Organizing for Digitalization: An Exploration of Strategic Change in the Capital Goods Industry

Abstract

Strategic change is necessary for an organization’s long-term survival, innovativeness and ability to sustain competitive advantage. However, it also puts the organization at risk. In fact three out of four strategic change initiatives fail (Decker et al., 2012; Ewenstein, Smith, & Sologar, 2015). This thesis research is aimed at supporting organizations that decide to under-take strategic change. It is aimed also at deepening our theoretical understanding of strategic change by providing a comprehensive exploration of the phenomenon. The thesis includes three studies, arranged according to Mintzberg and Westley´s (1992) model of “cycles of or-ganizational change”. Although each study considers the entire phenomenon of strategic change, each explores different aspects. Study one provides insights into the learning process that leads to the emergence of a new strategy. Study two explores the necessary mindset changes involved in a strategic change. Study three scrutinizes the organizational implementa-tion of strategic change. The case company in all three studies is a multinational engineering company that, when faced with imminent “digitalization” and the shift towards “industry 4.0”, decided to implement a fundamental strategic change to prepare for the digital age. The methodology employed in this is qualitative and relies on ethnographic data, interviews and archival data. My 3.5 years of employment in the case company provided me with “inside knowledge” and data, which it is unlikely that an external researcher would have been able to access, and allowed a comprehensive understanding of the phenomenon under investigation. Building on the insights from the individual studies, this dissertation contributes to our knowledge in four ways. First, it discusses strategic change in the context of economic growth. Industry upheavals, induced by the emergence of new technologies, regularly lead to economic decline. The slower rates of adjustment of societal socio-institutional structures, compared to rates of technological developments, result in misalignment with the new tech-nology and consequently in an economic downturn. At the firm level, demonstrated especially in study one, successful strategic change requires intensive learning from and interaction with the environment. At the level of the economy this increased interaction can contribute to a re-synchronization of the technology and socio-institutional structures and, therefore, mitigate economic decline and accelerate its subsequent growth. Second, this thesis research deepens our understanding of how the stages of a strategic change, that is, learning, mindset revision and implementation (Mintzberg and Westley, 1992), are interrelated. It extends current knowledge by suggesting that specific elements of these stages serve as inputs for multiple subsequent stages in parallel. In particular, the successful implementation of change requires parallel inputs, as shown by study three. Third, this research contributes to work on integrated solutions and complex products and systems. This dissertation shows how learning happens at the strategic level in this industry. Also, it provides insights into how the major changes to capabilities and organizations that these firms are required to execute in order to conduct stra-tegic changes, can be implemented. The fourth and final contribution is to methodology by introducing complete participation as a particular form of ethnographic research to study stra-tegic change in a business context. In so doing, this thesis tries to encounter the well-recognized and still existing challenge of fragmentation in this literature and its focusing on disconnected dimensions in research on strategic change, which issue still hampers our com-prehensive understanding of the phenomenon.