"Better Together" : Right Blend of Business Strategy and Digital Transformation Strategies

The area of digital transformation is increasingly drawing the attention of academicians and professionals. However, its relationship with business strategy has not been explored in the literature. To this end, we review the literature and develop a theoretical framework, firmly grounded in strategic choice and dynamic capability view theories, that explores how firms having different business strategies develop their own digital transformation strategy (the four dimensions; use of technologies, changes in value creation, structural changes and financial aspect) and implement it successfully. In addition, the impact of digital transformation implementation on open innovation, firm performance and competitive advantage is studied. Based on a sample of 215 responses from a survey with Bangladesh organizations, we validate the theoretical model and test the research hypotheses using structural equation modelling. Findings reveal business strategy is a very important determinant of implementing digital transformation strategy. Specifically, prospectors are associated with better use of technologies, changes in value creation, structural changes and financial aspects than defenders. Also, prospectors are associated with better implementation of the digital transformation than defenders. Last, digital transformation implementation positively influences open innovation, firm performance and competitive advantage