Identifying Digital Transformation Paths in the Business Model of SMEs during the COVID-19 Pandemic

Anjar Priyono,Vera Nur Aini Oktaviani Putri,Abdul Moin

doi:10.3390/joitmc6040104

Abstract

The objective of this study was to analyze how small and medium enterprises (SMEs) cope with environmental changes due to the COVID-19 pandemic by pursuing the business model transformation with the support of digital technologies. To achieve the objective, this study used a multiple case study design with qualitative analysis to examine the data obtained from interviews, observation, and field visits. Seven manufacturing SMEs from Indonesia were selected using a theoretical sampling technique, with the purpose of achieving some degree of variation to allow us to undertake replication logic. Our analysis demonstrates that SMEs adopt a different degree of digital transformations, which can be summarized into three paths, depending on the firms’ contextual factors. First, SMEs with a high level of digital maturity who respond to the challenges by accelerating the transition toward digitalized firms; second, SMEs experiencing liquidity issues but a low level of digital maturity who decide to digitalize the sales function only; and, third, the SMEs that have very limited digital literacy but are supported by a high level of social capital. This last group of firms solves the challenges by finding partners who possess excellent digital capabilities. The qualitative case study method allows us to conduct in-depth and detailed analysis, but has thin generalizability. To address this limitation, future research can use a survey covering various industries to test the proposed theory that has resulted from this study, so that the generalizability can be assured.

Highlights

The COVID-19 pandemic has caused dramatic environmental changes that encourage firms to adopt digital technology on a wider scale and under time pressure
These are presented as codes, themes, and dimensions, and from here, we identified strategies for carrying out digital transformation, which is the answer to the second research question
All participants involved in this study agree that the impact of implementing digital transformation has made the firms more agile, which has resulted in more flexible resource allocation

Summary

Introduction

The COVID-19 pandemic has caused dramatic environmental changes that encourage firms to adopt digital technology on a wider scale and under time pressure. Employees who work remotely have increased the need for firms to urgently undertake digital transformations; otherwise, the firms cannot operate properly [2,3]. In times of disruptive changes, such as many firms still assume normal conditions in their planning process and implement annual or multi-year planning. The plan that results from this approach can still be used but has much less relevance [4], while an emergent approach with a flexible strategy is viewed as more relevant [5]. The traditional linear approach, which refers to long-term strategic planning, is replaced by an iterative approach which requires a calibration between execution and planning [6]

Objectives

Results

Discussion

Conclusion