Design Capital and Design Moves: The Logic of Digital Business Strategy

Abstract

As information technology becomes integral to the products and services in a growing range of industries, there has been a corresponding surge of interest in understanding how firms can effectively formulate and execute digital business strategies. This fusion of IT within the business environment gives rise to a strategic tension between investing in digital artifacts for long-term value creation and exploiting them for short-term value appropriation. Further, relentless innovation and competitive pressures dictate that firms continually adapt these artifacts to changing market and technological conditions, but sustained profitability requires scalable architectures that can serve a large customer base and stable interfaces that support integration across a diverse ecosystem of complementary offerings. The study of digital business strategy needs new concepts and methods to examine how these forces are managed in pursuit of competitive advantage. We conceptualize the logic of digital business strategy in terms of two constructs: design capital (i.e., the cumulative stock of designs owned or controlled by a firm), and design moves (i.e., the discrete strategic actions that enlarge, reduce, or modify a firm's stock of designs). We also identify two salient dimensions of design capital, namely option value and technical debt. Using embedded case studies of four firms, we develop a rich conceptual model and testable propositions to lay out a design-based logic of digital business strategy. This logic highlights the interplay between design moves and design capital in the context of digital business strategy and contributes to a growing body of insights that link the design of digital artifacts to competitive strategy and firm-level performance.

Beyond Business-IT Alignment - Digital Business Strategies as a Paradigmatic Shift: A Review and Research Agenda

“…Organizations that possess digital options but are unable to leverage these assets through their processes, will likely fail to capitalize on digital opportunities [13,21,75]. Taken together, these insights infer that business processes and capabilities become a means through which IT creates value, creating a new notion of alignment.…”

“…Authors emphasize the point that the networked cocreation of value infers a change of organizational structures among factors towards digital ecosystems [21,55,75]. As organizations are increasingly dependent on the environment and its resources, Resource Dependence Theory (RDT) [60] might provide a suitable conceptual lens.…”

“…Matt et al [45] highlight the need for a continuous reassessment of the underlying assumptions and the overall transformational progress based on organizational outcomes, however, without providing concrete recommendations about implementation. Conceptually related to the aforementioned path-dependence of organizations, Woodard et al [75] provide an empirical approach to assess "design moves" which enlarge, reduce, or modify the number of digital artifacts by evaluating the range of available options and technical debt resulting from prior business outcomes.…”

“…More recently, the concept of digital business strategies (DBS) came to the fore, postulating a merger of business and IT strategies as a prerequisite for driving innovations and remaining competitive [8,50]. This phenomenon constitutes a global paradigmatic shift in understanding strategic management in the age of digital economics [70], accounting for the transformation of products, services, processes, organizational structures as well as business models through innovative technologies [52,65,75]. Since business and IT strategies should no longer solely "complement" [11:300] each other, it is imperative to assess how the fusion of business and IT affects organizations and their strategizing processes.…”

How it outsourcing impacts on value creation of manufacturer?

“…In their model, each gradation contributes a special ratio to the entire value creation, while value seizing by contributors relies on participant's relative contracting authority. [5][6][7][8][9] Woodard et al define digital enterprise strategies as a planned competition by e-commerce enterprises through distributing digitally enabled products or services [10]. Bharadwaj et al recognize four key areas that influence our reasoning on digital enterprise strategies and that help create a structure to describe the next generation of perceptions [11].…”