Adapting Corporate Strategies in a Digital Age
-by Jaya Pathak
The information age, or the digital age, commenced with the introduction of computers in the 1960s and persists today, marked by the swift evolution of electronic information processing and sharing. Four core technologies—computer hardware, software applications, internet and mobile communications, and artificial intelligence (AI)—have propelled this era, revolutionizing interpersonal interactions and information dynamics.
The International Telecommunication Union reported that, by 2019, 57% of households globally had internet access, 47% owned computers, and 85% of the population was covered by 4G mobile-broadband by the end of 2020.
This digital transformation has reshaped business landscapes, departing from the industrial age, owing to the economic principles of information. The digital era incentivizes building market share through network externalities, challenging traditional competitive strategies.
‘Born digital’ firms outpace traditional counterparts in operational efficiency, exemplified by Amazon’s shift to online dominance. Industry structures have shifted, concentrating infrastructure providers while fostering a multitude of companies offering applications.
In the digital realm, actors collaborate and compete simultaneously, giving rise to ‘coopetition.’ B2B markets undergo substantial changes, with manufacturing embracing automation, digital twins, and emerging technologies like 3D printing. Digitalization, combined with AI and machine learning, impacts diverse areas from game-playing to energy consumption.
The way companies do business is changing because of digital technology. We think these changes will affect how companies make strategies to create value. Here, we talk about how digital technology might impact three main areas that researchers have studied a lot and where we think the digital revolution will make the biggest difference:
Corporate Advantage: This means why some companies with many different businesses do better than others. Digital technology might change how companies compete and do better than their rivals. Corporate (Competitive) Advantage is about how companies can be better than others in the digital age. In the past, researchers studied two things: how one part of a company competes in a specific industry, and how a big company with many businesses in different industries tries to be better than others. Now, in the digital age, these two things are looked at together because sometimes the overall strategy of a big company can help one part of it to do better.
There are two main changes happening because of digital technology in this area:
- Different Business Models: Digital technology allows companies to have new and different ways of doing business. Some companies, like IBM or Oracle, create and use new technologies in traditional ways. Others, like Amazon or Netflix, use new technology to do things in totally new ways, creating unique ways to make and get money.
- From Capturing to Creating Value: Companies used to focus more on capturing value, like making money from their products. But now, with digital technology, companies are also focusing on creating value. This means they try to make something valuable first, like a service or a product, even if they don’t immediately make a lot of money from it. This shift is making some companies grow fast, especially because digital technology makes it easier to grow quickly.
Even though digital technology is changing how companies make money and what they focus on, there are also challenges. Some companies struggle to make a profit even though they are widely used, like WhatsApp. However, for others, digital technology helps them stick with customers, build trust, and even create situations where they become the dominant player in their industry.
Company Size, What They Do, and How Big They Get: Companies might change how big they are, what they do, and the limits of their business because of digital technology. It could change how companies decide what businesses they are in. The size, range, and limits of a company, often called its scale, scope, and boundaries, are important concepts in the digital age. Scale refers to how big a company is, scope is about the different businesses it has, and boundaries are like the borders that define what the company does. Digital technology has changed these aspects in different ways.
Digitalization can make things more efficient for companies by reducing the costs of doing business. This is because tasks can be automated, and there’s less chance of mistakes. It also makes it easier to resolve disputes. Some experts thought that, because of these benefits, companies might become smaller and more focused on what they do best.
However, digitalization has also helped companies work better inside. Tasks that were done by people are now done by machines or AI systems. This makes the company more efficient, and it might become bigger and offer a wider range of products or services. Examples of such big companies are Amazon, Google, and Tencent, which dominate entire sectors.
When it comes to the types of businesses companies are involved in, digital technology has led to changes in two ways. First, many companies now focus on their main activity but reach a wide market with different products, markets, and countries. This is known as a broad horizontal scope. On the other hand, some companies become more integrated, controlling more parts of their business. For instance, Wise (formerly TransferWise), Apple, and Tesla have a more vertical integration approach.
Digitalization also blurs the traditional categories of companies and industries. It has become harder to define the limits of a company because digital technology creates and replaces what used to be separate companies or industries. The way companies work with their employees has changed too, with more remote work and gig jobs. Companies also work closely with external entities, like service providers and partners, and this boundary between a company and the outside world is not as clear as it used to be.
Moreover, digitalization blurs the line between companies and customers, with some companies relying on customers to create content that they profit from. This change challenges the traditional understanding of firm boundaries. Overall, in the digital age, companies are becoming more dynamic and interconnected in various ways.
Inside the Company – How it Works: Digital technology might change how companies organize their work inside. It might change how different parts of a company work together and how they decide what to do. In the digital age, how a company is structured and designed on the inside has become a critical focus in corporate strategy research. This includes formal organization structures, how responsibilities and roles are assigned, how information flows, and how individuals are motivated and evaluated.
Traditionally, big companies in the industrial era used strict hierarchical structures because sharing information was costly. With digital technology, information can be collected and shared more efficiently, enabling real-time collaboration and more modularized work. This efficiency allows for flatter and more flexible ways of working, impacting both the overall structure of the organization and individual tasks.
Digitalization has led to innovations in corporate structures, such as network-based structures, agile working, and Holacracy, all supported by reductions in communication and coordination costs. This affects the balance between different tasks and decision-making processes within the organization.
In terms of decision rights, digitalization has both decentralized and centralized effects. On one hand, better access to information allows for more decentralized decision-making at lower levels of the hierarchy. On the other hand, lower communication costs enable top executives to have real-time access to frontline issues, leading to more centralized decision-making.
The role of corporate headquarters is also evolving in the digital age, becoming more dispersed and less defined. Modern communication technologies contribute to the emergence of dual and virtual headquarters, and the rise of remote work during the COVID-19 pandemic further accelerates this trend.
Additionally, the nature of tasks and workforce design is changing. The focus has shifted from automating physical actions to investing in software and AI. This impacts the distribution of work inside the firm, with an emphasis on human resource practices that capitalize on technology, cross-train individuals, and upskill the entire workforce.
The digital age also influences corporate management roles, giving rise to new functions like Chief Digital Officers (CDOs) who focus on cross-functional coordination and interpersonal skills. In summary, the internal structure and design of a firm are undergoing significant transformations in response to the opportunities and challenges presented by digitalization.
Understanding the impact of digital technologies on corporate strategy is still in its early stages. We don’t have clear answers about how digitalization affects firms externally or internally, nor do we have straightforward connections between digitalization and performance. This creates ambiguity and paradoxes, where opposing effects can happen simultaneously, highlighting the need for more research in this area.
The Special Issue of the Journal of Management Studies aimed to showcase cutting-edge research and set a research agenda for the future. We propose a simple categorization inspired by Ansoff (1957), which considers whether the corporate strategy phenomena and the theories used to explain them are existing or new. This categorization results in four strategies for knowledge development. These strategies are not rigid and may overlap.
The goal is to guide future research efforts effectively. The categorization process is subjective and imprecise, with blurred boundaries between strategies. The strategies for future research aim to explore various aspects of corporate strategy in the context of digitalization. The articles in the Special Issue provide insights and examples that contribute to this research agenda. Through systematic investigation and analysis, researchers can deepen our understanding of how digitalization shapes corporate strategies and performance.
Knowledge penetration refers to a strategy in research where existing corporate strategy phenomena are explored and explained further by building upon existing theories of the firm. This approach seeks to substantiate and expand upon established knowledge about how firms operate in various contexts, including the impact of digital technologies.
Researchers employing the knowledge penetration strategy investigate how digital technologies are integrated within multi-business firms to improve synergies or alter decision-making dynamics between corporate headquarters and business units. They may also reexamine classic findings, such as the relationship between diversification and performance, in emerging digital and high-tech sectors.
For instance, studies within this strategy may analyse how digitalization affects traditional trade-offs in corporate strategizing, such as the balance between commitment and flexibility. They might explore how digitalization influences transaction costs within organizations, examining whether certain organizational arrangements benefit more from digitalization than others.
Additionally, researchers using the knowledge penetration strategy may employ novel methodologies, such as supervised machine-learning classifiers, to analyse large datasets and uncover insights about corporate strategy that were previously challenging to examine.
Digital Age Strategies Private Limited is a privately held company that was incorporated on March 8, 2004. It operates as a non-government company and is registered with the Registrar of Companies in Bangalore. The primary activities of Digital Age Strategies Private Limited include legal, accounting, book-keeping, auditing services, tax consultancy, market research, public opinion polling, and business and management consultancy.
The board of directors of Digital Age Strategies Private Limited consists of Dinesh Shivaram Shastri, Umesha Rao Yelluru, and Upendra Rao Veena. These individuals are responsible for overseeing the company’s management and strategic decisions.
A digital strategy is a plan a company makes to use technology like computers, phones, and the internet to grow its brand. This plan helps employees connect with customers, boost sales, and showcase the brand effectively. Company leaders design and adjust the strategy based on market needs, technology trends, and business performance.
Key components of a digital strategy include:
- Digital marketing: Using technology channels like social media, email, and content to increase brand awareness and engagement.
- Advertising: Delivering targeted materials online to attract and engage customers through websites, search engines, or pay-per-click.
- E-commerce: Buying and selling products or services online, allowing customers to shop from computers, tablets, or phones.
- Customer interaction: Creating open channels for feedback and interaction to improve customer service and gather data for targeting and product improvement.
- Search engine optimization (SEO): Improving the website’s visibility on search engines by using tags, keywords, and links to increase traffic and accessibility.
Digital corporate banking means offering corporate banking services online, including account setup, management, and transactions. It improves convenience and access for corporate clients by providing integrated services through user-friendly digital channels. The business benefits for banks include quicker customer acquisition, improved customer loyalty through enhanced experiences, and faster development of innovative products.
It lowers operational costs, shifts focus to value-added services instead of administrative tasks, and reduces investments in fixed assets. In simple terms, digital corporate banking streamlines banking services for businesses online, making things quicker, easier, and more cost-effective for both banks and their corporate clients.
