Digital transformation in incumbent companies: a qualitative study on exploration and exploitation activities in innovation

Abstract

Digital transformation is a pivotal strategic pillar for companies. Despite its relevance, incumbent companies still face challenges in implementation due to the complex character of transformation processes. We provide a framework serving as guidance for leaders of digital transformations. Based on an explorative research design, we conducted 33 semi-structured interviews with experts of digital transformations of incumbent companies. Our findings indicate that leaders need to understand the terminologies related to exploration, exploitation, and digital transformation, and the complex interaction between all three areas. This includes digital literacy and being aware of differentiated treatment of exploration and exploitation in innovations and the relevance of both. Leaders must acknowledge that industry and organizational characteristics influence organizations’ tendencies towards exploration or exploitation in innovations. Exploration in digital transformation is about using digital technologies to rethink business models. Using digital technologies to optimize existing processes, products, and IT infrastructure is associated with exploitation. In sum, we need different target settings and approaches for the required activities.