Digital Business Strategy and
Configuring the Supply Chain
Jasper Habermehl (S3012255)
Rijksuniversiteit Groningen
Faculty of Economics and Business1st Supervisor: Dr. H. Broekhuis 2nd Supervisor: Prof. Dr. K.J. Roodbergen Words: 11,980 Groningen, Padangstraat 45, 9715CM +31623017978 j.n.habermehl@student.rug.nl
August 2017
Acknowledgements:ABSTRACT
This research had the objective to identify the considerations that companies have in reshaping their digital business strategy and what impact this strategy has on the configuration of the supply chain. To investigate this, a multiple case study had been conducted within the profit sector of the Netherlands. The findings of the research had shown that considerations can be divided into two different categories: considerations that drive or hinder change. The consideration to proactively use data helped companies to reshape its digital business strategy since this has a positive influence on the scope of companies; it diversifies the portfolio of products and services. A remarkable consideration that was found to have a hindering effect on changing the digital business strategy is compatibility. The effect of the digital business strategy on the supply chain configuration of companies is twofold. First effect of the DBS on the SCC is the change in the supply chain network structure as a result of changes in the scope of the company. Second effect is the smoother information streams as a result of the scalability-component of digital business strategy.
TABLE OF CONTENTS
ABSTRACT ... 2
TABLE OF CONTENTS ... 3
1. INTRODUCTION ... 5
2. LITERATURE REVIEW ... 8
2.1 Digital business strategy ... 8
2.1.1 Conceptions ... 8
2.1.2 Scope ... 10
2.1.3 Scale ... 10
2.2 Considerations... 11
2.2.1 Company’s attitude towards technology ... 11
2.2.2 Changes in value creation ... 13
2.3 Supply chain configuration ... 13
2.3.1 Supply chain network structure ... 13
2.3.2 Information and materials flow ... 15
2.3.3 Relationships and governance ... 16
2.4 Conceptual model ... 16 3. METHODOLOGY ... 18 3.1 Research design ... 18 3.2 Research setting ... 18 3.3 Case selection ... 18 3.4 Data collection ... 19 3.5 Operationalization of variables ... 21 3.6 Data analysis ... 21 3.7 Safeguard measures ... 22 4. FINDINGS ... 23
4.1 Digital business strategy (DBS) ... 23
4.1.1 Flexibility ... 23
4.1.2 Scope ... 24
4.1.3 Scale ... 24
4.2 Considerations regarding the DBS ... 25
4.2.1 Considerations that drive change ... 25
5. DISCUSSION ... 30
5.1 Theoretical implications ... 30
5.1.1 Considerations and DBS ... 30
5.1.2 DBS and its effect on SCC ... 32
5.2 Practical implications ... 33
5.3 Limitations and future research... 34
6. CONCLUSION ... 34
7. REFERENCES ... 35
APPENDICES ... 40
APPENDIX 1. INTERVIEWS ... 40
Appendix 1.1 Interview build-up ... 40
Appendix 1.2 Interview 1 ... 41
Appendix 1.3 Interview 2 ... 42
APPENDIX 2. OPERATIONALIZATION AND CODING TREE ... 46
Appendix 2.1 Operationalization ... 46
Appendix 2.2 Case descriptions ... 47
Appendix 2.3 Coding tree ... 48
APPENDIX 3. SUPPLY CHAIN CONFIGURATIONS ... 54
Appendix 3.1 Case 1 ... 54
Appendix 3.2 Case 2 ... 55
Appendix 3.3.1 Case 3, old Supply chain configuration... 56
Appendix 3.3.2 Case 3, new Supply chain configuration ... 57
Appendix 3.4.1 Case 4, Supply chain configuration – Hospital food service ... 58
1. INTRODUCTION
Giant companies such as Amazon, Über, and Netflix have successfully exploited the benefits of digital resources. Their success is established on global connectivity (internet) that helped shaping their competitive advantages, and, to offer innovative products/services from any place (Ritala, Golnam, Wegmann, 2013). Global connectivity helped to achieve joint production with customers and suppliers, and, enables organizations to reach across boundaries of distance, time, and function (Coltman, Tallon, Sharma & Queiroz, 2015; Bharadwaj, El Sawy, Pavlou & Venkatraman, 2013). Due to these successes, other companies are considering new opportunities to exploit digital resources, in order to increase value for their customers in an efficient and scalable way. Research shows that the exploitation of new digital resources should be based on the digital business strategy of a company, in order to take full advantage of the technological characteristics (Matt, Hess & Benlian, 2015; Veit et al., 2014). Yet, the establishment of such a strategy can be challenging, since it is hard to combine new digital resources with existing ones (Downes & Nunes, 2013). Another challenge concerning the digital business strategy is the risk on short term investment (Downes & Nunes, 2013), as one cannot oversee all characteristics of the digital resource beforehand. This implies that often during the process, additional (e.g. financial) resources might be needed to have the desired technological effect. As the need of deploying digital resources is evident, many companies consider to replace existing digital business strategies and to reconfigure their supply chain accordingly (Downes & Nunes, 2013). Yet, in this context of digitization, it is unknown which specific considerations are dominant in reshaping the digital business strategy and what impact this strategy has on the configuration of the supply chain.
configurations makes it hard to exploit the advantages of new digital resources, especially in the management with other companies (Van Alstyne et al., 2016). This is due to the fact that traditional supply chain configurations are perceived as static and fixed, meaning that the configuration solely defines constraints in which the supply chain can operate (Chopra & Meindl, 2004; in Chandra & Grabis, 2016). Yet, flexibility is needed in order to adapt easily to changing customer demands and the operating environment (increased digitization) with relatively minor resource requirements or without lowering operational efficiency (Chandra & Grabis, 2016). It is unknown how companies are currently managing the flexibility in the supply chain in order to cope with the current context of digitization. This research aims at both (a) discovering the considerations that companies have in (re)shaping the digital business strategy and (b) how this strategy is affecting the configuration of the supply chain. The current state of digitization has led to an emergence of best-practice digital business strategies and related business models, such as the ones of Über, Netflix and Amazon. Yet, other companies are in the transition and start to replace existing strategies based on the increased state of digitization. No previous research has been dedicated to the considerations that companies have in shaping these strategies, nor the relationship between the digital business strategy and the configuration of the supply chain. Therefore, studying these variables within the context of increased digitization should provide insights in how companies shape digital business strategies and what considerations are dominant in shaping them. The relationship of the digital business strategy with the supply chain configuration adds the dimension of management with external partners in the current context of digitization. This results in the following research question:
What considerations do companies take into account when (re)shaping their digital business strategy and what impact does this strategy have on the supply chain configuration?
unknown how the digital business strategy leads to changes in the supply chain configuration. Authors state that in order to have an optimal supply chain, it is important to configure it based on the changing dynamics; such as the trend of increased digitization (Chandra & Grabis, 2016). While this external trend is present, it is unknown how internal developments lead towards new supply chain configurations. Moreover, practitioners may benefit from this research in the sense that an understanding is generated of what effect certain considerations have on the digital business strategy. This might be helpful for managers that face the transition to new strategies, since companies might face the same considerations. The link between strategy and supply chain configuration can be beneficial to managers in the sense that strategy is not solely an internal aspect, it influence the configured network of the supply chain.
2. LITERATURE REVIEW
The literature review of this research is divided into three elements: Digital business strategy and related considerations, supply chain configuration. The first section of the literature review consists of the business strategy that results from the increased context of digitization; the digital business strategy.
2.1 Digital business strategy
Business strategy is a broadly researched topic within business literature. Business strategy is defined as: “The pattern in the stream of events that characterizes the match an organization achieves with its environment and that is the determinant for the attainment of its goals” (Håkansson & Snehota, p. 189, 1989). This definition underlines that business strategy does not have to be explicitly formulated to function as a strategy, since it is a pattern in a stream of events. Yet, this pattern has to ensure a match with the environment (such as increased digitization) and is the determinant whether attainments (achievements) have been realized.
A distinction of the business strategy is the digital business strategy. The digital business strategy is a relatively new concept in literature. The digital business strategy is shortly defined as the strategy that is formulated and executed by leveraging digital resources in order to create differential value (Bharadwaj et al., 2013; Coltman et al., 2015). Since this definition does not explain the strategy element, the following definition of the DBS is constructed for the sake of this research: The digital business strategy is a pattern in the stream of events that characterizes the execution of how digital resources are leveraged in order to create differential value.
2.1.1 Conceptions
Conception 1 (Chen et al., 2010) Conception 2 (Chen et al., 2010) Conception 3 (Chen et al., 2010) Conception 4 (Bharadwaj et al., 2013)
DBS is: facilitating the overall business strategy
the strategy for IT and all related processes
the shared view of IT within an
organization
the overall business strategy Relationship between DBS and overall business strategy? DBS is a part of the overall business strategy, and is not bound to a certain functional area
DBS is considered a functional strategy within the business strategy
DBS is a separate strategy from the business strategy
DBS is the core strategy
DBS is carried out:
Company-wide Departmental Company-wide Company-wide
Impact of DBS on overall overall business strategy?
Safeguard that the overall business strategy is implemented
To determine all IT asset necessities; make sure all assets are in place and effectively allocated Provide consensus throughout the organization to lead IT investment decisions Provide the flexibility to respond to any change in the market
TABLE 1. CONCEPTIONS (Chen et al., p, 239., 2010)
changes in the overall strategy, which implies that the company could adapt better to evolving states of digitization. Furthermore, companies aim to build capabilities based on digital resources. A company is dependent on employees when building these capabilities, employees have to be involved, continually identify opportunities, and implement changes based on digital resources (Peppard, Galliers & Thorogood, 2014). Peppard et al. (2014) state that the DBS should change elements of the business, which is in line with the third conception in Table 1. Moreover, the digital business strategy affects two categories of a business: scope and scale (Bharadwaj et al., 2013; Coltman et al., 2015).
2.1.2 Scope
The scope of a company is defined as: “The portfolio of products and services as well as activities that are carried out within a company’s direct control and ownership.” (Bharadwaj et al., p. 473, 2013). The digital business strategy focuses on how to redefine the products, business, and activities by enabling and facilitating digital resources (Venkatraman, 1994). Business scope redefinition based on digital resources requires the most changes in transforming the business strategy (Venkatraman, 1994). Yet, business scope redefinition has the most potential benefits, as it enhances the capabilities based on current customer demand. The capability to process information is leveraged in order to constitute both a flexible and effective business entity (Venkatraman, 1994). Digital resources are, therefore, not considered as a simple utility but a fundamental source of business (Venkatraman 1994). This is in contrast with the first two conceptions described in part 2.1, as both conceptions do not aim to add or change anything to current business strategy.
As has been described in the introduction of this research, new business strategies arise as a result of technological development. This means that activities and the portfolio of products/services of a business can be extended or substituted due to the presence and execution of digital resources. Literature claims that executing and leveraging digital resources leads to a more diversified product and service portfolio (Ray, Xue & Barney, 2012; Qrunfleh & Tarafdar; 2014), as digital resources add functionality to existing products/services. Companies are better able to monitor changes in the market and respond to those by correctly leveraging and executing digital resources (Qrunfleh et al., 2014) due to the fact that information processing can be done more efficiently with digital resources. This means that adjustments based on customer demand can be established faster than in traditional business (Qrunfleh et al., 2014).
2.1.3 Scale
One of the current trends in digitization is cloud computing, which stands for the capabilities of computers based on the internet, such as: software, information, and shared computing resources (Mirrazavi & Khoorasgani, 2016). Cloud computing makes it possible to access resources at any place via the Internet, meaning that no local resources are needed to be acquired (Mirrazavi & Khoorasgani, 2016). Capabilities are scaled up by the means of global connectivity; information can be accessed at any place without having to invest in infrastructure or local software (Mirrazavi & Khoorasgani, 2016). Moreover, the integrated usage of information systems such as ERP and EDI can contribute to the scalability by facilitating day to day operational efficiency (Qrunfleh et al., 2014), since these digital resources provide more information and insights for workers to execute tasks. This is further explained in the supply chain planning of this report, in section 2.2.2. Therefore, these digital resources help to achieve more at no cost. Moreover, EDI applications facilitate cost savings by the coordination and communication between the company and suppliers/customers (Qrunfleh et al., 2014).
Scalability is important in designing a digital business strategy, yet, it should not be the main element: “When a company solely seeks efficiency, the boundaries of the current strategy are fixed and given.” (Venkatraman, p. 85, 1994). The combination of seeking the right value for customers, and hereafter redefining the business scope should be the most important element of the digital business strategy (Bharadwaj et al., 2013).
2.2 Considerations
This element of the literature review focuses on the considerations that derive from reshaping the digital business strategy based on the current context of increased digitization. Each company transformation resulting from digitization is affected by some common considerations (Matt et al., 2015), independent from the industry the company is in. The first consideration that will be addressed is the company’s attitude towards technology. The second consideration is the change in the value creation. This consideration has been identified in the digital business strategy-section of this literature review as the most promising element of evolving strategies (Bharadwaj et al., 2013)
2.2.1 Company’s attitude towards technology
Considerations Definition Positive/negative influence
Perceived difficulty The degree to which the application of new technology is free of efforts.
Negative
Adoption experiences
Accumulated technical background and knowledge of the technology user
Positive
Suppliers’ commitment
Level of commitment by technology suppliers to help provide the needed information to implement technology well. Either supportive/restrictive
Positive/negative
Perceived benefits The belief that the technology will improve the productivity or even economic situation
Positive
Compatibility Connection of new technologies with internal established technology
Positive
TABLE 2. ATTITUDE TOWARDS TECHNOLOGY ADOPTION (Kai-ming Au & Enderwick, P. 267, 2000)
2.2.2 Changes in value creation
Value creation is the essence of business strategy (Fosso Wamba, Akter, Edwards, Chopin & Gnanzou, 2015), as it is the co-created output of a network of organizations. It is defined as the contribution to the utility of the final good or service to customers (Pagani, p. 618, 2013). Value creation is leading in the selection of network partners, as expectations of the eventual value creation need to match (Frow et al., 2014). The considerations in the value creation mostly concern whether the new digital business strategy leads towards changes in the core business (Matt et al., 2015).
There are three methods to reshape value creation (Berman, 2012):
1. Enhance physical products/services through digital content, information, and engagement 2. Extend the physical products/services with digital content, information, and engagement 3. Redefine the value delivered, and replace physical with digital value
To enhance the physical products and services is most likely to occur when companies want to differentiate their offerings (Berman, 2012). For example, car manufacturers are nowadays offering WiFi in their cars to differentiate from their competitors. To extend the physical products/services with digital resources is mostly used for opening new streams of revenue. To redefine the value that a company delivers is mostly used to create a full new experience of value to the customer. One example would be for the physical DVD-industry; which is partially replaced with online video on demand. These services can now be accessed anywhere, with a greater variety of assortment.
2.3 Supply chain configuration
The third concept that will be addressed in this literature review is supply chain configuration. A supply chain configuration helps to capture the most relevant and capability-influencing attributes of a supply network (Mintzberg, 1998). Supply chain configuration is defined as the arrangement of entities, such as suppliers, manufacturers, warehouses, distributors and retailers, and, relationships that gives the supply chain its inherent form (Chandra & Grabis, p. 3, 2016). The arrangement of entities that is referred to by Chandra & Grabis can be described as the supply chain network structure of companies together with the flow of materials and information (Singh & Gregory, p. 394, 2008).
2.3.1 Supply chain network structure
Traditional pipeline model
One of the most common and basic supply chain network structures is the pipeline model (Hagiu & Wright, 2015). This model consists of at least three members; the supplier, focal firm, and customer. Products or services are moved downstream towards the end customer, whereas information flows in both directions. The traditional pipeline supply chain can be disadvantageous in some cases, as it has a low degree of adaptability (Ketchen & Hult, 2007). Adaptable supply chains are based on information systems that identify market changes, and then adapt to new market circumstances in the sense of e.g. new facilities, different suppliers or outsourcing (Ketchen & Hult, p. 574, 2007), which is in contrast with the traditional pipeline model. The goal of traditional pipeline supply chains is to move the products/services according to the formulated company strategy, not to signal changes in the market and adapt where needed (Ketchen & Hult, 2007).
Multi-sided platform model
A supply chain network structure that emerged from new forms of digitization is the multi-sided platform model (Van Alstyne et al., 2016; Ritala et al., 2013). The multi-sided platform supply chain is identified by two specific requirements (Hagiu & Wright, p. 5, 2015):
- They enable interactions between the supplier and customer;
FIGURE 1. MULTI-SIDED PLATFORM VS. PIPELINE MODEL
2.3.2 Information and materials flow
There are two substructures in supply chain management in terms of flow (Lewis & Talalayevsky, 2004): materials and information flow. The design of information flow has traditionally been a subsequent stage of designing the material flows in supply chain management (Lewis & Talalayevsky, 2004). The design of the materials flow generally dominates the design of supply chain management, whereas information flows help to reduce distortions in the chain.
mostly used for companies internally, whereas EDI is more used for buyer-supplier relationships (Welker et al., 2007).
2.3.3 Relationships and governance
Relationships are essential to manage the supply chain. To manage suppliers or customers, two distinct types of governance are discussed in the literature; contractual and relational governance (Cao & Lumineau, 2015). Contractual governance can be considered as the legal contract. This governance mechanism is defined as the extent to which the relationship is governed by the legal agreement (Cao & Lumineau, 2015). A relationship is governed by the legal agreement by explicitly stating the responsibilities of each party. Additionally, relational governance is defined as the extent to which a relationship is governed by sharing norms and having social relationships (Zhou & Xu, 2012), it is mostly described as trust and relational norms. Trust is defined as the degree to which a party has confidence in the other party’s integrity and credibility in the relationship (Cao & Lumineau, 2015). When trust is high in a relationship, both companies share the mutual morale that no detrimental situation will be abused by the other company, and that the other party acts in a favorable way (Cao & Lumineau, 2015). While relational and contractual governance are fairly distinctive mechanisms, they can complement each other in controlling relationships (Cao & Lumineau, 2015). Overemphasizing on one of both governance systems leads to a lower achieved performance. Yang, Su & Fam (2012) state in their research that simultaneous application of both governance systems leads to lower transaction costs, due to a lower possibility of contract breach or renegotiation.
2.4 Conceptual model
There are three main concepts established in the literature of this research: the considerations related to shaping the digital business strategy, the digital business strategy itself, and supply chain configuration. There are two distinct relationships in this research, these have been visualized in the conceptual model (Figure 2) as the two arrows Q1 and Q2.
Q1: What considerations do companies have in shaping their DBS in the context of digitization, and how do these considerations affect the DBS?
offerings, and that therefore a constant reconfiguration of strategies is needed. Yet, it is unknown how certain considerations drive or hinder changes in the digital business strategy.
Q2: In the context of increased digitization, how does the digital business strategy affect the configuration of the supply chain?
The second relationship under investigation is the effect of the digital business strategy on the supply chain configuration. Pagani (2013) stated in her research that companies structurally have to reconfigure its competences in order to capture the needed value creation for customers. Yet, value creation is a co-created output of a network of organizations (Frow et al., 2014). This network of organizations is in this research referred to as the supply chain.
3. METHODOLOGY 3.1 Research design
This research aims to investigate how certain considerations influence a (part of a) company its digital business strategy and how this strategy affects the supply chain configuration. Qualitative research has been done to fulfill the aim of this research, due to the exploratory nature of considerations and the unknown relationship between the DBS and SCC. More specifically, the chosen method for this study is multiple case study. Case study research is defined as: “A history of a past or current phenomenon, drawn from multiple sources of evidence.” (Leonard-Barton, 1990 in Karlsson, p. 167, 2016). Multiple case study was selected as the method for this research, since it is the appropriate study for answering ‘what’ and ‘how’ questions (Eisenhardt, 1989; Voss, Tsikriktsis and Frohlich, 2002), such as the one for this research. Moreover, a multiple case study method provides the researcher the opportunity to explore the specific phenomena in a real life context (Yin, 2004), which is useful for this research since the context of increased digitization has a high impact on the considerations that companies have in shaping the digital business strategy.
3.2 Research setting
The setting for doing research is the Dutch profit sector. The profit sector is suitable for this research since technological development in this sector has driven companies to change elements of their digital business strategy (Bharadwaj et al., 2013; Ritala et al., 2013).
3.3 Case selection
The digital business strategy and supply chain configuration of (a part of) companies is the unit of analysis. Decisions regarding the configuration of the supply chain and digital business strategy provide an insight in the considerations that were in place. These two concepts are suitable as a unit of analysis, as the digital business strategy provides an insight in the current understanding of the selected cases regarding digitization, and how the cases exploit the benefits of latest digital resources. The next step of this research is to check how the DBS has affected the supply chain configuration. This multiple case study research represents four different cases that will be analyzed to draw a reliable result. The collection of data for multiple cases helps to reduce observer bias as it increases the external validity (Karlsson, 2016). This study aims to achieve replication logic, in order to further enhance the external validity (Yin, 2004)
considerations that companies have in reshaping the digital business strategy. Therefore, these criteria form the basis to select the cases, as a consistent outcome in findings assures a more generalizable understanding of the considerations that companies have in reshaping their DBS. An overview of the case selection criteria can be found in the table below.
Case: DBS conception:
whether digital resources have been applied company-wide or per department DBS addresses scope? DBS addresses scale?
E-services Company-wide Yes Yes
Foodservice Company-wide Yes Yes
Orthopaedics Departmental No Yes
Foodservice Company-wide Yes Yes
TABLE 3. CASE SELECTION CRITERIA
Literal replication is expected to be found for Case 1, 2, and 4. Literal replication means to find similar results across multiple cases (Yin, 2004). This is achieved due to the fact that these selected Cases score the same on each of the three criteria: a company-wide DBS that both addresses the scope and scale of the company. The results of Case 3, the orthopaedics department, will be explained based on theoretical replication. Theoretical replication predicts contrasting results for predictable reasons (Yin, 2004). A departmental DBS, such as for Case 3, limits this Case in the sense that decisions regarding digital resources are made in isolation (Chen et al., 2010). The DBS is therefore having a less drastic impact on the company, and solely seeks to improve the efficiency and productivity (scalability) of the company (Bharadwaj et al., 2013). Case 3 is included in the research, as it is expected that different scores on the case selection criteria might lead to different considerations in shaping the digital business strategy. Lastly, a brief description of all Cases can be found in Appendix 2.2.
3.4 Data collection
The sources of evidence that will be used for this research are the following:
- Documents: which describe the supply chain configuration in terms of governance and materials/information flow;
- Documents: that provide technology benchmark reports to assess motives concerning digital resource usage;
- Observation: to observe the internal operations of a company as a part of their supply chain configuration;
- Interviews: to identify and sketch the supply chain configuration;
- Interviews: to identify considerations towards an adapted digital business strategy and possible changes for the supply chain configuration.
An overview of all data gathering with can be found in Table 4.
Concept Topics Case 1
(E-service) Case 2 (Food) Case 3 (Orthopaedics) Case 4 (Food)
Interviewee SC Manager &
Financial Manager & IT manager SC Manager Logistics Manager & SC Manager Director Supply chain confi- guration Network structure Relationships Interview (120 minutes) Interview (120 minutes) Observation (120 minutes) Interview (120 minutes) Observation (240 minutes) Interview (60 minutes) Governance Not present Documents:
- Service level agreements Documents: - Service level agreements Digital business strategy Scale Scope Interview (120 minutes) Documents: - Technology benchmark report - Company vision Interview (120 minutes) Documents: - Technology benchmarks - Strategy reports - Company vision - Company roadmap report Interview (120 minutes) Documents: - Technology benchmarks - Strategy reports - Internal briefing on technology - Internal reports Interview (90 minutes) Documents: - Technology criteria report - Company vision Conceptions Conside- rations Attitude towards technology Changes in value
Interview protocol
The interview protocol that had been established for the sake of this research can be found in Appendix 1. The interview protocol had been established beforehand to assure reliability during the phase of data collection (Karlsson, 2016). Two interviews were conducted, in which the first one was unstructured and the second one was structured. The aim of the first unstructured interview was to identify the supply chain configuration. The second, structured, interview concerned the identification of the DBS, and the considerations relating to the DBS. A detailed overview of how the interviews were built up can be found in Appendix 1.1, followed by the two interviews in Appendices 1.2 and 1.3.
3.5 Operationalization of variables
One of the important elements in sustaining the construct validity is, according to Stuart et al. (2002), to operationalize the variables. This operationalization can be found in Appendix 2.1.
3.6 Data analysis
The interviews have been recorded and transcribed before starting the process of analysis. The first unstructured interview provided the supply chain configurations of all selected cases. These were sketched together with the interviewed experts and can be found in Appendix 3.
The next step was to retrieve data concerning the digital business strategy and related considerations. First, all interviews were conducted and recorded. Second, all voice recordings were transcribed and reduced. Third step was the deductive coding process of the transcribed interviews, based on the established operationalization of variables (Appendix 2.1). The software package ATLAS.ti was applied to label the data. After having performed the first coding based on the literature review, an inductive coding process was applied based on the codes that emerged from the retrieved data. Then, the labels were compared and grouped; representing the second order codes. This represented the within case analysis, this analysis helps to get more familiar with the patterns of each of the selected cases (Eisenhardt, 1989). The result of the coding process is the coding tree, which can be found in Appendix 2.3.
3.7 Safeguard measures
This methodology section poses several safeguard measures to ensure validity and reliability of this research. These can be found in the table below.
Type Measure
Internal validity Triangulation
Reliability Interview protocol interview 2
Generalizability Replication logic: literal replication & theoretical replication
Multiple cases Construct
validity
Operationalization of variables
4. FINDINGS
This section of the report addresses the findings that have been retrieved from the data analysis. The build-up of this section is the following: first, the digital business strategies of the selected cases will be discussed. These will be linked to the considerations that the companies had while shaping this strategy. Last section addresses the DBS and its implications on the configuration of the supply chain.
4.1 Digital business strategy (DBS)
There is a pattern in the stream of events of how the execution of digital resources has been leveraged for each of the four cases, which means that there is a strategy. This section addresses whether digital resources are applied company-wide (cross-functional) or solely functional for departments. Another element of the digital business strategy that has been retrieved from the data analysis is that in each Case management had to decide between: to favor custom-built digital resources, or to acquire standard ones.
Moreover, digital resources are leveraged company-wide for each of the cases, except for Case 3. Case 3, the orthopaedics department, leverages its digital resources departmentally: "Our digital resources are used for the whole department of orthopaedics." (Logistics manager, Case 3). Yet, the department of orthopaedics applies the digital resources in a cross-functional fashion, meaning that multiple sub-departments make use of the resources: “The orthopaedics specialists are informed concerning patients based on the EPD. In the future, the EPD will provide input for ERP concerning the ordering of needed materials; meaning that it affects procurement, the surgery department, finance etc.” (Logistics manager, Case 3). The combination of multiple digital resources has to provide the input (information) for the execution of tasks for various sub-departments within the orthopaedics-department.
4.1.1 Flexibility
orders. 4.1.2 Scope
The scope of the cases has been affected by digital resources for Cases 1, 2 and 4. First of all, companies had been able to better monitor changes in the market. This is due to the fact that companies are more proactive with data: “The patient has to provide the permission that his data will be gathered in the database. His or her preferences help to generate big data [...] What is the eating behaviour, what is this type of patient allowed to eat? Then we adjust our services to the needs.” (General manager, Case 4). The gathering of data was identified as one of the companies’ key considerations, this is further discussed in section 4.2.1. Furthermore, Case 3 did not sense a change in the scope of the orthopaedics-department as a result of digital resources. This can be explained by the fact that their overall strategy is ‘to have significant impact on healthcare’ (Company report, Case 3), and that their core service is not affected by the discussed departmental-wide digital resources (EPD, ERP and scanning).
Moreover, the flexibility of the resources of Case 1, 2, and 4 help them to enter new markets: “We have to make sure to be as flexible as possible with our digital resources. For example, our website needs to have the option to add new categories for new markets [...]. Being flexible stimulates to be active in different markets.” (IT Manager, Case 1). This relates back to having custom-built digital resources. Case 1 is flexible to adapt or diversify offerings if needed, by building their own resources. An overview of the DBS per Case can be found in the table below.
Concept Sub-dimension Case 1 Case 2 Case 3 Case 4
Flexibility Custom-built vs. standard digital resources C C S C
Scope and digital resources
More diversified portfolio of products/services
X X - X
Being able to monitor changes in the market and respond accordingly
X X - X
Enter new markets X X - X
Scalability and digital resources
Improved efficiency through digital resources:
X X X X
Efficiency by making less errors due to digital resources
- X X -
Efficiency by having all data in place to do the work
X X X X
TABLE 6. DIGITAL BUSINESS STRATEGY
4.1.3 Scale
shorter time frames. Efficiency had been achieved for the cases in two different ways: making fewer mistakes, having all the information to do the work.
All Cases faced changes regarding the scalability-component of the digital business strategy. This is exemplified by Case 2, the food service company acquired an order picking program based on novel order-picking insights; picking based on pictograms that contain all the information that is needed to perform the task. A third-party digital resource provider facilitated this program, it has been developed based on the needs of Case 2: “Our system of order picking helps us to work way faster due to its simplicity, [...] the process is error-proof, as the program does not accept any scanning mistakes.” (Supply chain manager, Case 2). This novel digital resource was custom-built together with an external partner based on their insights, which resulted in an error-proof order picking process. Case 3 acquired a program to register all inventory into their ERP-system: "To understand the impact of such technologies is actually a no-brainer, we have to have that specific technology. Why? To not have missing materials, to guarantee patient safety; those are always the most important." (Logistics manager, Case 3). There are less missing materials as a result of the resource, and the logistics manager of Case 3 is provided with all the information required to do execute his tasks: “I perform the analyses and I can think three steps ahead as a result of the new systems. I have all the data in place” (Logistics manager, Case 3). Efficiency is mostly affected positively by the combination of making less mistakes and having all the information in place. An overview of what elements of scalability have been touched upon per Case can be found in Table 5.
4.2 Considerations regarding the DBS
This study aims to explore the considerations that companies have in shaping digital business strategies. The considerations that derive from the current context of digitization can be classified into two categories: Considerations that drive change and considerations that hinder change.
4.2.1 Considerations that drive change
Concept Considerations DBS: Custom-built digital resources DBS: Scope DBS: Scale Attitude regarding digital resources Inflexibility of previous/current digital resource C1,C2,C4 C2 C1,C2,C3,C4 Adoption experiences - C2,C4 - Perceived benefits - C1,C2,C4 C1,C2,C3,C4 Suppliers’ commitment - C4 - Changes in value creation
Enhance value creation
- C4 -
Extend value creation
C1,C2,C4 C1,C2,C4 -
Data Data-driven - C1,C2,C4 C1,C2,C3,C4
TABLE 7. CONSIDERATIONS THAT DRIVE CHANGING THE DBS
One of the dominant driving forces of change that have been found during data analysis are the inflexibility of previous/current digital resources. This is for example expressed by Case 1: “Our supply chain-system is outdated. We have acquired it more or less 12 years ago.” (IT Manager, Case 1). This system is the reason that Case 1 does not have supply chain planning, whereas the e-service company wants to custom-built a new one for the future, in order to be more efficient by having all data in place. Additionally, Case 2 faced the same situation regarding a dirent digital resource: “The website that we had before was good, yet it was quite traditional. Customers were satisfied with the order-platform but we could not show customers all the information. [...] At a sudden moment we ran out of options regarding our previous website.” (Supply chain manager, Case 2). Case 2 developed a new order-platform (website) to facilitate the customers with more information. Their experience with the previous digital resource that lacked flexibility helped them to change their website. The experiences regarding inflexible digital resources had been the driver for all Cases to make changes in their DBS, mostly concerning flexibility (custom-built/standard digital resources) and scalability.
provide a convenient ordering platform with lots of information.” (General manager, Case 4). The food service company for patients wants to provide customers with a convenient customer-portal that facilitates ordering and added services (recipes). Value creation of Case 4 is enhanced in the sense that services are added through digital resources, such as recipes. Value creation is extended with the help of digital resources, as the customer-portal allows customers to order their meals from home. Moreover, the Cases 1 and 2 extended their value creation as well, since they added products and services to their offering with the help of digital resources. Extending the value creation is linked to the scope of the company, which has been diversified based on this consideration. Moreover, extending the value creation is related to the digital resources that are in place. Case 1, 2 and 4 choose to acquire custom-built digital resources in order to sustain flexible to change elements of the value creation for the future.
Case 1, 2 and 4 want to be data-driven, to be able to monitor changes in the market and to diversify their offering of products and services. This is therefore directly related to the scope of the digital business strategy. Being data-driven could lead to a more differentiated portfolio of products and services, as more knowledge concerning customers’ preferences can been identified: “We used to supply the simple cafeteria, currently we supply star-restaurants. We identified their needs with the help of our digital resources.” (Supply chain manager, Case 2). This is supported by Case 1: “We think to know what the customer wants, based on our digital resources. That’s having an impact on our value offering to the customer.” (IT Manager, Case 1). Case 1 wants to diversify their portfolio in order to become the biggest personalized gift shop in the Netherlands. The digital resources provide them with an idea of how to diversify their portfolio. Being more proactive based on the gathered data seems to have an effect on the scope of companies, it also helps companies in their scalability. This is directly linked to the element of being efficient because of having all data in place. This has been found for all of the four Cases: “Our digital resources is the method to get more in control with our stock.” (Supply Chain Manager, Case 3). This is directly linked with the scalability element that has been described in section 4.1.3, in which the Logistics manager notes that he currently has all the data in place to do his work.
4.2.2 Considerations that hinder change
Concept Considerations Case 1 Case 2 Case 3 Case 4 Considerations that hinder change Need for compatibility X X X X Perceived difficulties with implementation - - X - Privacy issues - - X -
TABLE 8. CONSIDERATIONS THAT HINDER CHANGE
Each of the selected cases perceives compatibility as a consideration relating to its DBS. Compatibility has some advantages, as the combination of multiple digital resources results in a richer amount of data (Case 1-4). This is illustrated in the Product Information Management-system of Case 2 (PIM): “PIM helps us to process all product-information. Suppliers feed all their product information in this module, which is then shown on our order-platform (website). The PIM is capable to process high amounts of information, and it’s compatible with our systems.” (Supply chain manager, Case 2). Suppliers process their information on the PIM-system, which is then shown to the customers on the order-platform of the food service. This has a positive influence on the scalability of the company, as Case 2 does not need to process any product information of its suppliers on the order-platform. Yet, compatibility hinders the flexibility of the company, since every new digital resource needs to comply with current technology. A dominant consideration for Case 2 is compatibility with their ERP-program: “We have a complex ERP-system, which is the backbone of the company. We acquired it 30 years ago and developed it according to our needs. [...] Maybe, the ERP-system runs out of all possibilities. That could be in half a year, or ten years. We don’t know.” (Supply chain manager, Case 2). As the ERP-system is the backbone of their company, it feeds all other digital resources. Therefore, new digital resources always have to be compatible with this program, which means that the company is less flexible in acquiring the needed resources. The other companies require compatibility as well. Compatibility is a reason for Case 1, 2 and 4 to custom build digital resources by yourself, or acquire custom-built digital resources. Moreover, Case 3 has perceived difficulties in setting up new digital resources, which hindered their acquisition of the required digital resources. The same accounts for the issue of privacy. This has not been found for any of the other cases and can be explained by the privacy-sensitive data of patients.
4.3 Relationship of DBS with SCC
network structure of the selected cases is partly affected by the digital business strategy. Case 2 and 4 have a multi-sided platform structure for certain elements of their offering of products and services, in which the company provides a platform to facilitate communication between the customer and supplier. This is facilitated by one of the digital resources of the company: “Digital resources make it possible to extend our supply chain, and deliver at homes. Our supplier delivers directly to the customer.” (General Manager, Case 4). This extension of the supply chain has been illustrated in Appendices 3.4.1 (pipeline model) and 3.4.2 (multi-sided platform). Case 2 and 4 have a hybrid model, which means that both the traditional pipeline as multi-sided platform model have been applied. Case 2 states the following regarding their multiple types of supply chain network structures: “We have a very flexible supply chain. Customers can pick up their products at the self-service warehouse. Or sometimes suppliers deliver directly to the customers.” (Supply Chain manager, Case 2). In this sense, the DBS had an effect on both the supply chain network structure, as well as the scope of the company, since the portfolio of products/services was diversified which leads to a hybrid supply chain network structure.
Yet, the need for having diversification in the portfolio does not always mean that a hybrid, or multi-sided platform, structure is applied. This has been illustrated in Case 1, Appendix 3.1. The diversification of the portfolio of Case 1 did not lead to a different market structure than the traditional pipeline model. This is due to the fact that they simply raise capacity in order to meet the needs of a diversified portfolio. The e-service company wants to offer personalized gifts and services: “We want to sell post cards with every other gift, we produce these post cards ourselves. Therefore, every order passes our head-office before going to the customer.” (Supply chain manager, Case 1). The multi-sided platform supply chain network structure is in this way not possible to maintain, since suppliers do not directly deliver to customers. One of the reasons behind not changing the supply chain network structure of Case 1 could be the lack of knowledge regarding their supply chain performance: “We do not have a clear picture of our supply chain performance.” (Supply chain manager, Case 1).
another (compatibility with external resources). Different digital resources are compatible with each other, and a higher number of supply chain partners are real-time informed: “Supply chain planning is essential in this sense, we order via an integrated module of a supply chain’s partner’s planning.” (General Manager, Case 4). Case 4 benefits from an integrated module that is facilitated by external partners, and therefore generates an accumulated quantity of data. This impact of having all data in place on the supply chain configuration has been retrieved for each of the four Cases.
5. DISCUSSION
This research aimed to answer the question what considerations companies have in shaping the digital business strategy within the context of digitization, and how the digital business strategy is having an effect on the supply chain configuration of companies. Findings have shown that there are considerations that drive, or hinder, changes in the digital business strategy. There are four considerations that have a positive effect on the attitude regarding digital resources, one consideration regarding changing the value creation towards customers, and one consideration regarding the use of data. A remarkable consideration that was found to have a hindering effect on changing the digital business strategy is compatibility. The effect of the digital business strategy on the supply chain configuration of companies is twofold. First effect of the DBS on the SCC is the change in the supply chain network structure as a result of changes in the scope of the company. Second effect is the smoother information streams as a result of the scalability-component of digital business strategy. The following section will elaborate on these findings.
5.1 Theoretical implications
This section of the report is divided into two sections. First section addresses the considerations and digital business strategy, the second section addresses the effect of the digital business strategy on the supply chain configuration.
5.1.1 Considerations and DBS
Considerations that drive change
The literature section of this research proposed that there are five different considerations that companies have which influence the attitude regarding digital resources, and could therefore have an effect on the digital business strategy of a company (Kai-ming Au & Enderwick, 2000; Nguyen, Newby & Macaulay, 2013). Two of them are supported by multiple cases within this research: adoption experiences, and perceived benefits. Earlier adoption experiences helped Case 2 and 4 to change elements of its scope, earlier experiences in setting up new digital resources has provided them guidance in diversifying their products and services. This is in line with the article of Kai-ming Au & Enderwick (2000), in which they state that when the accumulated technical background and knowledge of the technology user is high, the attitude towards technology adoption is positive. This is due to the fact that the company is more capable to oversee the technological requirements and benefits of digital resource. The same can be said for the consideration of perceived benefits, since the positive expectation of prospective digital resources contribute to a positive attitude (Kai-ming Au & Enderwick, 2000), and eventually influences the scope and scale of a digital business strategy. Moreover, the inflexibility of current/earlier digital resources has shown to have a positive effect on changing the digital business strategy. This consideration had not been identified by Kai-Ming Au & Enderwick (2000), yet other research has found that this consideration has an effect on especially small- and medium enterprises (Nguyen, Newby & Macaulay, 2013). This is due to the fact that inflexible technology has to be upgraded in order to remain competitive or enhance the innovative capacity (Nguyen et al., 2013). This research supports this finding, changes in the scope could lead to remaining competitive, since a more differential value is created.
Proposition 1: The more data-driven companies are, the better insight in business opportunities are generated, the more diversification in the portfolio of products and services is established.
The next section addresses the reversed effect of considerations on the digital business strategy: the consideration that hinders change.
Consideration that hinders change
Moreover, this study has shown that compatibility is one of the hindering considerations in reconfiguring the digital business strategy. This is in contrast with other articles, which underline positive effects of compatibility (Ceric, 2015; Kai-ming Au & Enderwick, 2000; Wu, Yeniyurt, Kim & Cavusgil, 2006). Compatible digital resources seem to have a positive effect on the value creation of a company (Ceric, 2015), and it provides companies the opportunity to have richer data, since different forms of data supplement each other. Companies’ capabilities are influenced by compatibility, since compatibility helps to organize internal and external processes more effectively (Wu et al., 2006). This research has shown that compatibility is not solely beneficial. The need for compatibility can hinder companies in the reconfiguration of their supply chain, since a web of resources is harder to replace than individual ones. This is exemplified by Case 2, since this company had acquired an ERP-system 30 years ago. This resource is the backbone for all of its processes; it feeds all other resources with information and might run out of options within a couple of years. Yet, the company does not want to replace it, since the digital resource is their foundation in its web of digital resources. Their resistance to change from ERP-system is in line with Downes et al. (2013), as one cannot oversee all characteristics of new digital resources beforehand. It is unknown whether a new ERP-system would comply with the need of compatibility, as the current system is doing. This resistance results into a lower flexibility to reconfigure their supply chain to future needs. All four cases face the hindering effect of compatibility, and are therefore required to acquire or create custom-built digital resources. This is due to the fact that standard solution does not match with the strategy. This can be translated into the following proposition: Proposition 2: The more flexible a company wants to be, the more custom-built resources it must create/acquire, to lower the hindering effect of compatibility-considerations.
5.1.2 DBS and its effect on SCC
scope is to offer additional services via their website, which are delivered at home. The food service company adapts the supply chain configuration by maintaining a multi-sided platform structure for this specific service, whereas for their earlier operations they maintain a traditional pipeline model. They have a hybrid supply chain network structure in order to create the right value for different customer groups. Case 1 does not maintain a hybrid supply chain network structure, which could be explained by a lacking insight in their supply chain performance (IT Manager, Case 1). Case 1 raises its capacity when needed, to cope with the diversifications in its portfolio of products and services. Chandra & Grabis (2016) state that maintaining a traditional supply chain network structure is expensive due to the fact that more resource requirements are needed, since boundaries are static and fixed. This could be the situation for Case 1.
Moreover, the information streams in the supply chain configuration of companies seem to benefit from the scalability element of the digital business strategy. Companies aim to have all data in place, to efficiently perform work. New digital resources facilitate the information flow between supply chain partners. All selected Cases experienced this and aim to achieve an efficient stream of information. Literature states that significant cost reductions can take place as a result of digital resources managing the information flow in the supply chain (Christiaanse & Kumar, 2000; Klein & Ben-Elia, 2016). Christiaanse & Kumar (2000) state that special programs must be acquired for multiple supply chain partners in order to generate a rich amount of data. This research adds that companies nowadays seem to seek the connection between existing digital resources, to have richer data, because different forms of data supplement each other.
5.2 Practical implications
Some elements of this research could be taken into account for practical manners when reshaping DBS or SCC within the context of increased digitization. First, this research provides an insight how the DBS can have an effect on the scope and scale of a company. Data has provided companies with the opportunity to discover new opportunities and, consequently, aim to steer their business in the direction that customers want. The consideration to operate more data-driven has a positive effect on the diversification of the portfolio of a company. This is due to the increased insights that companies have in customers’ demand and therefore adjust their offering.
digital resources, rather than having standard inflexible solutions. This might have an impact on the costs of the company.
5.3 Limitations and future research
This research poses several limitations, even though it has been designed carefully. First, the need for research relating to the DBS and SCC was established by best-practice companies, such as Über, Netflix etc. These companies have succeeded in translating their digital resources and supply chain configuration into successful performance of their business. This research provides an insight in the considerations that companies have in shaping their DBS and SCC, however performance has not been taken into account. Further research could be dedicated to investigate which considerations relating to the DBS and SCC have an effect on performance. Additionally, this research is solely taking into account the perspective of the selected cases. It is conceivable that the customer may perceive the value created by the company differently than the company itself. Future research could investigate the effect of new digital business strategies from multiple perspectives, to generate a more detailed understanding.
6. CONCLUSION
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