Traditional agencies on bridges: How is digital transformation changing business models?

Abstract

Digital technologies produce new strategic and organizational challenges for incumbent firms that require major digital transformation (DT) processes, leading to the evolution of business models (BMs). Contributing to the research stream on DT and BM evolution, this study explores which technologies have the most relevant effect on core BM dimensions, i.e., value proposition, value creation, and value capture, by investigating both the consequent themes and intensities of change in these dimensions. A valuable context for analysis was chosen: the advertising industry and traditional communication agencies, namely, creative and media agencies. Based on 38 in-depth interviews with senior communication professionals and qualitative content analysis, we propose a comprehensive reading of (1) the impact of specific technologies on different BM dimensions and components and (2) the themes and intensities of change in creative and media agencies’ BM dimensions. Finally, we outline an interpretative framework, identifying two different paths for incumbents: outside-in BM adaptation and inside-out BM innovation. This study therefore offers two academic contributions. First, it overcomes the vagueness of previous investigations that considered the effects of digital technologies in general terms, and it also resolves the narrow scope of research that focused only on the impact of one specific technology. Second, by deepening the understanding of the joint evolutions and intensities of change across all three BM dimensions, this study has widened the limited scope of previous contributions on one BM dimension. By doing so, it offers a comprehensive reading of BM dynamics due to DT.