Aligning With New Digital Strategy A Dynamic Capabilities

Journal of Strategic Information Systems 27 (2018) 43–58
Contents lists available at ScienceDirect
Journal of Strategic Information Systems

journal homepage: www.elsevier.com/locate/jsis
Aligning with new digital strategy: A dynamic capabilities

T
approach
⁎
Adrian Yeowa, , Christina Sohb, Rina Hansenc
a
School of Business, Singapore University of Social Sciences, 461 Clementi Road, Singapore 599491, Singapore
b
Division of Information Technology and Operations Management, Nanyang Business School, Nanyang Technological University, 50 Nanyang Avenue,
Singapore 639798, Singapore
c
Department of Digitalization, Copenhagen Business School, Howitzvej 60, 3, 2000 Frederiksberg, Denmark
AR TI CLE I NF O AB S T R A CT
Keywords: Prior IS research has not fully addressed the aligning process in the highly dynamic context of
Aligning digital strategy. To address this gap, we conduct a longitudinal analysis of a B2B company's
Dynamic capabilities journey to enact its B2C digital strategy, using the dynamic capabilities approach. We found that
Digital strategy as an organization shifts towards a digital strategy, misalignments between the emergent strategy
Tension
and resources give rise to tension. Our study resulted in the development of an aligning process
B2C ecommerce
IT Alignment
model that is comprised of three phases (exploratory, building, and extending) and generalizable
organizational aligning actions that form the organization's sensing, seizing, and transforming
capacities. These aligning actions iteratively reconfigured organizational resources and refined
strategy in order to respond to both changes in the environment and internal tensions. We also
recognized that there are challenges to alignment, and conceptualized them as paradoxical
tensions. This provided insights as to how such tensions are triggered and how they can be
addressed. Finally, by applying the dynamic capabilities approach to aligning, we also show that
alignment is not separate from such capabilities, but that aligning is enacted through the sensing,
seizing and transforming capacities and their attendant aligning actions.
1. Introduction
Information Technology (IT) alignment continues to be an important topic in information systems (IS) research and practice
because it has been shown to positively impact performance (Gerow, Grover, Thatcher, & Roth, 2014; Renaud, Walsh, & Kalika,
2016). Alignment may be even more challenging today as contemporary organizations, in response to environmental dynamism and
digital innovations, undergo tremendous change in their operational and strategic models (Coltman, Tallon, Sharma, & Queiroz,
2015; Fonstad & Subramani, 2009). In particular, organizations have increasingly digitized their operations and processes
(Bharadwaj, Sawy, Pavlou, & Venkatraman, 2013; El Sawy, 2003). This has important implications for alignment. It is no longer just a
matter of alignment between IT functional strategy with the firm’s business strategy (Bharadwaj et al., 2013; Coltman et al., 2015);
instead, there is a blurring of the distinction between business and IT strategies, leading to a fusion between them in the form of
digital strategy (Galliers, 2011).
Alignment in the context of digital strategy is challenging for several reasons. First, organizations find it difficult to fully articulate
their digital strategies upfront in the face of environmental dynamism. Alignment is therefore a continual process of aligning to the
moving target of emerging strategy. Second, digital strategy is inherently multi-functional (Bharadwaj et al., 2013) and alignment
⁎
Corresponding author.
E-mail addresses: adrianyeowyk@suss.edu.sg (A. Yeow), acsoh@ntu.edu.sg (C. Soh), rinahansen@hotmail.com (R. Hansen).
http://dx.doi.org/10.1016/j.jsis.2017.09.001
Received 12 February 2015; Received in revised form 14 September 2017; Accepted 15 September 2017
Available online 28 September 2017
0963-8687/ © 2017 Elsevier B.V. All rights reserved.
A. Yeow et al. Journal of Strategic Information Systems 27 (2018) 43–58
requires the simultaneous development and reconfiguration of IT and business resources across multiple organization processes.
While prior research has typically treated alignment as an event or end-state (Benbya & McKelvey, 2006), more recent research
has called for a focus on the aligning process rather than on alignment (Karpovsky & Galliers, 2015; Wilson et al., 2013), and to
understand the role of actions taken over time to align strategy and resources (Chan & Reich, 2007; Coltman et al., 2015;
Marabelli & Galliers, 2017). Karpovsky & Galliers (2015) have identified individual actions in aligning. This paper examines the
aligning process at the organizational level, and seeks to answer the question of how the aligning process unfolds through organi-
zational actions in a digital strategy context.
We find dynamic capabilities a useful approach to examine the aligning process, as it focuses on the actions taken by organizations
to change their resources in order to adapt to changing environments (Eisenhardt & Martin, 2000; Peteraf, Di Stefano, & Verona,
2013; Teece, Pisano, & Shuen, 1997). Drawing on the view that dynamic capabilities are composed of both broad organizational
capacities and specific actions that work together to effect organizational change, we developed a framework of aligning actions for
our analysis. The prior IT alignment research also noted that there are usually challenges to aligning that reflect the tension between
prior and new resource commitments. We drew on the paradox literature to further conceptualize these challenges to aligning and its
relationship to aligning actions (Smith & Lewis, 2011).
We conducted a longitudinal study of a European sports fashion company that shifted from a pure business-to-business (B2B)
model to augment it with an Internet-based business-to-consumer (B2C) digital strategy over a five-year period. Our study resulted in
the development of an aligning process model that is comprised of three phases (exploratory, building, and extending) in which
specific organizational aligning actions, within each of the broader categories of sensing, seizing, and transforming dynamic capa-
cities, iteratively reconfigured organizational resources and refined strategy in order to respond to both changes in the environment
and internal tensions. Our discussion explicates the critical role of aligning actions throughout the aligning process as well as its
complex relationship with tensions that emerged during the aligning process. We found interesting insights into the paradoxical
nature of such tensions and how aligning actions can effectively address these tensions so that the aligning process can continue.
In the following section, we present the relevant literature on IT and business alignment. We explain how the dynamic capabilities
approach, supplemented with an understanding of tensions from the paradox literature, provides a useful framework for the study of
the aligning process. We then describe our methodology, and present our findings. We conclude with a discussion of the results and
implications for research and practice.
2. Theory
2.1. IT and business alignment
IT alignment is important because it has been found to be associated with performance (Bergeron, Raymond, & Rivard, 2004;
Chan, Huff, Barclay, & Copeland, 1997; Croteau & Bergeron, 2001; Gerow et al., 2014; Kearns & Sabherwal, 2007; Oh & Pinsonneault,
2007; Sia, Soh, & Weill, 2016; Zahra & Covin, 1993). IT alignment continues to be of interest to practitioners and researchers, as
evidenced by a recent special issue on alignment and its high ranking in a recent survey of practitioners (Coltman et al., 2015; Renaud
et al., 2016).
Traditionally, there have been various definitions of alignment, with some focusing mainly on the fit between business and IT
strategies (e.g., Reich & Benbasat, 1996). However, Henderson and Venkatraman (1993) in their seminal strategic alignment model,
define alignment not only as fit and integration between business and IT strategy, but also between business and IT infrastructure and
processes. Tallon (2008) further strengthens the argument for the value of strategy-resource alignment by noting that the integration
of IT and business processes can be causally ambiguous and hence the source of superior performance.
Recent developments in practice and research have identified the need to further evolve our understanding of alignment. In
particular, environmental dynamism (El Sawy, 2003) arising from digital innovation and interconnectedness of global business has
led organizations and researchers to pursue the notion of digital strategy (Sia et al., 2016). Unlike the traditional view that considers
IS and business as two distinct structures to be aligned, digital strategy explicitly recognizes the embeddedness of IT throughout the
organization and that IT strategy is integrated with business strategy (Bharadwaj et al., 2013; Galliers, 2011). Thus, digital strategy is
inherently transfunctional, as IT is pervasive in functions such as operations and marketing. Hence, researchers argue that there is a
fusion of IT and business strategies – in contrast to the traditional view of IT as a “functional level strategy that must be aligned with
the firm’s business strategy” (Bharadwaj et al., 2013 p. 472). Environmental dynamism also means that organizations may not be able
to fully articulate their digital strategies upfront. The dynamism and complexity of the business and technology environment suggest
that digital strategy is emergent, iterative, and influenced by evolving organizational capabilities (Galliers, 2011).
How then is IT alignment achieved in a digital strategy context, where strategy is an emergent fusion of business and IT, and
where organizational capabilities evolve constantly? Recent research that has argued for a general shift of focus to the aligning
process rather than on alignment (Karpovsky & Galliers, 2015; Street, Gallupe, & Baker, 2017; Wilson et al., 2013) provides a helpful
perspective. Taking a process approach to alignment is consistent with other views. Several researchers noted that alignment is not an
event (Hirschheim & Sabherwal, 2001) nor an end-state (Benbya & McKelvey, 2006), but rather a journey of continuous adaptation
and change. Mithas et al. (2013, p. 513) also note in the context of digital strategy that dynamic synchronization is needed between
business and IT to gain competitive advantage. Other recent work in alignment also found that strategy is implemented via a series of
processes that occur over time (Queiroz, Coltman, Sharma, Tallon, & Reynolds, 2012; Tallon, 2008).
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2.2. Aligning IT and business strategies
Prior research on the aligning process has identified two broad patterns. One pattern is that it is a continuous adjustment of
business and IT strategy and resources (Rondinelli, Rosen, & Drori, 2001). The process is incremental as organizations change one or
more components of alignment over time. For example, Hirscheim and Sabherwal (2001) show that several organizations changed
their business strategies, IS roles, sourcing and structure over time, and not always in the direction of alignment. Their study provides
snapshots at critical points of the aligning process, showing that organizations sometimes change some components in one direction
and others in the opposite direction, and sometimes even reverse some changes. A recent contribution to the incremental view of
aligning is that the continual interaction among components is not only due to top-down direction, but also subject to bottom up
emergent processes (Karpovsky & Galliers, 2015; Marabelli & Galliers, 2017).
The second pattern of the aligning process is that of punctuated equilibrium (Sabherwal, Hirschheim, & Goles, 2001). Sabherwal
et al. (2001) found in the organizations studied, long periods of incremental evolutionary change punctuated by periods of rapid
revolutionary change. The triggers for revolutionary change were environmental shifts, sustained low performance, influential
outsiders, new leadership and perception transformation. As with the incremental approach, punctuated equilibrium does not assume
that a forward direction of change towards a desired end goal. However, this view has been criticized for appearing to suggest that
the preferred state is equilibrium (Orlikowski, 1996).
The focus on the aligning process, rather than alignment, has enabled a more complex and holistic perspective from both the
incremental and punctuated streams of research. Both streams note that aligning requires simultaneous changes across multiple
components, not only at the strategic level but also at the level of IT and business resources. Other researchers who specifically
discuss digital strategy also note the importance of resources. For example, Mithas et al. (2013) assert that the organization’s in-
vestment in IT resources is a critical decision in digital strategy, while Grover and Kohli (2013) note that digital strategies leverage an
organization’s ability to rapidly deploy systems on developmental platforms. This, together with the fact that digital strategy is itself a
fusion of business and IT, suggests that the focus on aligning business and IT strategy may not be appropriate. Rather, it is the ongoing
alignment of business and IT resources with the emerging digital strategy that is more relevant today.
While prior research on aligning has provided useful insights about the components that need to be aligned and the broad patterns
of change (snapshots of alignment across time), the question of how aligning occurs within organizations requires us to also un-
derstand the series of actions that organizations undertake – both planned and emergent (Galliers, 2011; Marabelli & Galliers, 2017).
One approach to studying the “how” of aligning is suggested by Karpovsky and Galliers (2015), who identified a set of aligning
activities or actions by analyzing past studies of alignment. They provide an important level of granularity as a counterpoint to the
previous approaches that identify the broad patterns of aligning (i.e., incremental or punctuated), by examining the range of aligning
actions that individuals might undertake. They conceptualize the actions into four broad categories. The first two categories, adap-
tation (evaluating context) and translation (developing, configuring) are more tool oriented; and the second two categories, in-
tegration (strengthening, signaling) and experience (negotiating, learning), are more social in nature. Street et al. (in press) adopted
this approach to understand the different patterns of aligning actions used by new ventures to manage their strategic alignment. We
adopt this idea of aligning as a set of actions and apply it to the organizational level, as digital strategy requires changes that often
take place beyond individuals.
2.3. Challenges to aligning
We also note that the aligning actions taken by an organization are unlikely to unfold in a predictable manner. Prior research
notes that aligning is challenging (Benbya & McKelvey, 2006). Hirscheim and Sabherwal’s (2001) study suggests that organizations
are faced with organizational inertia, sequential attention to goals, knowledge gaps, split responsibilities and underestimation of
problems in their aligning process. An organization’s past investments in business and IT resources and processes create path de-
pendency (Ghemawat, 1991; Reynolds & Yetton, 2015), making it challenging for an organization to develop new resources and
processes to support changes in strategy (Chan & Reich, 2007; Galliers, 2004). Others have noted that strategic alignment is often
confronted by the tension between the formal, top-down approach that exploits existing resources and plans and informal, improvised
approach that takes advantage of emergent opportunities and resources at hand (Galliers, 2011; Marabelli & Galliers, 2017; Renaud
et al., 2016). Put together, there is a paradox of alignment is that while it enables an organization to succeed in one strategy, it fosters
inertia, reduce its ability to improvise, and may be “toxic” for another strategy that the organization is seeking to embrace
(Daniel & Wilson, 2003; O’Reilly & Tushman, 2016).
Paradoxes– elements that seem logical individually, but inconsistent when juxtaposed – give rise to contradictory demands or
tensions (Smith & Lewis, 2011). Organizations are rife with tensions, for example between collaboration and control, individual and
collective, flexibility and efficiency, exploration and exploitation. While these tensions exist both at the level of the individual and the
organization (Cameron & Quinn, 1988), in this study, we focus on the organizational tensions. Smith and Lewis (2011) in their
seminal review of paradox studies in the management literature, identified four categories of tensions: (1) belonging (what the
organization’s identity currently is, and what it will become (O’Reilly & Tushman, 2008)); (2) learning (preserving existing com-
petencies developed during times of success, and learning new competencies (Miller, 1993)); (3) organizing (continuing with current
routines, and creating new routines (Gittell, 2004)); and (4) performing (conflicting demands of various internal and external sta-
keholders (Donaldson & Preston, 1995)). As pointed out in Marabelli and Galliers’ (2017) study, the organizational aligning process,
where organizations take actions to change various organizational components of strategy and resources, is likely to surface orga-
nizational tensions. For example, the path dependency from the organizations’ past investments in resources (Ghemawat, 1991;
45
Reynolds & Yetton, 2015), will be associated with organizing tension as the organization struggles between continuing with existing
processes as well as creating new processes in support of the new digital strategy.
Some organizations may attempt to resolve the tension by taking an either/or approach. For example, by ignoring the pressure to
change and realign. However, researchers in the paradoxical tradition advocate a both/and approach. For example, ambidexterity
researchers have recently adopted a paradoxical approach, acknowledging the need for organizations to pursue both exploration and
exploitation simultaneously (O’Reilly & Tushman, 2008, 2016). The both/and mindset requires acceptance, learning to live with the
paradox and appreciating the differences as opportunity for creativity (Beech, Burns, de Caestecker, MacIntosh, & MacLean, 2004;
Poole & Van de Ven, 1988; Schneider, 1990).
Interestingly, recent theorizing has proposed that organizations with dynamic capabilities are more likely to have greater ac-
ceptance of paradoxical tensions (Smith & Lewis, 2011). This is an important insight for the research on IT aligning. The dynamic
capabilities approach is primarily concerned with strategic change (Helfat & Peteraf, 2009), which is at the heart of IT alignment
research. It also provides analytical tools to unpack the processes by which organizations change their resources and strategy in order
to adapt to changing environments (Daniel, Ward, & Franken, 2014; Koch, 2010). Given that a major challenge in aligning is how
organizations purposefully change their IT and business resources to fit with emergent strategy, we believe that the dynamic cap-
abilities approach provides a helpful theoretical foundation for examining the phenomenon of aligning in the context of digital
strategy.
2.4. Dynamic capabilities approach to aligning
The dynamic capabilities approach emerged from the Resource Based View of organizations (Peteraf et al., 2013) and is mainly
concerned with processes by which organizations not only change their resources and routines but their products and services so as to
survive in changing environments (Eisenhardt & Martin, 2000; Teece et al., 1997). Teece et al. (1997 p. 516) first defined dynamic
capabilities as “the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing
environments.” Thus they emphasized that dynamic capabilities approach is linked to the organization’s capacity. Later Eisenhardt
and Martin (2000) proposed an alternative view that focused on specific organizational processes that integrate, reconfigure, gain,
and release resources to achieve new resource configurations. More recently, leading scholars of dynamic capabilities defined dy-
namic capability in more general terms i.e., “the capacity of an organization to purposefully create, extend, and modify its resource
base” (Helfat et al., 2007 p. 4) while Teece (2007, 2014) suggested that dynamic capabilities could be disaggregated into three broad
capacities of sensing, seizing and transforming.
Although earlier dynamic capabilities scholars diverged on whether dynamic capabilities are idiosyncratic or common across
organizations and whether they confer sustainable competitive advantage to the organization, scholars have recently proposed an
integrative approach that attempts to reconcile these divergent views (c.f. Barreto, 2010; Di Stefano, Peteraf, & Verona, 2014; Peteraf
et al., 2013). The common theme they found in their review of empirical and theoretical dynamic capabilities studies is that while
dynamic capabilities exist in different forms, they also exhibit common features that can still be idiosyncratic in details (Barreto,
2010).
Drawing from this integrative approach (Barreto, 2010; Di Stefano et al., 2014; Peteraf et al., 2013) as well as Helfat et al.’s (2007)
and Teece’s (2007) views of dynamic capabilities, we conceptualize dynamic capabilities as composed of both broad organizational
capacities and specific actions that work together to effect organizational change. At the broad level, we adopt Teece’s view (2007,
2014) that dynamic capabilities include three capacities: sensing, seizing, and transforming. In turn, these broad capabilities operate
through a cluster of specific organizational actions working together to effect change (Eisenhardt and Martin, 2000; Di Stefano et al.
2014). We discuss them below.
Teece’s (2014) Sensing, which involves “identification, development, co-development and assessment of technological opportu-
nities in relationship to customer needs” (p. 332), could potentially be the first dynamic cluster enacted by organizations. However,
sensing is not limited to technological opportunities but encompasses other environmental changes or internal decisions. Teece
(2009) argues that sensing is important as organizations need ways to steer through uncertainty and gain insight to new opportu-
nities. This is especially important to aligning in the digital strategy context as digital strategy is ongoing and emergent, and or-
ganizations need to be able to identify and understand the changes that are required and how these changes can be implemented as
part of their strategic approach. Sensing would in turn be enacted through the following actions. First, scanning action refers to
organizational efforts to explore opportunities and markets, gather information from internal and external sources e.g., customers,
vendors, and to filter relevant information to detect potential opportunities. This involves putting in place processes, e.g., R & D
activity, interactions with key customers and suppliers, to search locally and broadly across technical and market domains so as to
garner relevant information for internal teams (Teece, 2007). Next, there is learning that refers to actions undertaken by organizations
to learn and evaluate potential opportunities by monitoring performance or gaining more insights so to assess and identify specific
areas for further actions (Nonaka, 1994; Teece, 2014). Third, is calibrating action where organizations engage in further sensemaking
after organizations have probed specific opportunities and attempt to refine their prior actions and figure out implications for future
actions (Weick, 1995; Weick & Sutcliffe, 2006).
The second capacity is Seizing whereby the organization mobilizes resources to address needs and opportunities identified by
sensing actions and to capture value from those actions (Teece, 2014). Seizing is a critical capacity for aligning as it enables the
organization to act on the opportunities that had been identified. Seizing moves the organization beyond just the understanding of the
new business opportunities to actually deciding what specific changes to make across its multiple organizational components in order
to capture those opportunities (Teece, 2007, 2014). As such, seizing involves the following actions including: designing, selecting
46
among options, and committing. Designing refers to organizational action undertaken to plan and design its new structures and
processes. Teece (2007) discussed how these structures include organizational boundaries, product architectures, business models
and internal processes supporting these designs. Selecting refers to the organizational action of selecting among different options
available in terms of its designs and other potential solutions for capturing the opportunities. In this case, options may include choice
of suppliers and platforms that may be provide complementary services or products as well as choices among new products, processes
or services and, even, business models (Teece 2009). Finally committing action refers to the decisions taken by the organization on
how to implement the designs as well as decisions concerning specific options of partners, services, processes, or business models
(Teece, 2009).
Finally the third capacity is Transforming that includes continued renewal involving “asset alignment, co-alignment, realignment,
and redeployment” (Teece, 2007, p. 1336). Teece (2007, 2009) broadly discussed how transforming may involve revamping of
routines, restructuring of departments, managing co-specialized assets, and putting in place governance and knowledge development
structures – in other words, it involves reconfiguring organizational resources. This dynamic capacity dovetails nicely with Eisenhardt
and Martin (2000)’s four different dynamic capability actions – leveraging, creating, accessing and releasing (Danneels, 2010;
Rindova, Martins, & Yeow, 2016). The transforming dynamic capacity is important to aligning as it helps reconfigure existing re-
sources to align them to the new strategy, as well as building new resources or accessing new resources to supplement current gaps in
organizational resource base. The relative novelty of digital strategies and the associated resources also means that many companies
may not have the internal expertise, and hence accessing external resources and/or creating new resources are likely to be significant
in aligning to digital strategy (Rindova et al., 2016).
The first action – leveraging – involves putting existing resources, specifically fungible resources, to new uses (Danneels, 2002,
2007). Leveraging existing resources requires that these are fungible (Teece, 1982) and involves applying them to other products or
strategies to build new capability. By reconfiguring existing resources, leveraging explicitly helps align existing organizational re-
sources with the new strategy. Next, creating action refers to the creation of new resources and processes, which are combined to form
a new competence (Danneels, 2002, 2010), such as new technological competence to make certain products or market competence to
serve a particular new market or customer group. Accessing is the use of external resources, e.g., from vendors or partners
(Eisenhardt & Martin, 2000) that are complementary to existing resources in the organization (Danneels, 2002, 2010). In the digital
domain, companies are increasingly accessing shared digital platforms (e.g., Amazon web hosting services or business community
platforms like healthcare exchanges) in order to supplement their business and IT resources (Markus & Loebbecke, 2013). Finally,
releasing involves dropping existing resources, such as reducing the workforce or removing resource combinations that may not be
optimal for a new digital strategy (Eisenhardt & Martin, 2000). This may also help organizations manage some path dependent
constraints. Some of these resources may be redeployed for other uses or processes within the firms (Danneels, 2010).
Our analytical framework thus uses the integrative view that conceptualizes dynamic capabilities as three core capacities –
sensing, seizing, and transforming – that are used by organizations to purposefully change their internal resources, processes, and
structures to adapt to changing environment. Each dynamic capacity is effected through a set of organizational actions as described
above and these actions are key to how the aligning process unfolds in organizations that pursue a digital strategy approach. While
this framework provides clarity to the role of purposeful organizational actions in aligning, it is still not clear how these actions assist
organizations in managing tensions surfaced during the aligning process.
This framework has been applied in an in-depth longitudinal case study of Hummel—a B2B supplier of sports fashion goods—who
was able to significantly realign its resources and implement a new B2C digital strategy. The framework enabled us to identify,
analyze, and understand the actions taken, as well as the interactions among strategy, resources and tensions during the five-year
period of developing and reconfiguring resources for the new B2C digital strategy.
3. Methodology
In order to understand more deeply how dynamic capability actions enable organizations to align to a new digital strategy as well
as manage emergent tensions, we used a revelatory case study approach (Sarker, Sarker, Sahaym, & Bjørn-Andersen, 2012). More
specifically, we conducted a detailed, longitudinal case study (Yin, 2003). This case study approach allowed for tracing the different
aligning actions used to reconfigure resources in a natural setting over time, rather than through frequencies or incidences (Yin,
2003). Furthermore, it enabled us to develop a rich account of the phenomenon (Benbasat, Goldstein, & Mead, 1987).
3.1. Case selection
We chose Hummel because we were able to study closely its shift to a new digital strategy and its actions taken to reconfigure its
resources from 2010 to 2014. Hummel was founded in 1923 in Hamburg, Germany, but is now based in Aarhus, Denmark. The
company operates in the sport and lifestyle apparel, as well as the footwear and accessories market, with an annual turnover of more
than US$200 million. Traditionally, all of Hummel’s sales have been B2B through distributors, agents, and licensed partners in over
40 countries, the largest markets being Denmark, Germany and Japan.
In 2010, Hummel recognized that to compete against larger sporting and lifestyle brands such as Adidas and Nike, it had to enter
into B2C ecommerce. The CEO therefore initiated a digital strategy, which included the development of B2C ecommerce. IT was
essential to the framing of the new strategy, and would require leveraging existing back-end IT systems and development of new B2C
facing IT systems. The strategy would also require leveraging existing business resources, such as marketing images, product text,
logistic and finance processes, as well as new business resources, such as B2C ecommerce governance and processes. The digital
47
Table 1
Number of interviews by roles and departments.
Total number of interviews
Strategic management
CEO 13
CMO 12
CSO 8
Owner 3
Board 2
Senior management group 4
Subtotal 42
Functional departments
IT 5
Marketing 9
Sales 2
Finance 1
Logistics 1
Export 1
Design 2
Digital 14
Subtotal 45
Cross functional
Project groups incl. vendor 14
Steering Group 3
Hummel country partners 24
Subtotal 41
External
Technology partners 4
Industry contacts 26
Subtotal 30
Total 158
strategy was, as such, a fusion of IT and business strategy.

However, as a traditional B2B company, Hummel had neither experience nor capabilities in the B2C arena. The company
therefore embarked on a series of actions to develop resources to enable the shift to B2C. In 2012, Hummel carefully piloted B2C
ecommerce in a limited way in Denmark and Germany; in 2013, after 90 years of operating an exclusively B2B business, the company
rolled out full B2C ecommerce in Germany. In 2014, the company rolled out B2C ecommerce to other countries.
3.2. Data collection
The data collection commenced in August 2010 and concluded in December 2014 when the project came to an end, as no new
findings relevant to the project emerged. We used multiple sources of data, including interviews, documents and observations. We
were able to obtain in-depth access to Hummel’s resource reconfiguration, as one of the co-authors was involved in the strategy
formulation and the resource development.
At the strategic level, 42 interviews were conducted with top management (CEO, Chief Marketing Officer (CMO), Chief Sales
Officer (CSO) and company owner). The interviews were in-depth, semi-structured and open-ended. Key questions used in the
interviews included how they viewed the aligning process in a digital strategy context from the perspective of their respective roles
within Hummel. The interviews were recorded, transcribed and analyzed. Further, another 116 interviews with Hummel internal
employees and external partners were conducted. The interviewees were predominantly departmental managers in the various
functions involved, but all levels of the company were represented in the interviews. Interviews were between 30 min and two hours
in length, were nearly all tape-recorded, and extensive notes were made during the interviews. Interviews with individuals focused on
how the individuals or departments were involved in developing the B2C ecommerce. There were also cross-departmental group
interviews (e.g., steering and project groups) that focused on how the company as a whole could build B2C ecommerce to align with
the new business strategy. Table 1 below summarizes the interviews by internal departments or external partners, indicating the
number of interviews.
In addition to the interviews, we also reviewed a wide range of documents, including company documents (e.g., Brand book,
country contracts, 2016 strategy and plans, yearly departmental plans, etc.), presentation slides for the B2C proposal and updates to
management, archives (e.g., historical marketing campaigns, website contracts, etc.), emails (e.g., between owner and management
group, between management group and the digital team, etc.), and meeting minutes (of meetings with different Hummel country
partners, management and marketing meetings).
48
3.3. Data analysis
We first wrote up the case chronologically, describing the key challenges, actions and milestones of Hummel as it embarked on the
strategic change to expand to B2C ecommerce. This was presented to senior management multiple times during the five years, thus
verifying the accuracy of our interpretation of the data.
As we developed the chronological case and reviewed the data, we realized that the aligning actions were associated with a
specific phase-specific project focus, namely, Exploratory, Building and Extending. Specifically, we observed that Hummel began the
Exploratory Phase when the Hummel CEO began scanning information on the subject of digital strategy and interpreting, sensing and
shaping this new opportunity for the company. This set of activities culminated in a digital strategy for B2C ecommerce. Once the
broad B2C strategy had been outlined, we observed Hummel engaged in the Building Phase by addressing major IT and business
resource development decisions, i.e., whether to handle ecommerce in-house or to outsource it to a third party ecommerce company.
This then culminated in the launch of the global website with pilot B2C ecommerce. We identified that Hummel began its Extending
Phase when it simultaneously developed and integrated the IT and business resources for a pilot launch of B2C ecommerce to full
ecommerce, extending the B2C site to other countries and adding enhancements such as mobile functionality.
We iterated between data and extant dynamic capabilities literature (Elsbach & Sutton, 1992). After identifying the aligning
phases in the creation and implementation of Hummel’s digital strategy, we initially analyzed the aligning actions within the phases
in terms of the actions suggested by Eisenhardt and Martin (2000) and Danneels (2010) i.e., four dynamic capability actions, which
are leveraging, creating, accessing, and releasing. However, as we reviewed the data in each phase, we identified a series of key
challenges—we refer to as “tension”—that had critical impact on the aligning process. For example, one challenge that emerged early
was the sales department’s concern with cannibalization of their B2B sales and effect on relationships with distributors. In view of
tension in each phase, we decided to broaden our understanding of dynamic capabilities actions and adopted the framework de-
scribed in the theory section as it had greater empirical relevance with our data (Teece 2007, 2009, 2014). As discussed above, this
analytical framework is based on the three core dynamic capacities: Sensing, Seizing, and Transforming. For our coding purposes, we
focused on more granular actions as our main analytical unit i.e., organizational action linked to each of the three core capacities.
Thus for the Sensing capacity that is focused on opportunity identification and assessment, we coded the following organizational
actions: scanning action, learning action, and calibrating action. An example of scanning action was Hummel’s CEO reviewing the
external environment regarding B2C ecommerce, while an example of learning action was Hummel obtaining feedback from their
distributors in different countries concerning customization of their ecommerce system. Finally, and example of calibrating action
was the formulation of B2C strategy to avoid cannibalizing B2B business.
For the Seizing capacity that looks at decisions and design of organizational components to capture opportunities, we coded for
designing action, selecting action, and committing action. An example of designing action was the decision to place B2C project under
marketing. Selecting action was seen in how Hummel chose to have the in-house B2C ecommerce system over an outsourced solution.
Example of committing action was the decision by Hummel’s Board and CEO to approve resources for the five-year plan to implement
the non-cannibalizing digital B2C strategy.
Finally, for Transforming capacity where the focus is on the reconfiguration and redeployment of resources, we coded the four
actions identified in the literature i.e., (Danneels, 2010; Eisenhardt & Martin, 2000). Example of leveraging action was Hummel’s
extension of the existing enterprise resource planning (ERP) system for B2C ecommerce use. Example of creating action was the
creation of the new role of Head of Digital and a new digital department; while accessing action is seen in Hummel using external
resources from the ecommerce system vendor for its B2C website and ecommerce system. Finally, an example of releasing action was
moving employees from the sales department to the digital department.
4. Findings
4.1. Existing business strategy
Hummel had been operating as a sports fashion B2B supplier since its inception in 1923. Its corporate business strategy was fully
focused on developing products to sell via large sport retail chains and sport specialists. To support this strategy, Hummel developed
business resources and IT resources that enabled it to be competitive in this particular market. The business resources included a
distinctive and well-known design, good manufacturing partnerships, as well as logistics, finance, marketing, sales and service tuned
to its B2B customers, thus ensuring quality products are delivered at the right time.
The IT resources that supported the existing business strategy included an ERP system (Microsoft Dynamics Navision) and an
established IT department that supported the ERP system. The IT Manager had been with Hummel for many years and was re-
sponsible for implementing the ERP system in 1998.
In 2010, Hummel’s CEO sensed the need for Hummel to establish direct contact with the end-consumer via digital channel.
However, the company did not possess any capabilities to steer in this new direction. It would need to reconfigure and develop
resources to align with the emerging digital business strategy. How did this process unfold? Below, we explicate Hummel’s aligning
process as it developed both its B2C digital strategy and ecommerce business and IT resources.
4.2. Exploratory phase (January 2010–December 2010)
The CEO recalled that ecommerce had been mentioned informally at Board meetings in 2009 for the first time, “not as a strategic
49
element, more like ‘we also need to be in on it.’” The CEO had been scanning information on the subject of B2C ecommerce:
“The only thing I knew was that this thing [digital B2C] was something we needed to do something about. Internally in the company,
including myself, we had no such knowledge at all as to what the world or market would bring in the next three or four years [in terms of
digital B2C]. So we needed something; we needed capacity … within this area.”
CEO
The CMO similarly explained the sense of the need for exploring new strategic directions:
“The reason was first and foremost, that we in general wanted to strengthen our digital capability but also competence. We knew that it was
an area that Hummel did not possess any significant skills within so we saw the possibility to strengthen our profile. Another reason was
that I thought we might achieve some competitive advantage at some point. I didn’t understand to what extent, where and when, to be quite
honest.”
CMO
In the beginning of 2010, the CEO met with an experienced ecommerce executive to explore how Hummel could benefit from the
new digital channels for sales and marketing purposes. After numerous discussions, the CEO created a new position, Head of Digital,
who would be responsible for setting up social media and B2C ecommerce capabilities within the company. The CEO then began to
learn about new digital opportunities and evaluated the possibilities through conversations with the Head of Digital – who gathered
information from internal and external research, and the departments involved in potential digital projects. He noted “2010 was the
year where I and the Board of Directors decided to have a more strategic focus on the web and the possibilities it gave.”
The first task for the Head of Digital was to take stock of the current business and IT resources to evaluate how these were
applicable to B2C ecommerce. This included initiating and building individual relationships with all the departments in the company,
introducing them to ecommerce and to the implications for their existing processes. The IT department shared with Head of Digital
his knowledge about the structure of data in the ERP system and the integration possibilities. The logistics and finance departments
similarly started to share their knowhow during the informal discussions, and contributed to possible solutions for specific B2C
ecommerce challenges. For example, logistics already had a day-to-day service setup with single package delivery for B2B customers
that conceivably could be reconfigured for B2C use. It would need different packaging and handling, including a different B2C
labeling, invoicing and payment structure and returns process, but it seemed feasible.
Due to the lack of alignment between the new strategy of going multichannel with B2C and the existing B2B resources, leveraging
the existing B2B resources for B2C triggered tensions. Specifically, some employees were strongly opposed to introducing B2C
ecommerce. Their reasons included perceiving B2C ecommerce as extra workload on top of their already stressed jobs. B2C ecom-
merce was also unknown territory for the employees, and they questioned not only their own competencies, but also the business
consequences for the company. In particular, the CSO was against the project:
“The dealers in Denmark would be really pissed off. Even if they get a cut of the sale. I have said that if we do open a webshop in Denmark it
will be without me.”
CSO
The CSO’s opinion strongly shaped his sales and customer service departments’ attitude towards B2C ecommerce. They were
afraid that if Hummel introduced B2C, the existing B2B customers would get upset that it might cannibalize the existing channels,
and that would cause Hummel to lose the business which they had been building over many years. The CSO and his departments were
not alone. The Logistics Manager echoed the CSO when he stated, “but we are a B2B company!” At the same time, the IT Manager was
very protective of the existing ERP system, which had been utilized only for B2B, and did not want to adapt it for B2C product data in
the ERP system. But in order to build B2C ecommerce, Hummel had to figure out how to use the existing data and integrate it with the
new B2C ecommerce frontend system. Yet the IT Manager, who did not have any B2C knowledge, did not want B2C customer data in
the ERP system, as he believed that the ERP system would not be able to handle the volume and the different product attributes (e.g.,
pictures, videos, sales descriptions, size guides, etc.).
Organizationally, these tensions shaped the strategy and the development of resources as Hummel attempted to address them
through various aligning actions. First, the management designed the organizational structure so that the ecommerce project was
placed under the marketing department, rather than the sales department given the latter’s lack of enthusiasm for the new B2C
strategic directions. Next, Hummel’s management refined the nascent B2C strategic direction by positioning ecommerce and the B2C
website as a support tool, and not as a sales tool (e.g., not offering product categories that were widely distributed in the B2B
channels, not offering discounts and not providing free shipping). This was carefully calibrated to avoid cannibalization of the
existing wholesale accounts and the Head of Digital referred to this B2C strategy as a “non-cannibalizing” position relative to the
existing B2B business
Finally, in December 2010, the Head of Digital presented to the board the refined digital strategy with its five-year plan for roll
out, budget for building the IT systems, and for hiring of people for the ecommerce project. She was careful not to put sales or
commercial key performance indicators (KPIs) in this “non-cannibalizing” ecommerce strategy. The Board approved the strategic
plan. With the Board’s commitment, strategy and budget, as well as dedicated human capital, Hummel began to get ready for
implementation. (Table 2 summarizes the key aligning actions taken).
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Table 2
Aligning actions – exploratory phase.
Broad aligning action Specific aligning action (details)
Sensing Scanning: CEO reviewing environment regarding B2C ecommerce. Ecommerce being mentioned at Board meeting not very formally,
but more as something they should be aware of. CMO noting that it’s an area they do not have much knowledge of, but could
potentially help them competitively
Learning: CEO having many conversations with new Head of Digital. Head of Digital getting to know what was available internally by
talking to various departments, including IT to understand IT systems. Employees from various departments involved in these
conversations start to get a sense of B2C
Calibrating: Formulating B2C strategy to avoid cannibalizing B2B
Transforming Creating: Head of Digital position and hiring experienced B2C person to fill this position.
Seizing Designing: Identifying processes and other internal resources that could be used for B2C – e.g., B2B logistics day-to-day service setup
could be adapted for B2C
Placing B2C project under marketing
Committing: Board and CEO approve resources for five-year plan to implement the non-cannibalizing digital B2C strategy
Note: Italicized texts are actions taken to address the tension arising from the misalignment between the emerging B2C digital strategy and existing resource con-
figuration.
4.3. Building phase (December 2010–March 2012)
In this new phase, Hummel had to consider whether to handle ecommerce in-house or to outsource it to a professional ecommerce
company. Given the company’s lack of experience and resources for B2C ecommerce, Hummel seriously considered outsourcing and
scanned various external B2C platform providers. In the outsourced ecommerce solution (third-party platform) Hummel would hire
an ecommerce company to manage its ecommerce operations – from purchasing and fulfillment to website management and cus-
tomer service. The ecommerce shop would be treated as a B2B account, for which Hummel would allocate an assortment and ship to
the ecommerce company’s warehouse. The ecommerce company would then ship the products directly to the end-consumer when
they purchased from the webshop. The ecommerce company would also ensure traffic flow to the website, and service all customer
emails and phone calls. Hummel would not have any direct contact with the end-consumer. Choosing this option would mean that
Hummel would not have to invest in building internal B2C ecommerce capabilities.
An in-house ecommerce solution (owned platform) would require Hummel to invest in new B2C ecommerce systems and to
establish a digital department in the company. The entire company also had to learn about B2C ecommerce, and many departments
such as logistics, finance, sales, customer service and export would have additional responsibilities. However, an owned platform
would provide full control of the new business, i.e., when and where to roll out ecommerce (control of timing and geography), which
assortment (control of product mix), service levels and branding message (control of branding and governance). This solution would
give Hummel full control of its brand across its online properties, thus allowing it to proactively manage potential channel conflicts.
Outsourcing B2C ecommerce was preferred by many (given the general resistance towards B2C), as Hummel could keep the
existing B2B configurations. Creating an in-house B2C ecommerce setup also meant that Hummel would have to reconfigure existing
resources and create new resources, resulting in extra work for the entire company. However, after extensive discussions between the
Head of Digital and Hummel’s management, Hummel’s management decided to select the in-house B2C ecommerce setup as it was
more aligned with the non-cannibalizing position of Hummel’s B2C strategy. More importantly, they believed that it was paramount
for Hummel to have full control of the brand across all online sales and communication channels globally in order to manage the
potential channel conflict and to create an aligned global brand. The CEO stated:
“The online sales are not my priority now. Businesswise, it does not matter if I turnover one million, five or ten millions. That is not my
worry. But if I don’t get to control the brand and the sales distribution online, that would be a worry.”
CEO
Thus the tension between the new B2C strategy and existing B2B resource configuration influenced this decision and Hummel’s
board and CEO authorized the development of the in-house solution. This decision further shaped the understanding of the B2C
strategy within Hummel. As the development of internal B2C involved not just systems, but depended heavily on business processes
and resources in logistics, finance, marketing and sales, B2C ecommerce was increasingly treated as a digital strategy, as opposed to a
technical initiative. The CEO noted “Digital is not only a technical thing. It is certainly a transformational and organizational thing.”
To support the non-cannibalizing, in-house digital B2C strategy, both business and IT resources had to be transformed. Hummel
created a digital department within the company, which was expected to bridge the business processes (sales, marketing, logistics,
finance, etc.) and backend IT, as well as manage all digital B2C initiatives, including external IT system vendor relations. An
ecommerce coordinator was hired to coordinate the projects related to internal and external IT infrastructure, data and integration, as
well as write standard operating procedures (“SOPs”) to formalize the new processes within Hummel. A digital communicator was
also hired to develop and structure digital communications across all channels and to orchestrate and support all Hummel partners
interacting via digital platforms in a coherent manner.
The digital department was critical in designing, reconfiguring, and accessing B2C vendor resources to help build its new B2C
resources. First, they designed and specified the requirements for a B2C ecommerce system. Next, they used that set of requirements
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to choose a system vendor that could develop a custom solution to fit Hummel’s unique needs. They managed the vendor relationship
closely and collaborated with the vendor and the IT department in defining the system infrastructure and product data structure for
the B2C frontend, as well as the various integrations. This required quite a large “data wash”, i.e., cleaning the product data and
establishing a new data structure. This meant that business and IT staff had to work closely together; for example, it required that all
product designers standardize the creation of new product attributes in the ERP system. If there were errors in the data, it would be
displayed directly to the end-consumer, which could hurt the brand image. Hummel now had structured data in one central system
that allowed digital initiatives (e.g. website activity, digital marketing campaigns, etc.) to be measured real-time.
Business resources were simultaneously reconfigured to support the evolving B2C strategy. A steering group comprising the CEO,
CMO, CFO and Head of Digital was created to provide strategic oversight in leveraging internal resources and processes. Eight cross-
departmental project groups, with all departments being represented, were also created to solve different challenges. For example,
the logistics project group (made up of logistics, finance, IT and digital department representatives) helped leverage existing logistics
process to develop B2C picking, packing, shipping and return handling processes. It was essential to include all departments across
the project groups, as the ecommerce site would depend on, and impact, all departments. Furthermore, existing processes had to be
reconfigured. For example, marketing and creative processes were restructured to cater for B2C requirements (e.g., new photography,
packshot1 and video set-up, revised catalogue set-up, revised campaign set-up, etc.).
Hummel also created new business processes for B2C including: governance (e.g., a Digital Manual, providing guidelines and
directives for areas related to ecommerce on Hummel’s own platform and external platforms), SOPs for data handling, payment flows,
B2C customer service, as well as, structures, routines and 24/7 system service for ecommerce. All these, together with the website and
ecommerce system (built by the IT vendor) and the integration with the existing ERP system formed the foundation of Hummel’s B2C
website. It was through the tight fusion of internal and external business and IT resources that collectively made the initial B2C digital
business possible. Because of this interplay, it became possible to show campaigns, real-time product data, stock levels and prices
from the existing ERP system on the new frontend B2C website and ship products to the end-consumer.
The global brand website with pilot ecommerce in Denmark and Germany were then launched and subsequently rolled out to
other local country websites (France, Spain, Turkey and UK) on the global B2C website. The main purpose of grouping all countries
on one platform was to ensure a coherent brand experience across local websites, to centralize ecommerce systems and to prepare for
full global ecommerce in 2016.
However, while rolling out the country sites, Hummel learned that they needed to further customize the system to fit the different
countries’ needs. For example, France and Turkey, two of Hummel’s focal countries, needed a facility to upload their own locally
produced Hummel products. Hummel leveraged on its ecommerce system by extending its functionality so that they could gain access
to their specific part of the backend to upload their own products. At the frontend, all Hummel products would be showcased side by
side as one aligned global brand. As the IT department had become familiar with the ecommerce system, the existing ERP system was
further leveraged so that the data could now be transferred every minute instead of once every hour.
However, as the B2C strategy was increasingly rolled out, even in its non-cannibalizing form, misalignments began to surface.
Specifically, Hummel found that there were limits as to how much the existing B2B ERP system could be further expanded. For
example, the ERP system could not handle the increasing requirements for rich product data on the website (e.g., videos, product
sales descriptions, customer comments, ratings, user generated images, etc.). To address the tension that arose from this misalign-
ment, Hummel decided to approach an external vendor to develop an external system to supplement their existing system. The digital
department again designed the requirements for this system – the product information management (PIM) system – and then accessed
their ecommerce vendor to customize the PIM system for the company’s specific needs. This system was then integrated with the ERP
and ecommerce system so that all inventory, prices and rich content could be showcased on the website. The new PIM system could
furthermore export data to the Brand Button2 and the mobile site used in the virtual walls in physical stores. By the end of this phase,
Hummel had built an integrated IT infrastructure that was tuned to the specific needs of the company by carefully wrapping the new
consumer facing systems around the existing backend IT systems. (Table 3 summarizes the key aligning actions taken in the Building
Phase).
4.4. Extending phase (April 2012–December 2014)
The actions taken to build the PIM system and integrate it with the B2B ERP enabled the B2C business to grow. The workload for
the digital department increased rapidly as customers shifted to Hummel’s digital channels for both sales and communications.
Hummel had to create new roles in the digital department in order to meet both the B2B and B2C customer expectations. This
included a copywriter (for enriching the product sales texts, the brand communication and the digital marketing campaigns), B2C
customer service (as requests increased with sales volumes), and a B2B ecommerce specialist (to manage the B2B ecommerce
platform, ensure that online retailers followed Hummel’s ecommerce guidelines, support them with digital content and material, as
well as installation of the Brand Button on online retailers’ websites).
All the roles in the digital department integrated business and IT functions across the company. For example, the B2C customer
service employee’s function was tightly integrated with B2B sales and customer service (e.g., aligning the communication about
delivery times or about production faults for products), logistics service center (e.g., ensuring that the service center was instructed
1
A packshot is a photograph of a product (often on a mannequin), which clearly shows the attributes of the product.
2
Brand button is a mini version of the Hummel website which was placed on third party online retailers’ sites as an iframe that opened as a light box.
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Table 3
Aligning action – building phase.
Broad aligning action Specific aligning Action (details)
Sensing Scanning: Finding out from external B2C platform providers the terms of their business and comparing that with in-house solution
Learning: Obtaining feedback from countries that some customization needed. Limits to existing B2C platform, not being able to
handle rich data
Seizing Selecting: Considering the pros and cons associated with having in-house or outsourced B2C ecommerce. Assessing vendors to build
the in-house B2C platform
Committing: Board and CEO authorize development of in-house B2C capability
Deciding to have vendor develop a product information management system (PIM).
Designing: Specifying the requirements for the in-house B2C platform
Specifying the requirements for the PIM enhancement to the B2C platform
Transforming Creating: Created a digital department (with hiring of coordinator and communicator) and a steering group. Developed new SOPs,
governance processes. Integrated new B2C ecommerce with existing system and deploying new B2C websites for Denmark, Germany
and then its global B2C website. Further creation of Brand button and mobile site
Accessing: Hiring and managing vendor to help create in-house B2C platform
Building a Product Information management system and integrating with ERP and ecommerce
Leveraging: Digital department worked to leverage existing product data and Hummel’s logistics, finance, marketing processes. They
extended the ecommerce system for country upload and improved data transfer from ERP system to B2C system from once every hour
to every minute
figuration.
about individual returns and quality checks), export (e.g., for daily updating on local sales events, licensed Hummel collections, fake
Hummel products and social media profiles that popped up), IT (e.g., regarding products that were not showing correct prices due to
a mistake in the ERP system), marketing (e.g., regarding missing pack shots, new catalogues), and product development (e.g., special
collections with special attributes).
Finally, as the digital sales platforms became a larger part of daily business, part of sales and customer service departments’
workload shifted to the digital department. A digitally savvy employee was released from the sales department to work in the digital
department. The employee became the much-needed link between the two departments.
The development of the PIM system and Brand button during the building phase enhanced the existing B2B business as well. The
Brand Button and PIM system supported the B2B retailers, and the “Storefinder” on the B2C website created traffic to the stores of
Hummel’s B2B customers. The digital knowhow the company had developed also helped boost Hummel’s B2B online retailers’ sales.
The CEO commented:
“We now have the professional tools and the capability to deal with online retailers in a successful manner, which we didn’t have before. It
is in fact today close to 12% of our total worldwide sales. It was below 1% before.”
CEO
By now, Hummel’s managers and employees had become used to the company operating a B2C ecommerce business in addition to
its traditional B2B business. The brand website with ecommerce facilities and integrated systems were running smoothly. All de-
partments in the company were involved in different aspects of running ecommerce, and only a few regarded the new business
opportunity as a threat at this stage.
The new B2C ecommerce business contributed to the company’s growth, both directly (by additional business) and indirectly (by
influencing and controlling the digital B2C space), as the CEO explained,
“We don’t have a big pressure on it [B2C] today, but I think that the hidden benefit will always be a lot, lot bigger. It’s like an iceberg. I
think that for every shoe we sell online, we have influenced 9 sales elsewhere.”
CEO
The B2C business had notably higher gross margins compared to the B2B business, and was more profitable. The B2C business also
created greater awareness of the Hummel brand. For the first time in the company’s history, there was a direct connection between
the brand and its consumers. Furthermore, Hummel had built a valuable and relevant set of digital capabilities. The company could
now take control of its digital presence and, more importantly, the relationship and interaction with end-consumers. The CEO
commented on the strategic control by highlighting the business alignment the company had achieved,
“We have aligned our own communication and we have aligned regional communication, and we are on our way to reaching international
alignment. We have the platforms aligned now, meaning that countries have the same platform. I think we had 22 or 24 different platforms
[websites] a few years ago, which we have now changed into one.”
CEO
This enhanced B2C resource configuration, however, posed a challenge to the non-cannibalizing-brand control-only strategy, as it
could easily support full B2C ecommerce. The digital department began promoting the roll out of full B2C ecommerce on Hummel’s
website. The German B2C ecommerce site was expanded to include the full assortment of products. The roll out of full product
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Table 4
Aligning actions – extending phase.
Broad aligning action Specific aligning action (details)
Transforming Creating: Additional roles/position/size of digital dept. Expanding business resources (warehouse/logistics, finance) to handling
increased B2C volume
Leveraging: Integrating growing B2C processes with B2B processes. Leveraging new B2C capabilities such as Brand Button, PIM and
store finder to enhance B2B sales
Releasing: Moving employee from sales to digital department
Seizing Selecting: Identifying where to go full B2C ecommerce and where to hold back
Designing: Specifying extent of stock for B2C, and marketing and incentives for B2C.
Committing: Decision to go slow on rolling out full B2C
figuration.
assortment in Germany did not involve any further development to the ERP or ecommerce systems as they were built from the onset
to handle scalable ecommerce. In contrast, the growing ecommerce volume required more efforts from other business resources, e.g.,
warehouse, the returns and service center had to revisit their work processes in order to leverage their small B2C ecommerce setup for
larger volumes. Furthermore, the finance setup for B2C ecommerce had to be expanded for handling of larger volumes of customers
and for an automated financial tracking of the orders.
As a result, tensions emerged again. The strong opposition of the B2B Sales Director and his sales and customer service de-
partments in the Denmark office meant that full ecommerce was not launched in Denmark. Because of the tensions, Hummel’s
management decided to slow down the extent it deployed its B2C capabilities. Specifically, its ecommerce rollout was done via
incremental changes to ecommerce from one season to another season. Next Hummel addressed the tension by its internal process
design: (1) the management did not want to focus on B2C sales KPIs although they had the capability to push the B2C sales more
aggressively; (2) Hummel did not invest in separate stock for the website; and (3) it did not support marketing activities that pushed
sales such as providing discounts or incentives to buy via its ecommerce site. (Table 4 summarizes the key aligning actions in the
Extending Phase).
5. Discussion
This study sets out to answer the question of how the aligning process unfolds in the digital strategy context through organi-
zational actions. We used the dynamic capability approach to conceptualize aligning actions as comprising a set of sensing, seizing
Fig. 1. The IT aligning process through aligning actions and tensions.
54
and transforming organizational actions that iteratively reconfigured organizational resources and refined strategy in order to re-
spond to changes in the environment. The analysis of the longitudinal data resulted in the conceptualization of the IT aligning process
(see Fig. 1), showing how an organization moves through phases of aligning as it embarks on a new strategic direction and develops
new resource configurations that are better aligned to the new strategy.
5.1. The IT aligning process
Our longitudinal study, which examined in detail Hummel’s aligning process over a five-year period, found that aligning was
indeed a continual, ongoing process. Hirscheim and Sabherwal’s (2001) study showed through snapshots of organizations at various
points of time in their aligning process that organizations were usually not in a state of alignment because they seemed unable to
make all the necessary changes to the various components of resources and strategy. Likewise Street et al.’s (in press) study of new
ventures found that the state of alignment is in constant flux. There is, hence, a growing view that it is more helpful and realistic to
focus on the aligning process rather than alignment per se. We similarly found that during the study period Hummel was never
completely in alignment or equilibrium. Additionally, our in-depth access to Hummel over the five-year period of the study, enabled
us to develop a process model of the organizational aligning at the level of organizational actions, as well as to identify a range of
tensions that arise in the aligning process, and the influence of the interactions between aligning actions and tensions on the co-
evolution of strategy and resources (see Fig. 1).
We first provide an overview of the aligning process across the three major phases of iterative aligning observed. The three
phases—exploratory, building, and extending—were not developed a priori from extant theory but were grounded in the data.
In the exploratory phase, the aligning process is initiated when the organization takes actions to sense new opportunities and
threats and begins to articulate a new strategy. In this phase, the organization may also begin to seize the opportunity by taking some
preliminary actions to identify initial resources required to start the change. These actions call attention to the misalignment with the
existing resource base, which in turn results in tension. The tension is often between the contradictions in organizational identity and
competencies, as well as processes and performance. (These tensions will be discussed further below). The organization then takes
further aligning actions to address the tension. In this study, the introduction of an emergent B2C ecommerce strategy to an es-
tablished B2B organization triggered tension. Employees were pulled in two different directions in terms of their identity (whether
they were B2B or B2C company), concern about serving existing and new customer segments, and learning new competencies.
Hummel then took further aligning action to calibrate the new strategy to one of non-cannibalizing to B2B sales, to make it more
acceptable to the organization.
The same sequence is observed in the second and third phases. The building phase also begins with aligning actions, but with the
focus of developing a new resource configuration that will support the new strategy. Interestingly, these aligning actions are in-
fluenced by the tensions and aligning actions of the previous phase. In our study, the tension and the action to calibrate strategy as
non-cannibalizing influenced the way the organization acted to seize and transform its resource base by guiding it to create its own
ecommerce site for better control and to ensure non-cannibalization. As the aligning actions significantly reconfigured the resource
base, they again zero in on the aspects of the existing resource configuration that are causing problems, and again trigger tensions. In
this study, the misalignment between the established ERP system (optimized to support the B2B operations) and the requirements of
the growing B2C needs triggered tension as the IT department stood firm on maintaining the ERP’s alignment with the B2B op-
erations, whereas the Digital team working on the B2C digital transformation called for richer data handling capabilities. As in the
previous phase, the organization took further aligning actions to address the tension. They seized the opportunity to create a separate
PIM system, and to continue the transformation of the resources by accessing vendor capabilities.
In the third phase of aligning – the extending phase – the aligning actions taken to address the tension by enhancing the B2C
capabilities led to continued growth of the B2C business and further leveraging and enhancing of B2C capabilities built in the
previous phase. Interestingly, these leveraging actions resulted in an expanded new resource configuration that outpaced the non-
cannibalizing digital strategy. Whereas digital strategy led the resource configuration in the exploratory and building phase, now in
the extending phase, the digital strategy lagged the new digital resource configuration. This new misalignment again triggered
tension between the proponents of the B2B business and the proponents of the growing digital business within the organization.
Again, further aligning actions were taken to address the tension – the organization chose to slow down the pace of the B2C rollout,
particularly in its home market where resistance was strongest. We focus next on two key aspects of the aligning process- aligning
actions and tensions.
5.2. Aligning actions and tension
In this process view, the actions taken by the organization are critical to aligning. We provide a theoretically grounded set of
organizational aligning actions, drawing on the dynamic capabilities literature, as its focus on organizations’ ability to sense op-
portunities and to take advantage of them by reconfiguring the resource base was consistent with the focus of aligning. Following
Teece’s (2007, 2009, 2014) view of dynamic capabilities, we identified three broad categories of aligning actions – sensing, seizing
and transforming. We also reviewed the literature and developed a set of more granular aligning actions within each of these
categories, namely scanning, learning and calibrating (sensing), designing, selecting and committing (seizing), and leveraging,
creating, accessing and releasing (transforming).
We found, somewhat to our surprise, that sensing, seizing and transforming actions occurred throughout the aligning process,
albeit in different proportions. As expected, the aligning actions in the exploratory phase were largely sensing in nature – specifically
55
scanning, learning and calibrating – as the organization attempts to make sense of the opportunity and clarify its emergent strategy.
However, there were a few seizing and transforming actions also, mainly to create initial capability to continue sensing, and to help
the organization articulate a more concrete strategic plan. In the building phase however, the seizing and transforming actions
dominate. This is understandable, as the organization focuses on designing and changing its resource base to align with the strategy
articulated in the previous phase. There are some sensing actions in this phase, taken in the service of resource reconfiguration. For
example, scanning the environment for resource reconfiguration options (e.g. whether to outsource or build internal resources). In
the extending phase, seizing and transforming actions continue but with a key difference; these aligning actions are now working
with the new resource configurations developed in previous phase. For example, the leveraging actions in this phase are more about
leveraging the new B2C resources, rather than the previous B2B resources.
One noteworthy finding concerns the unintended impact of aligning actions, where they triggered tension as they inadvertently
created the (mis)alignment between strategy and resources. For example, in the exploratory phase, the aligning actions resulted in an
emergent strategic direction. This created a situation where the requirements for the new strategy were at odds with the organi-
zation’s existing resource base. In the building phase, the aligning actions closed the gap between the new strategy and the resource
base by significantly changing the resource configuration. In the process however, it also highlighted aspects of the existing resource
configuration that were particularly difficult to align with the new strategy (in this case the ERP system), and this again triggered
tension. Finally, in the extending phase, the aligning actions so enhanced and leveraged the new resource configuration that it
resulted in a growing misalignment with the non-cannibalizing B2C strategy, and again led to tension. Put together, this points to an
interesting insight—in that while aligning actions in general seek to reduce the misalignment between strategy and resource, in the
short term, as the organization is going through the process, these same actions can increase misalignment.
Tension occurs in situations where there are contradictory demands (Smith and Lewis, 2011). The aligning literature has noted
challenges in terms of path dependence, where existing legacy resources could pose a significant challenge to aligning to new strategy
(Galliers, 2004; Ghemawat, 1991; Reynolds & Yetton, 2015), and cognitive limits, where the organization finds it difficult to be open
to new options in order to deal with emergent and unplanned changes (Chan & Reich, 2007; Danneels, 2010; Galliers, 2011;
Marabelli & Galliers, 2017). Our study further unpacks the nature of such challenges by conceptualizing them in terms of paradoxical
tensions. We observed all four categories of paradoxical tensions in our study (i.e., organizing, learning, belonging, and performing
tensions) and saw different aspects of path dependence and cognitive limits in them. The organizing tension – where employees
struggle with the demands of existing B2B versus new B2C processes – are related to the challenges of path dependence and legacy
resources. The learning tension where employees are torn between sticking with their current B2B competencies versus learning new
B2B knowledge and are related to the issue of cognitive limits previously noted in the literature. We also observed the belonging
tension, where employees struggled with whether they were a B2B or B2C company; and the performing tension, as the organization
struggled with whether to prioritize the demands of its B2B or B2C customers.
Finally, we found emergent aligning actions were also used to address tensions that arose due to misalignments between strategy
and resources. The paradox literature notes that it is critical to address tension in order for organizations to survive and thrive.
Further they note that effective management of tension requires a both/and approach, that recognizes the legitimacy of opposing
demands, and does not overly privilege one end over the other. We see both/and approach at play in the specific aligning actions that
Hummel took to address the tensions in each phase. For example, in the exploratory phase, the calibrating action to frame the
strategy as non-cannibalizing acknowledges both the concerns of those involved in the B2B business and of those in the B2C initiative
while enabling Hummel to move the B2C initiative forward. In the building phase, the actions to commit to an external PIM system
acknowledged the limits of the ERP system, while enabling the B2C to meet their richer data requirements. In the extending phase,
the actions to selectively slow down the B2C rollout in certain geographical areas, acknowledged the strong resistance from the home
country B2B operations, while still enabling full B2C to progress in other countries.
6. Implications for research and practice
6.1. Research contributions
Our longitudinal study of Hummel contributes to the overall research on IT alignment in several ways. First, our study presents a
model of the aligning process. The process model explicates a set of generalizable organizational actions that enables the aligning
process, thus contributing to current research that has begun to look at different actions required to achieve alignment (e.g.,
Karpovsky & Galliers, 2015; Street et al., in press). Our findings complement Karpovsky and Galliers’ (2015) findings in that our
aligning actions occur at the organizational level while their aligning activities are located at the individual level. In addition, our
findings add to the view that both intended and emergent aligning actions are required to pursue planned changes while managing
unpredictable and emerging issues during the process of aligning (Karpovsky & Galliers, 2015; Marabelli & Galliers, 2017; Street,
2006). This is especially evident in how some aligning actions drove new digital strategies while others responded to emergent
tensions. In future research, one could consider how different intended and emergent aligning actions enacted by different individuals
map to the organizational aligning actions.
Second, our study conceptualizes as paradoxical tensions the challenges previously noted in alignment research. By carefully
tracing how misalignment and tensions emerge during the aligning process, we found that tensions emerge in part due to path
dependent investments made by the organizations in the past (Ghemawat, 1991; Reynolds & Yetton, 2015) but also in part due to the
very aligning actions taken during the aligning process. This contrasts with the implicit assumption that aligning actions’ impact on
alignment is always positive. Further, our conceptualization of tension as paradoxical tensions helps us to appreciate the different
56
dimensions of the tension – belonging, learning, organizing and performing; and also suggests a more nuanced way to resolve and
address them. Thus the emergent aligning actions that address tension are not only about realigning strategy and resources as the
tensions may involve deep-seated organizational contradictions. Our findings show that a nuanced approach involves aligning actions
that adopt a both/and approach; this approach may not fully realign the strategy and resources but is still effective in reducing the
gaps and meeting differing needs. Finally, by linking tension with ongoing iterative aligning actions, we argue that, if effectively
managed, tension also serves as a generative mechanism in that it actively shapes and influences what aligning actions are taken and
the subsequent resource configurations and strategies (Benbya & McKelvey, 2006).
Third, by applying the dynamic capabilities approach to analyze aligning actions, we show how the aligning process may in-
fluence the competitiveness and performance of organizations adopting digital strategy (Daniel & Wilson, 2003;
Tallon & Pinsonneault, 2011). Whereas earlier literature on strategic value of alignment has mainly looked at the how the state of
alignment influence organizational performance (c.f., Gerow et al., 2014), recent studies have begun to link alignment with the
organization’s ability to sense and respond (Marabelli & Galliers, 2017; Street et al., in press; Tallon, 2008; Tallon & Pinsonneault,
2011). Our study of a digital strategy context builds on this perspective to show that alignment is not separate from such capabilities
but that the aligning process is enacted through such sensing, seizing, and transforming dynamic capacities and their attendant
organizational actions. Our study of the aligning process also resonates with strategic management’s view that strategy (including
digital strategy) is tightly linked with the three dynamic capacities (Barreto, 2010; Teece, 2014). More importantly, through our
detailed analysis of the dynamic capability cluster of actions, we show in concrete ways how dynamic capabilities can support the
development and subsequent refinement of (digital) strategy and at the same time how (digital) strategy influence the specifics of
how to deploy and configure resources (Teece, 2014). Other research could investigate the extent to which the different dynamic
capabilities and its aligning actions differ in other industry settings and in cases of non-digital strategy.
6.2. Practice contributions
Our study also provides several practical insights. First, we found that it was paramount for top management to communicate a
clear, albeit broad, strategy to all levels of the organization. At Hummel, this was lacking in the initial phase, causing tension between
the new Head of Digital and existing functional department members who were already overburdened with their daily B2B workload
and could not appreciate the need for the new B2C business. As we have mentioned above, this tension had significant ramifications
on Hummel’s subsequent approach, i.e., the decision that the new B2C business would play a support role and not a sales role.
Second, we also identified that it was necessary to invest in creating an entirely new department (in Hummel’s case a digital
department) to run and coordinate a new B2C business. It would not have been possible to sense and seize the opportunity, develop
and deploy B2C ecommerce, as well as enhance B2C and integrate with B2B solely through existing resources. There has to be a
willingness to invest in the opportunity and create a new dedicated team to leverage the existing workforce in a cross departmental
manner, as well as be responsible for accessing and project managing external resources.
Finally, we found that a clear focus on integrating the new and existing business was important. The better an organization is at
leveraging an existing business for the new business, the more successful it will be, as the new business will be accepted and be able to
build on the scale of the existing business. It is, however, important to have new resources (such as the digital department) to tie the
new and existing businesses together. When this is done purposefully, the new business will enhance and support the existing
business.
In conclusion, as organizations increasingly shift towards digital strategy, the need to understand how aligning unfolds across
multiple transfunctional processes becomes more critical and can potentially be a source of competitive advantage (Tallon, 2008).
While alignment research has explicated the patterns and complexity of aligning process, few have focused on the ongoing aligning
actions involved in the process (Karpovsky & Galliers, 2015). By adopting a dynamic capabilities approach, we conceptualized
aligning as a dynamic capability comprising of sensing, seizing and transforming capacities and specific aligning actions within each
capacity (Danneels, 2010; Eisenhardt & Martin, 2000; Teece, 2014). We found that the aligning actions, while necessary for aligning,
highlight misalignments between the emergent strategy and existing resources and give rise to tension. Our analysis suggests that
organizations have to be attentive to the emergent tension, selecting from the range of aligning actions, to enact the appropriate
aligning actions so as to successfully navigate the digital strategy transformation.
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Journal of Strategic Information Systems 27 (2018) 43–58

Contents lists available at ScienceDirect

Journal of Strategic Information Systems

Aligning with new digital strategy: A dynamic capabilities

2.1. IT and business alignment

2.2. Aligning IT and business strategies

2.3. Challenges to aligning

2.4. Dynamic capabilities approach to aligning

3.1. Case selection

Total number of interviews

strategy was, as such, a fusion of IT and business strategy.

3.2. Data collection

3.3. Data analysis

4.1. Existing business strategy

4.2. Exploratory phase (January 2010–December 2010)

Broad aligning action Speciﬁc aligning action (details)

4.3. Building phase (December 2010–March 2012)

4.4. Extending phase (April 2012–December 2014)

Broad aligning action Speciﬁc aligning Action (details)

Broad aligning action Speciﬁc aligning action (details)

Fig. 1. The IT aligning process through aligning actions and tensions.

5.1. The IT aligning process

5.2. Aligning actions and tension

6. Implications for research and practice

6.1. Research contributions

6.2. Practice contributions

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