2017; Venkatraman, 1994; Wade, 2015). The categories
are ranked chronologically, as these aspects frequently change in this order
(Morgan & Page, 2008; Venkatraman, 1994).
• Internals: changes in internal operations, technology, and labor
• Connectivity: changes in the connection between processes, businesses,
and entities
• Offerings: new or enhanced products and services
• Structure: changes in the structure, roles, and culture, i.e. organizational
transformation
• Business model: changes in business scope, management, and strategy

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Use of digital technologies for
business transformation
Use of digital technologies for
society transformation
Connecting the
digital society and business
Figure 2: The Segments of the Digital Transformation Framework
In the scope of DT, the business changes are brought by the increased
exploitation and use of digital technologies (Venkatraman, 1994; Wade, 2015), as
represented by the left segment in the DT framework (see Figure 2). The simple
use of new technologies for the same way of working in these aspects is not
enough; businesses must transform their approaches in these aspects (Earley,
2014). Ideally, the companies should aim to integrate the digital technologies to
change all aspects, and eventually the business model itself (Kane et al., 2017).
This means that each aspect of the business should be optimized given the
current digital technologies.
It is important to note that these aspects do not always change in this order. For
example, a company can be digitalizing its business model while maintaining its
old structure. Furthermore, the change process above can reiterate for every new
digital technology wave. Hence, it is a process in which various business aspects
can change subsequently and simultaneously with different digital technologies.
Society Transformation is represented by the right axis and can be understood
as the changes happening in people, customers, and societies over time. In the
context of DT, it is about the changes happening due to the increased use of digital
technologies, as represented by the right segment in the DT framework (see Figure
2). People are becoming increasingly digitalized because they adopt digital
technologies in every aspect of their lives. This affects their acceptance of digital
trends, their identity, their notion of privacy, their work, the way they
communicate, and the way they live (Hanelt et al., 2015; Schwab, 2015). As
customers, their consumption patterns, notion of ownership, demands, and

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product knowledge have changed intensively (Berman, 2012; Schuchmann &
Seufert, 2015; Schwab, 2015). As an aggregated effect, this also happens with the
entire society (Ebert & Duarte, 2018). In brief, these changes can be summarized
in five categories. Similarly to the business changes above, we argue that these
changes usually happen in this order but do not have to. Likewise, these changes
can happen subsequently and simultaneously with different technologies.
• Tasks: changes in isolated tasks and activities
• Connectivity: changes in communication, informedness, and network
• Usage: changes in products and services used in daily life
• Structure: changes in work-life balance, habits, and routines
• People: changes in people’s values, notion of ownership, identity, and
way of living
The connection between society and business, and the customer experience are
changing too, represented by the bottom segment of the DT framework (see
Figure 2). The digital businesses are increasingly being connected to the digital
society through the linking of the private and corporate IT (Parviainen et al.,
2017), or the co-creation of value between digital customers and digital
businesses (Gray et al., 2013). This includes digital interactions, distribution
(Lanzolla & Anderson, 2008), cooperation, information sharing and co-
specialized investments (Katsamakas, 2014). Several important digital players
have profited from this digital connection such as Airbnb, Uber, and eBay.
Lastly, the changes that happen along the three axes cannot be considered as a
single event or one-time exercise. Instead, it is a continuous change process fueled
by digital innovations and breakthroughs (Krell & Gale, 2005; Parviainen et al.,
2017) in which the different transformations become increasingly connected.
Several authors refer to this interconnected state as the digital economy (Hinings
et al., 2018; Liu et al., 2011; Solis, 2015).

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5 What is Digital Transformation?
5.1 Introducing a Novel Definition
k
Digital technologies
SocietyBusiness
Internet
Computing
SMACIT
Advanced AI
Tasks
Connectivity
Usage
Structure
People
Internals
Structure
Business model
Connectivity
Offerings
IT
DT intensity
low
high
Figure 3: The Digital Transformation Process
We argue that DT concerns the entirety of the changes above. Thus, it can be
understood as the circular motion towards the outer edges of the DT framework
in which digital technologies iteratively bring forward more changes in business,
society, and their connections, shown in Figure 3. We expand this idea, by
arguing that DT is happening and steered by the increased interactions between
these developments, illustrated by the two-headed arrows between the axes in
the framework. This makes the different transformations intertwined which
dramatically increases the DT’s velocity (Bharadwaj et al., 2013; Demirkan et al.,
2016), scope and impact. Thus, the following DT definition is proposed:
Digital transformation is the continuously increasing interaction between digital
technologies, business, and society, which has transformational effects and increases the
change process’s velocity, scope, and impact.

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5.2 The Interactions
Between digital technologies and business. New digital technologies or
innovation pressure businesses into digitally transforming due to the risk of
competitors gaining a competitive edge by adopting those technologies
(Bharadwaj, 2000; von Leipzig et al., 2017). This vulnerability has also been
referred to as digital Darwinism: only the most responsive enterprises to digital
innovation survive (Schwartz, 2002; Solis, 2015). In turn, this threat leads
businesses to adopt a more risk-promoting culture and structure to become more
agile and innovative (Kane et al., 2015), which can be the key to future success
(Christensen, Raynor, & McDonald, 2015). This cohesion between digital
innovation and business is becoming increasingly imperative such that a digital
strategy, which consolidates both strategies (Sebastian et al., 2017), and new
executives functions such as Chief Digital Officers (CDOs) are often introduced
(Singh & Hess, 2017).
Vice versa, businesses influence digital technologies by imposing quality
standards, adopting certain technologies, and demanding specific solutions
(Baden-Fuller & Haefliger, 2013). The government can also play a significant role
in this relation: it can decide what practice is appropriate for digital disruptors,
the time lag between innovation and policy legitimation, and can influence the
standard-setting through its purchasing power (Hinings et al., 2018).
Between digital technologies and society. Digital technologies influence
society into digitally transforming by offering improvements, exciting products,
and convenient services in daily life. Vice versa, society can influence the digital
innovation by its adaption of certain digital technologies, its purchase behavior,
and its demands (Baden-Fuller & Haefliger, 2013; Risselada, Verhoef, & Bijmolt,
2013).
Between business and society. Digitalized businesses foster the DT of
societies by offering more services, convenience, and benefits to their digital
customers. For example, many transport companies offer small discounts for
ordering tickets with their app versus from the kiosk. This nurtures customers to
adopt this digital service, who in turn put more pressure on the companies that
do not yet offer this service. Digitalized businesses also impact the job market,
such as the creation of the digital skills job gap (Westerman & McAfee, 2012),

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the rising number of jobs that can be replaced by machines (Guest, 2014), and
changes in the type of work (Parviainen et al., 2017).
In turn, the digitalized society heavily influences businesses. First, customers
demand the same digital convenience they experience in their private lives when
interacting with businesses. Hence, businesses must deliver convenient digital
interactions at every touchpoint in the customers experience lifecycle
(Schuchmann & Seufert, 2015). Secondly, digitalization influences customers’
behavior: customers are less loyal, more informed, tolerate fewer errors and form
higher expectations (Henriette et al., 2015; Horlach, Drews, & Schirmer, 2016).
Thirdly, not only the customers but employees become more demanding about
their working conditions (Solis, 2015; Westerman et al., 2011).
5.3 Example of DT Interactions
As an example of how these interactions steer DT, the history of Netflix is
modeled on the framework in Figure 4. Netflix started as an online DVD
rental/delivery company. When internet technologies that allowed for streaming
of videos were adopted by customers (1), Netflix was influenced to digitalize
some of their products (2) and opened its streaming service (3). In turn, this
fostered the digital service acceptance of society (4), and due to the success,
Netflix started transforming its organizational structure (5) to focus on streaming
services and by confining the DVD rentals. In a similar fashion started the shift
towards mobile (6, 7, 8 and 9). Now, Netflix’s business model is online-streaming
only (10). This fostered the acceptance of digital business models in society (11).
Consequently, this caused pressure on other media companies to digitalize their
business models (12), for example, the streaming services boom we witness today
(McDonald & Smith-Rowsey, 2016).

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Digital technologies
Society
Business
Internet
SMACIT
Usage
Structure
Business model
Offerings
IT
1
2
3
4
5
6
8
7
9
11
12
Transformation
Interactions
10
Figure 4: Netflix Case Example
5.4 Related Terminology in the Literature
Prior research has argued that DT is characteristically different from previous
IT-enabled transformations due to its larger external impact (Ismail, Khater, &
Zaki, 2017), its digital interactions and distributions (Lanzolla & Giudici, 2017),
the network competition (Katsamakas, 2014) and more. Other authors, such as
Vial (2019) argue that DT is an evolution of IT-enabled transformation. The DT
framework provides a comprehensive answer to this problem, as the inner circles
can be understood as what was previously called IT-enabled transformation and
the outer circles of what several authors limit their definition of DT to. Thus, the
DT framework explains both terms as part of the DT process but with different
scopes.
In light of the increased literature that highlights the importance of being
customer focused when embarking DT in businesses (Berman, 2012; von Leipzig
et al., 2017; Weill & Woerner, 2015) and the rise of peer collaborative companies,
e.g. Booking, it is argued that digital business transformation concerns the
exploitation of both the opportunities brought forward by digital technologies,
and by the digital society. In a similar fashion, the digital society transformation
considers the use of digital technologies for changes in society and the changes
in their relationship with businesses. Finally, the digital technologies innovation
includes the increased use in business and society, and their respective reversed
influence, as illustrated in Figure 5.

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Digital business
transformation
Digital society
transformation
Digital innovation
Figure 5: The Digital Transformation of Business, Society, and Technology
6 Validation of the Digital Transformation Framework
It is possible to validate the DT framework and definition against the definitions
found in the literature by positioning these on the framework, as shown in Figure
6, Figure 7 and Figure 8. The definitions are placed on the DT framework as
circular segments to indicate their scope. Three different figures and several
distinct colors were used solely for clarity purposes. The spherical segments
overlap such that the outer segment also includes the inner segments; for
example, definition 2 extends definition 3. It is worth noting that all definitions
could be placed on the DT framework, and their ensemble takes the form of the
framework, which lends some validity that the framework and definition are
consistent with the literature.
Digital technologies
SocietyBusiness
1
23
4
7
8
10
Internals
Structure
Business model
Connectivity
Offerings
Internet
Integration
SMACIT
Advanced AI
IT
Tasks
Connectivity
Usage
Structure
People
Figure 6: Validation Part I

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Digital technologies
Society
Business
5
11
13
12
15 16
17
Internet
Integration
SMACIT
Advanced AI
Tasks
Connectivity
Usage
Structure
People
Internals
Structure
Business model
Connectivity
Offerings
IT
Figure 7: Validation part II
Digital technologies
SocietyBusiness
14
69
Internet
Integration
SMACIT
Advanced AI
Tasks
Connectivity
Usage
Structure
People
Internals
Structure
Business model
Connectivity
Offerings
IT
12
Figure 8: Validation Part III
7 Conclusion and Future Work
Digital transformation has received a great deal of attention in research but lacks
a unified definition. In this paper, we contribute to the information systems
research literature by providing a conceptual framework that reconciles the
various aspects of DT and use it to formulate a novel and comprehensive DT
definition, which were validated against the literature. These findings assist an
understanding about the scope, forces, and impact of DT and can be among the

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first steps towards a unified definition, which is the key element of a well-
developed scientific discipline (Torgerson, 1958). Additionally, practitioners and
researchers can use the DT framework to frame their work.
In future work, the following use cases of the DT framework will be investigated:
• Modeling a company’s current state on the DT framework together with
its customers allows for the identification of DT opportunities and
threats. This could be seen as misalignments between the axes.
• Second, by modeling several companies, or even countries, on the
framework, the DT framework could be used as a comparison tool.
• Third, by giving weights to the respective segments and transformations,
the DT framework can be used as a maturity tool or to derive DT metrics
from.
Despite its exploratory nature, this study offers novel insights into the concept
of DT and raises intriguing questions regarding the nature and the impact of the
interactions between digital technologies, society, and business. In future studies,
considerably more research will need to be done to determine how these
interactions impact and shape DT, and to validate the framework empirically.
Moreover, future research should be conducted to better understand how
businesses can exploit the opportunities brought by a digital society.
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