How to configure an organization’s digital operating model during digital transformation and digital innovation to achieve sustainable competitive advantage

The environment in which firms operate is becoming increasingly turbulent (Vial, 2019). Innovation and transformation offer numerous opportunities for organizations to cope with turbulent business environments (Alsufyani & Gill, 2021; Hund, Wagner, Beimborn, & Weitzel, 2021; Vial, 2019). The concept of an operating model (OM) is frequently used by organizations when making decisions for innovation and transformation (van der Heijden, Viaene, & Van Looy, 2022). An OM can be defined as a “representation of combinations of resources (e.g., organizational structure, business processes, technology) that show the transformation of an entity to an improved state for the customer” (van der Heijden et al., 2022, p. 110). A domain-specific OM that is focused on digital innovation (DI) and digital transformation (DT) is called a digital operating model (DOM) (van der Heijden et al., 2022). DI has been defined as “the creation or adoption, and exploitation of an inherently unbounded, value-adding novelty (e.g., product, service, process, or business model) through the incorporation of digital technology” (Hund et al., 2021, p. 6)”. DT has been defined as “a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies” (Vial, 2019, p. 121). Central in both definitions of DI and DT is a digital technology and an action to apply, being it create, adopt, exploit (in case of DI), or combine (in case of DT). Underlying these two phenomena is the struggle between “old” and “new” (Drechsler, Gregory, Wagner, & Tumbas, 2020): changing the “old”, such as existing capabilities and well-established procedures, to enable the “new”. This is where DOM can play a role. Building upon the definition of an OM, a DOM should provide guidance to organizations in configuring resources to transform from old to new using digital technologies. The success of this transformation comes down to the extent to which the strategy that it seeks to pursue is aligned with its design and structure, as posited by structural contingency theory (Lawrence & Lorsch, 1967). This alignment between strategy and performance is described as ‘‘fit’’ in the strategic management literature (Venkatraman & Prescott, 1990). This fit is what we refer to as a configuration. The definition of a configuration can be found in the literature on configuration theory and posits that “for each set of strategic characteristics, there exists an ideal set of organizational characteristics that yields superior performance” (Vorhies & Morgan, 2003, p. 101).  One of the reasons why it is so difficult for organizations to transcend from old to new can be found in the theory on structural inertia. Structural inertia proposes that inertia develops by institutionalizing operational routines that are designed to increase reliability (i.e., low variance of performance, e.g., regarding the quality of products) and accountability - the ability of organizations to account rationally for their actions (Hannan & Freeman, 1984). Literature, however, has identified two factors under which organizations do change their structure: 1) poor performance such that its very existence is in danger and 2) the appearance of new technologies. The latter factor is the driver for our research in which we would like to examine how organizations implement DI and DT by configuring their DOM and break through the negative effects of structural inertia.