HKUST Business School Magazine

Driving digital transformation Established companies often face unique challenges when pursuing digital transformation, especially when it involves disruptive innovations that require difficult trade-offs. For incumbents, assessing the impact of new technologies on existing capabilities is essential. They must determine whether a technology is competence-enhancing, improving existing capabilities, or competence-destroying, rendering current skills obsolete. This understanding will inform strategic decisions and resource allocation. Additionally, incumbents should evaluate the strategic significance of new technologies by asking the right questions of the right people. Engaging with fringe market customers, for example, can provide valuable insights into emerging trends and unmet needs. Organizations must also focus on creating initial markets through experimentation. This could involve piloting new products or services in niche markets before launching them on a larger scale. By identifying and developing these initial market opportunities, incumbents can mitigate the risks associated with digital transformation. To succeed, established companies must be cautious of common pitfalls, such as delayed participation, sticking to familiar practices, reluctance to fully commit, and lack of persistence 6 . These traps can hinder progress and prevent organizations from seizing digital opportunities. Investing in expanding the organization’s peripheral vision and fostering a culture of learning is essential for identifying emerging trends and potential disruptions. By maintaining flexibility in their strategies, incumbents can adapt to changing market conditions and pivot when necessary. Additionally, granting autonomy to new ventures focused on emerging technologies is crucial for success. Allowing teams to operate independently fosters innovation and creativity, free from the constraints of traditional organizational structures. This autonomy empowers teams to experiment, iterate, and develop solutions that align with evolving customer needs and market dynamics. New entrants, on the other hand, face distinct challenges in driving digital transformation, particularly regarding resource constraints and market positioning. New entrants must decide between two primary approaches: technical framing and market framing. Technical framing involves improving existing products or services using digital technologies to make themmore appealing to mainstream customers. This approach requires anticipating competitive responses from incumbents and safeguarding intellectual property to maintain a competitive edge. Conversely, market framing focuses on identifying unserved or underserved customer segments that incumbents overlook. This strategy allows new entrants to carve out niches in crowded markets and establish themselves as viable competitors. For technical framing, new entrants should be prepared for competitive responses from established players and imitators. Protecting innovations and intellectual property is crucial to maintaining a competitive advantage in the marketplace. Additionally, engaging in ongoing innovation efforts can help new entrants establish temporary competitive advantages that can be leveraged for growth. For market framing, new entrants must address the liability of newness, which can hinder credibility and customer trust. Being attuned to environmental changes and stakeholder sentiments is vital for adapting strategies effectively. New entrants should also carefully evaluate social pressures and respond appropriately to maintain a positive brand image. By understanding the unique challenges they face, new entrants can position themselves for success in the digital landscape. Insight Biz@HKUST 36