Creating value in the age of digital transformation

The digital revolution has led to more businesses undertaking their own digital entrepreneurship by utilising digital operations, offering new digital products, and generating more profound digital insights. Professors Jahangir Karimi and Zhiping Walter at the University of Colorado Denver, USA, have studied the role of entrepreneurial agility in digital entrepreneurship in the newspaper industry, with a focus on creating business value in response to digital disruption. They say that, over time, firms need a cluster of capabilities to enable a digital strategy, leading corporate entrepreneurship through digital transformation.

Digital entrepreneurship has gained attention in relation to electronic commerce, as well as in strategic entrepreneurship. Digital transformation and digital entrepreneurship are fundamentally changing and disrupting the dynamics of the economy, our society, and our markets. This so-called digital disruption can be defined as ‘the rapidly unfolding processes through which digital innovation comes to fundamentally alter historically sustainable logics for value creation and capture by unbundling and recombining linkages among resources or generating new ones’. Companies rely on new disruptive technologies to introduce new products and platforms and incorporate environmentally sustainable practices to realise new business models.

The combination of digital information goods and computing and communication devices are impacting businesses and our society as a whole, particularly through five forces: 1) globalisation, 2) millenialisation (meaning the increasing influence of the millennial generation), 3) prosumerisation (meaning the convergence of producers and consumers), 4) business virtualisation, and 5) platformisation. These digital forces are most disruptive in the communications, information, media, and entertainment (CIME) industries.

Business models are disrupted
Print media remains one of the most disrupted industries with a growing number of newspapers being forced to shut down operations across the globe. Those newspaper companies that remain active on the market have seen dramatic changes in their traditional operating models. In response to digital forces, major CIME companies in both print and broadcasting have adapted their business models by now focusing first and foremost on offering digital solutions. Digital platforms are being deployed to attract and engage audiences, and a wide variety of online models draw away more and more of the newspapers’ advertising dollars.

Readers can comment and make suggestions on articles as they are being blogged or tweeted by journalists. Consequently, newspaper companies are seeing their dominance erode and their business models disrupted. The audience’s new online behaviour has pushed newspaper companies to focus on digitisation, digital platforms, digital innovations and transformations. Industry analysts are even predicting an eventual collapse of the century-old newspaper industry; as a whole, the newspaper industry has lost tens of thousands of jobs since the digital disruption, and its revenue level has decreased to that of the 1950s.

Digital entrepreneurship creates new business opportunities for fostering sustainability by developing and using new digital technologies to accelerate business transformation.

Digital-age opportunities
However, a few newspapers are thriving in this new digital age. To respond to digital disruption, the newspaper companies need to change, extend, and adapt their current resources, processes, and values, to build digital platform capabilities to survive (see Figure 1). As such, reinventing the IT function to deliver digital products and services can provide a new competitive advantage for incumbents in every business.

Digital entrepreneurship creates new business opportunities for fostering sustainability by developing and using new digital technologies to accelerate business transformation.

Acceleration of business transformation
Digitisation presents significant threats, as well as opportunities, to all businesses by altering the structure of their competition, conduct, customer engagement, and performance. It fundamentally disrupts the dynamics of markets by changing the way customers experience, discover, explore, buy, and engage with products and services. Companies rely on new disruptive technologies to introduce new products and platforms and incorporate environmentally sustainable practices to realise new business models. Digital entrepreneurship creates new business opportunities, fostering sustainability by developing and utilising new digital technologies to accelerate business transformation.

BMIA
In an important study, Professor Jahangir Karimi at the University of Colorado Denver, USA, along with Associate Professor Zhiping Walter, examined the extent to which corporate entrepreneurship has an impact on disruptive business model innovation adoption (BMIA) in response to digital disruption, and how such adoption affects business performance. Creating value can be measured using the metric of business model performance (BMP), since the business model provides a reliable indication of value realisation. BMIA is a mechanism for enacting entrepreneurial opportunities, and it provides a link between entrepreneurial opportunities and their exploitation.

Using survey data from a sample of newspaper companies, the researchers found significant evidence for a direct association between autonomy, risk-taking, and proactiveness with the extent of disruptive BMIA. However, they did not find such evidence for a direct association of innovativeness with the extent of disruptive BMIA (see Figure 2).

Entrepreneurial Agility (ENTAG)
The researchers’ most recent study focuses on the role of entrepreneurial agility in digital entrepreneurship, in response to digital disruption. Entrepreneurial agility (ENTAG) can be defined as managerial cognitive abilities to anticipate, visualise, and exploit entrepreneurial opportunities associated with digital entrepreneurship. ENTAG is a critical component of a firm’s strategic entrepreneurship decision-making component and has its roots in strategic management literature. ENTAG captures the extent to which a firm possesses the dual capabilities of: 1) strategic leadership for sensing threats and opportunities and then allocating resources to execute their strategy; and 2) organisational design for structural adaptation to respond accordingly.

The researchers addressed three research questions in their study:

1. What are the critical dimensions of ENTAG?

2. Can ENTAG impact digital entrepreneurship by combining or integrating opportunity- and advantage-seeking behaviours in response to digital disruption?

3. Does opportunity-seeking behaviour mediate the impact of advantage-seeking behaviour on creating value?

This study suggests that the managers’ cognitive abilities of opportunity foresight, systemic insight, and entrepreneurial mindset are necessary to anticipate, visualise, and exploit new digital opportunities. It highlights a definitive process and triggering events and the specific order through which the combination or integration of opportunity- and advantage seeking behaviour must occur.

Further, it demonstrates that BMIA mediates the impact of building digital platform capabilities for digital entrepreneurship on creating value. These digital entrepreneurship behaviours will enable firms to take advantage of their digital platform ecosystems to develop new digital products and business models. Firms still face various challenges such as monetisation and creating data-enabled business models to leverage their data-driven insights. They will need to work towards making their digital strategy process more dynamic.

Firms need a cluster of capabilities for sensing, seizing, and transforming digital entrepreneurial opportunities to enable digital strategy for digital transformation.

Firms’ survival strategies in response to digital disruption will depend on the proper alignment between building digital platform capabilities for product and business-model innovation. Such an alignment will enable them to meet their digital platform ecosystem partners’ evolving needs in using these capabilities, and taking advantage of the digital platform ecosystems to innovate new digital products and business models. Over time, firms need a cluster of capabilities for sensing, seizing, and transforming digital entrepreneurial opportunities to enable a digital strategy for digital transformation.

By focusing on the cognitive aspects of strategic entrepreneurship decision-making, this study provided empirical evidence for the impact of ENTAG on digital entrepreneurship by combining or integrating opportunity- and advantage-seeking behaviours to create value in response to digital disruption. Direct associations were found between ENTAG and BMIA, between ENTAG and building digital platforms capabilities, and between BMIA and business model performance (see Figure 3). Importantly, this study showed that ENTAG is beneficial in influencing a firm’s digital entrepreneurship efforts by building digital platform capabilities and adopting a new business model.

Building digital platform capabilities
Further, the researchers found that digital platform capabilities directly impact BMIA, and that the effect of building digital platform capabilities on creating value, as reflected in business-model performance, is achieved only through BMIA. The study goes on to suggest that managerial cognitive abilities are vital instigators of entrepreneurial agility in building digital platform capabilities and business-model innovation adoption. These capabilities will enable managers to better understand the threats and opportunities associated with digital disruption and to search for digital priorities beyond the boundaries that once seemed secure. The results suggest that entrepreneurial agility and digital platform capabilities are mutually reinforcing. As a whole, they belong to an integrated system for enacting strategies for digital entrepreneurship to create value. The researchers expect their results to be generalisable to firms with a varied combination of physical and digital products.

Future research needs to address how entrepreneurial cognitive abilities impact the distribution of entrepreneurial agency, and what factors might influence the interrelationship of entrepreneurial agility, digital platform capabilities, and BMIA.