Abstract
The COVID-19 pandemic has intensified the digitization of traditional businesses. In the retail sector, e-commerce played a fundamental role and promoted major changes in the consumer pattern. This evolution and its impact can be studied through the digital transformation lens, which is a multidisciplinary and holistic concept that encompasses a new strategy and new ways of strategizing. The present study aims to describe the digital transformation strategy implementation path at a Brazilian pre-digital retail company and discusses the role the COVID-19 pandemic had played. Moreover, the case highlights important strategic issues and provides the opportunity to analyze whether it is a strategic process or a strategic practice. Thus, it can enlighten which theory best supports DTS studies. This study also increases the understanding of the strategic configuration of digital transformation embracing context, process, and outcomes. And it also sheds light on the dilemma between brick-and-mortar stores and digital ones.
TopOrganization Background
The retail sector is central in all economies, and it occupies a privileged position near customers. The trade occurs when a business sells a product or service to an individual consumer for his or her use. Therefore, it can catch firsthand changes in consumer preferences. It is the heart of a complex value chain that includes storage, logistic, legal transactions, advertising, and so on. The retail sector is also very diversified, with many business models, but lately, the central discussion point has been the pros and counts of a brick-and-mortar store and virtual business channels (Reinartz, Wiegand & Imschloss 2019).
E-commerce has been a phenomenon that promotes major changes in consumption patterns, that have created real economic giants like Amazon (Baker, 2021; Verhoef, Broekhuizen, Bart, Bhattacharya, Dong, Fabian & Haenlein, 2021). In the strategic arena traditional companies needed to face innovative fast-growing digital-born entrants (Verhoef et al., 2021) for a while. However, this arena has changed again (Baker, 2021). The omnichannel tendency combines the shopping experience in brick-and-mortar stores with a variety of digital channels to increase retailer’s differentiation and leverage competitive edge (Sopadjieva, Dholakia & Benjamin, 2017). It hinges on the premise that “Consumers are more likely to trust a brand they have seen in the real world”. Because of it, born-digital businesses have started to create brick-and-mortar stores (Baker, 2021, p. 3).
Meanwhile, the COVID-19 pandemic has intensified the digitization of traditional businesses. Thus, the e-commerce giant Amazon continues to grow but lost market shares in 2020. The pandemic has influencing market dynamics, but it didn’t change digital evolution paths: “Many of the perceived Covid winners such as e-commerce, videogame and streaming media companies have simply been pulled a few years forward into an inevitable future. Their destiny did not change.” (Baker, 2021, p.2).
This evolution can be studied through the digital transformation lens, which is a multidisciplinary and holistic concept that encompasses a new strategy (Verhoef et al., 2021) and new ways of strategizing (Chanias, Myers & Hess, 2019; Correani, De Massis, Frattini, Petruzzelli & Natalicchio, 2020). Although SAP, a renowned technology company, has estimated that 84% of global companies regard digital transformations as a critical issue (Chanias et al., 2019), it is still a new trend with no consensus about what it is in business (Schallmo & Williams, 2018). Moreover, European Union (EU) has assumed the digitalization of the economy as a 2030 agenda goal based on the assumption that it will be the next major growth driver for the region, helping to fulfill integration gaps (Novak et al., 2018).
In this sense, the present study aims to describe a digital transformation strategy, hereinafter called DTS. It tells the story of a Brazilian pre-digital retail company's path to accomplish a digital transformation from the start and discusses the role the COVID-19 pandemic had played. Moreover, the case highlights important strategic issues (Schallmo & Williams, 2018) and provides the opportunity to analyze if it is a strategic process (Correani et al., 2020) or if it is a strategic practice (Chanias et al., 2019). Thus, it can enlighten which theory best supports DTS studies (Jones & Karsten, 2008; Whittington, 1996).
Key Terms in this Chapter
Strategy as a Practice: It consists of what the company does in terms of strategy. The practice is an outcome of agents’ relationships embedded in social structures. The structure encompasses organizational strengths and weaknesses that can favor or constrain the change. Therefore, part of the strategy as a practice is about recursiveness allowing competence and efficiency building. And part relies on learning and adaptation.
Digital Transformation Strategy: A digital transformation strategy can be a new strategy part of the strategic process or a strategic practice, depending on how it is designed and implemented.
Omnichannel: The omnichannel combines shopping experience in brick-and-mortar stores with a variety of digital channels to increase retailer’s differentiation and leverage competitive edge.
Strategy: Strategy is what sustain competitive advantage. It is fundamental to set the organizational direction and to analyze the right structures to fosters efficiency. It also helps an efforts convergence and improves coherence, and it is an important factor to ensure flexibility, adaptability, and business survival.
Digital Transformation: It is a change process to develop digital assets and capabilities to comply with customers’ needs and competition challenges. It has three stages according to the complexity of the change and the digital integration in terms of strategies, metrics, and goals.
Strategy as a Process: It considers the relationship between context and the firm in an instance through the internal and external variables that influence the strategic formulation and implementation. Thus, there are two different and interdependent stages of the same process. The strategic process has inputs and outputs. It has a start and end, therefore the results translated into the performance concept can be evaluated at the end of the process.
Retail Sector: The retail sector is central in all economies, and it occupies a privileged position near to customers. It is the heart of a complex value chain that includes storage, logistic, legal transactions, advertising, and so on. The retail sector is also very diversified, with many business models.