Journal of Business Models (2023), Vol. 11, No. 2, pp.

86-109

Internal organizational factors driving digital transformation

for business model innovation in SMEs
Chanté van Tonder1, Sandra Hasanefendic2, Bart Bossink3, Chris Schachtebeck4,
Cecile Nieuwenhuizen5

Abstract
Purpose: The primary purpose of this paper is to investigate which internal organizational factors drive the renewal
of SMEs’ business strategy and business culture to support their digital transformation trajectory.

Design/methodology/approach : The paper builds on a literature study and Delphi study from both a South African
and Dutch scholarly and industry perspective. For the Delphi study a questionnaire was used to determine the com-
monly cited internal organizational factors that drive digital transformation for business model innovation in SMEs
in an emerging and a developed economy. These factors were then confronted with the insights from the literature
study to draw literature-based and empirically grounded insights.

Findings: Specific internal organizational factors are identified that contribute to the renewal of SMEs’ business
strategy and business culture which support their digital transformation trajectory.

Research Limitations: The model was applied to three use cases in Smart Cities and Urban Digital Twins. Conse-
quently, the data ecosystems concern a high presence of public actors, yet also includes private companies. The
applicability needs to be identified in other sectors in further research. Additionally, as the scope of the study was
on business models, data governance, data-sharing and data ecosystems, abstraction was made of fields of study
beyond these topics.

Originality/value : The study contributes to the current understanding of the internal organizational factors that drive
digital transformation for business model innovation in SMEs. Researchers can use these factors as a basis for future
research. For practitioners, the findings provide a guideline which SMEs can use to (re)arrange business activities to
enable digital transformation-induced business model innovation.

Keywords: Business model innovation; Digital transformation; Internal organization; SMEs

Please cite this paper as: Van Tonder, c., Hasanefendic, S., Bossnik, B., Schachtebeck, C., Niuwenhuizen, C. (2023), Internal organi-
zational factors driving digital transformation for business model innovation in SMEs, Journal of Business Models Vol. 11, No. 2, pp.
86-109

1, 4, 5: Department of Business Management, University of Johannesburg, Johannesburg, South-Africa, chantevt@uj.ac.za1,

cschachtebeck@uj.ac.za4, cecilen@uj.ac.za5
2, 3 Science, Business and Innovation, Vrije Universiteit, Amsterdam, Netherlands

ISSN: 2246-2465
DOI: https://doi.org/10.54337/jbm.v11i2.7403

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Introduction exceptions, such as Hrustek et al. (2019) who reflect

Digital transformation is defined as a way to deploy on factors which lead to digital transformation, e.g.
digital technologies within an organization that help customer drivers, and technology drivers. However,
to create and appropriate more value for an organi- their work focuses on external forces as drivers af-
zation (Verhoef et al., 2021, p.889). Such transfor- fecting digital transformation and in large organiza-
mation typically leads to business model innovation tions. There is still a lack of systematic knowledge
(see Di Vaio et al., 2021), including changes in the of internal organizational factors that drive digital
core organizational business processes (e.g. Usai transformation (Bin and Hui, 2021; Gasperlin et al.,
et al., 2021), capabilities (e.g. Guinan et al., 2019; Ri- 2021) and particularly concerning SMEs (Bin and Hui,
alti et al., 2019), and exploitation of completely new 2021; El Hilali et al., 2020; Gasperlin et al., 2021; Li et
market opportunities (Chen et al., 2014; Tan et al., al., 2018). SMEs are often regarded as flexible and
2015; Venkatraman, 1994; Wengler et al., 2021). Es- agile organizations, resulting in a competitive ad-
sentially, digital transformation is seen as an enabler vantage over large businesses. Yet, they are often
for continuous progression of businesses models also organizationally less prepared for technologi-
(Ziółkowska, 2021), aligning them better with the cal turbulence (Azevedo and Almeida, 2021), expe-
digital economy and strengthening digital customer riencing standardization challenges, cybersecurity
and business partner relationships (Kim, 2021; Ko- issues, and a lack of a digitally skilled workforce (Hor-
tarba, 2018). váth and Szabó, 2019), which might challenge digital
Literature on digital transformation has emphasized transformation-induced business model innovation.
the various digital transformation outcomes on or-
ganizational structure and business model perfor- At the same time, digital transformation requires
mance (Eller et al., 2020; Klos et al., 2021; Mhlungu internal organizational adaptation, such as changes
et al., 2019; Pucihar et al., 2019; Ram and Zhang, to processes, structures and especially strategy and
2021). For instance, Ardito et al. (2021) assess the culture (Verhoef et al., 2021; Zhang et al., 2022; Ba-
direct effect of digital transformation (jointly with dasjane et al., 2022). In particular, business strategy
environmental orientation) on the product and pro- renewal as an organizational driver is beneficial to
cess innovation performance of small and medium- businesses in multiple ways, such as satisfying cus-
sized enterprises (SMEs). Similarly, Favoretto et al. tomer needs, reducing resource waste, and achiev-
(2021) analyzed the effect of digital transformation ing ambidexterity, making it critical for stimulating
on business models and show that digital transfor- these other organizational processes as well (Wang,
mation forces manufacturing companies to change 2022). Yet, several authors (Matt et al., 2015; Hess et
their business logic, which brings about changes in al., 2016; Hyvönen, 2018) have argued that business
organizational elements such as value architecture leaders and managers still lack the skills and knowl-
and technological structure. Within this literature edge to formulate and implement a digital strategy,
strand, there are also studies specifically focusing which is why only a few businesses have managed
on digital technological tools used by organizations to implement digital transformation successfully.
that are innovating the way they do business and im- Similarly, Albrecht (2015) and Hemerling et al. (2018)
plement digital transformation, integrating big data, claim that culture is one of the key drivers contribut-
artificial intelligence, 3D printers, and social media ing to the failure of the digital transformation pro-
in their business processes (e.g. Ram and Zhang, cess. Pedersen (2022) agrees, arguing that business
2021; Rothberg and Erickson, 2017). leaders and managers lack the understanding and
knowledge of how digital transformation changes
Despite recent work that focuses on digital trans- and influences the business culture, calling for more
formation outcomes, there is less understanding of research to identify which organizational factors
the internal organizational factors within organiza- contribute to SMEs’ culture renewal to drive digital
tions that drive digital transformation processes and transformation for business model innovation.
related business model innovation. There are some

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Ultimately, there is a need to focus on internal or- After this introductory section, the remainder of this
ganizational factors that foster digital transforma- paper is organized as follows: The next section deals
tion and related business model innovation through with the literature on digital transformation and its
strategy and culture renewal because the external influence on changes in the strategy and culture of
drivers often influence digital transformation-in- organizations, which are concepts that are directly
duced business model innovation through internal related to business model innovation. The empiri-
organizational factors (Zhang et al., 2022). SMEs, cal research methods that were used to further
just like any other organization, digest external in- deepen the understanding of the internal organi-
fluences often through internal organizational ad- zational factors driving digital transformation for
aptation (see Greenwood et al., 2011). Therefore, the business model innovation in SMEs are explained in
central research question that aimed to support the third section. The empirical research results are
the closing of the above knowledge gaps was Which presented in the fourth section. In the fifth section
internal organizational factors drive the renewal of these results are discussed, they are confronted
SMEs’ business strategy and culture to support their with the literature, literature-based and empirically
digital transformation trajectory? grounded propositions are raised, the limitations of
this research are highlighted, and avenues for future
An exploratory research approach using a Delphi research are outlined. The last section closes with a
study was used to answer the main research ques- concise conclusion.
tion, by including a varied population sample to
achieve a convergence of opinions about which in- Theoretical background
ternal organizational factors drive business strategy
Digital transformation and business model inno-
and culture renewal necessary for digital transfor-
vation
mation for business model innovation in SMEs. The
Digital transformation - the introduction of new
intended contribution of this research to theory and
digital technology (Eksell and Härenstam, 2017) - and
practice was twofold. Firstly, this research aimed
business model innovation - the innovative rear-
to contribute to the literature on two organizational
rangement of business activities (Eksell and Hären-
drivers of digital transformation for business model
stam, 2017) - can exist independently of each other.
innovation in SMEs, namely business strategy and
In addition, digital transformation may also affect
business culture renewal, by developing an overview
the business model innovation of organizations (Ek-
of the internal organizational factors linked to either
sell and Härenstam, 2017). Digital transformation
of the two. Secondly, this study aimed to provide
and business model innovation functioning as two
practical insights for SMEs that want to set up, de-
independent entities are represented by the images
velop, or restructure their internal organizations to
on the left and right sides, respectively, in Figure 1.
enable digital transformation for business model in-
novation.

Figure 1

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The dependent relationship is visualized in Figure 1 has been identified by the organization, stimulat-
by the image in the middle. The research and this lit- ing the right skill set, and adapting and revising the
erature review focus on this dependent relationship. organizational strategy are imperative for effective
implementation of digital transformation-induced
Digital transformation is a complex and continuous business model innovation (see also Westerman et
process of adopting and adapting digital technolo- al., 2011). Kane et al. (2015) stress that digital trans-
gies invoking changes in organizational structures, formation for business model innovation, including
governance, product development, service deliv- the use of various interconnected digital technolo-
ery, and business models (Romanelli and Tushman, gies, requires a change in leadership, mindsets, and
1994; Verhoef et al., 2021; Warner and Wäger, 2019). attitudes towards risk as well as new ways of work-
It is responsible for adding to the organizational ing and openness to change. In particular, for SMEs,
competitive advantage in an increasingly volatile digital transformation for business model innovation
environment (Fitzgerald et al., 2014; Zott and Amit, can be challenging (Gruber, 2018). Small businesses
2010). Yet, transforming digitally and using it to in- often have a more specific focus, which tends to re-
novate a business model is challenging (Azevedo and duce the need for digital transformation, leading to
Almeida, 2021; Henriette et al., 2016). It requires an a lack of digital elements in their business model,
organization-wide change through the implementa- market approach and, most importantly, their busi-
tion and use of digital technologies (Remane et al., ness strategy. Blatz et al. (2018), Rothmann and Koch
2017; Richter et al., 2017). This is particularly rele- (2014), Szedlak et al. (2019), and Verhoef et al. (2021)
vant for SMEs, which are seen as a driving force and highlight that a renewal of organizational business
backbone of most economies (OECD, 2017). By lever- strategy is crucial for digital transformation. Bharad-
aging on digital transformation, SMEs can improve waj et al. (2013, p. 472) define a digital business strat-
their market intelligence, achieve standardization, egy as an “organizational strategy formulated and
and innovate their business model, allowing them executed by leveraging digital resources to create
to become players and even key players in globaliz- differential value”. It guides the efforts of leaders
ing markets while having access to a wide range of to create new value propositions by combining the
networks at a relatively low cost (OECD, 2021; Ulas, existing capabilities of their companies with capa-
2019). However, SMEs are (in comparison to large bilities enabled by digital technologies (Sebastian et
businesses) often more financially constrained and al., 2017). Digital transformation in SMEs requires a
conservative, making them less ready for changes thoroughly defined and adapted digital transforma-
induced by the set of digital transformation tech- tion strategy which centres on the coordination,
nologies that are being used by organizations to prioritization, and implementation of digital tech-
digitally innovate their business models (Azevedo nologies (Matt et al., 2015).
and Almeida, 2021; Eksell and Härenstam, 2017).
Digital transformation technologies are defined as Renewal of business culture
combinations of information, computing, commu- SMEs often lack the resources, managerial capabili-
nication, and connectivity technologies (Bharadwaj ties, and vision to fully understand the cultural im-
et al., 2013), for example mobile phones, large online pact of digital transformation for business model
datasets, connected devices, low-cost computing innovation. Hock et al. (2015) add that SMEs might
resources, machine learning, and natural language require a renewal of their business culture to one
processing (Vargo et al., 2021). that is supportive in implementing digital trans-
formation. Business culture consists of artefacts,
Renewal of business strategy values, and shared basic assumptions about the
Adopting digital technologies is key to driving digi- organizational business environment (see Schein,
tal transformation (Verhoef et al., 2021). Morakan- 1990). It is perceived as a valuable strategic asset
yane et al. (2020) and Fitzgerald et al. (2014) highlight that has the potential to support digital transforma-
that once the right digital technology to be adopted tion by exploiting digital technologies (Warner and

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Wäger, 2019; Westerman et al., 2011). Gamache et al. the observations more generalizable (Brady, 2015).
(2019) and González-Varona et al. (2020) argue that a Dalkey (1972, p. 15) states that a Delphi study is predi-
digital business culture perpetuates innovation, and cated on the rationale that “two heads are better
continuous improvement in skills, products, and re- than one, or … n heads are better than one”.
sources. Therefore, business cultural attitudes and
values can either support or hinder the digital trans- Participants from South African and Dutch aca-
formation of businesses (Vogelsang et al., 2019), demic organizations and SMEs
playing a crucial role in the adoption of new tech- The Delphi study was conducted with scholarly
nologies (see also Fitzgerald et al., 2014). experts in the closely related fields of entrepre-
Several cultural values needed in digital transforma- neurship, technology, business management, and
tion for SMEs have been identified (Tuukkanen et al., innovation. Invitations were sent to 19 South African
2022): dynamic responses to changing environmen- (SA) scholars (lecturers, senior lecturers, professors,
tal demands; striving for continuous organizational and/or academic entrepreneurship specialists) and
development and innovation; having an affinity to- 10 scholars participated, resulting in a 53% response
wards the organization; investing in continuous rate. Invitations were also sent to 26 scholars from
learning; developing tolerance towards mistakes; the Netherlands (NL) and 10 participated, resulting
being open towards calculated risks; nourishing in a 38% response rate. In total, 20 scholars partici-
trust between the company and its clients and trust pated in the study. Tables 1 and 2 present the demo-
within the organization; and investing in coopera- graphic data of the SA and NL scholars.
tion within the organization. A culture that promotes
creativity and innovation for new (and digital) prod- The participants from both the SA and NL academic
uct and service delivery, encourages risk-taking, and institutes were affiliated to a management or entre-
creates a sense of urgency in sensing new opportu- preneurship department, with 1 SA panel member
nities also contributes to digital transformation in affiliated to the Faculty of Art, Design, and Architec-
SMEs and potentially supports business model inno- ture. Furthermore, the majority of participants were
vation (Aksoy et al., 2017). senior lecturers (11 in total), alongside 6 professors
and 3 lecturers.
Research methodology
Delphi study The Delphi study also invited two groups consisting
For the empirical part of this study an exploratory re- of SA and NL employees/owners of SMEs. No exclu-
search approach using a Delphi study was adopted sion criteria applied to the SME participants; thus,
(Dalkey, 1972; Linstone, 1978; Turoff and Linstone, lower, middle, and top-level employees and/or the
2002; Hsu and Sandford, 2007; Avella, 2016). This owner of an SME could participate in the study. Invi-
approach gathers data from varied respondents tations were sent to 116 SA SMEs, and 8 participated,
within their domain of expertise, aims to bridge which is a 7% response rate. 24 invitations were sent
the gap between theory and practice, and increas- to NL SMEs, and 7 participated, resulting in a 29%
es an understanding of a certain phenomenon in response rate. The majority of the SME participants
more depth (Brady, 2015). This method was used to from both SA and NL firms were business owners (9
achieve a convergence of opinions about which in- in total). Furthermore, the majority of participants
ternal organizational factors relative to the renewal were part of a business with up to 50 employees (13
of business strategy and business culture drive digi- in total). A total of 15 SME employees and/or owners
tal transformation for business model innovation in participated in the Delphi study. Table 3 presents
SMEs. Consensus reaching was relevant in under- the demographic data of the SA and NL SME partici-
standing factors contributing to business strategy pants.
as well as business culture, as it enabled participants
from different power positions to form or share their All participating groups in the study exceeded
opinions and perceptions on the topics, making the required minimum number of 7 participants
(see Linstone, 1978; Okoli and Pawlowski, 2004).

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Table 1.

Scholars’ Institutions Frequency

University of Johannesburg 4

Stellenbosch University 1

University of Pretoria 2

University of Mpumalanga 1

Gordon Institute of Business Science 1

University of South Africa 1

Scholars’ Designations

Lecturer 2

Senior Lecturer 5

Professor 3

Scholars’ Affiliation to the University

Department of Business Management 8

Business School 1

Faculty of Art, Design, and Architecture 1

Table 1: Panel profile of SA scholars (n = 10)

Furthermore, collecting empirical data from repre- procedure that was followed to conduct the Delphi
sentatives of SMEs from both an emerging econo- study consisted of two rounds, which is the mini-
my (SA) and a developed economy (NL) (World Bank mum required number of rounds in a Delphi study
Data, 2021a; World Bank Data, 2021b) broadened the (see Thangaratinam and Redman, 2005). In round 1 in
analytical validity of the insights from the empirical an online questionnaire, the SA and NL scholars and
research towards the practice of emerging and de- practitioners were asked to rank a pre-structured
veloped economies. Although this analytical valid- list of organizational characteristics that are com-
ity is limited and further research is needed in other monly cited in the literature as important in driving
emerging and developed economies to strengthen it digital transformation for business model innovation
(Andrade, 2021), it can serve as a basis for such fu- (see Van Tonder et al., 2020), and were also invited to
ture studies (Patton, 2002). list additional organizational characteristics, based
on their experience. This resulted in an extended list
Two rounds of data collection of characteristics that were consolidated in a sec-
All data were collected online in two rounds us- ond version of the online questionnaire. In round 2
ing Google Forms, and communication with each the participants were asked to also rank the addi-
participant was organized via an online link. The tional characteristics, which resulted in an extended

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Table 2.

Scholars’ Institutions Frequency

University of Amsterdam 1

Vrije Universiteit, Amsterdam 3

University of Groningen 1

Radboud University 1

University of Twente 3

Tilburg University 1

Scholars’ Designations

Lecturer 1

Senior Lecturer 6

Professor 3

Scholars’ Affiliation to the University

School of Business and Economics, Management and Organi-

2
zation

Department for Entrepreneurship, Strategy, and Innovation

3
Management

Faculty of Science, Innovations in Human Health and Life

2
Sciences

Faculty of Economics and Business Management, Entrepre-

1
neurship and Innovation

Department of Management 1

Entrepreneurship and Small Business Management, Innova-

1
tion and Technology Management

Table 2: Panel profile of NL scholars (n = 10)

list of organizational characteristics that drive digi- Results of round 1

tal transformation for business model innovation in The scholars and SME participants were asked to
SMEs, some literature based and empirically vali- rate the most important internal organizational fac-
dated, and others empirically based and empirically tors in adopting digital transformation technologies
validated. as pertaining to the highest ranked organizational
characteristics, using a 5-point Likert scale from 5
(very important) to 1 (not important at all).

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Table 3.

Scholars’ Institutions Frequency SA Frequency NL

Nationality 8 7

Gender

Male 6 7

Female 2 -

Designation

Business owner 6 3

Top-level employees 2 -

Middle-level employees - 2

Lower-level employees - 2

Level of Education

Master’s degree - 7

Grade 12 (Matric) certificate 2 -

Post-matric diploma or certificate 3 -

Postgraduate degree 3 -

Length of Service

< 1 year - 1

1-5 years 4 5

6-10 years 1 -

> 10 years 3 1

Industry

Healthcare - 1

Construction 1 1

Computer and related activities 3 1

Public sector - 1

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Finance and business services 3 1

Research and development - 1

IT recruitment 1

Mobility and infrastructure development - 1

Business Size

< 5 employees 4 1

5-20 employees 1 2

21-50 employees 2 3

> 51 employees 1 1

Table 3:Panel profile of SA (n = 8) and NL SMEs (n = 7)

Table 4.

Mean Standard Deviation Mode

No. Item Scholars SMEs Scholars SMEs Scholars SMEs

Openness to new tech-

1 4.8 4.7 0.8 0.7 5 5
niques and methods

2 Agility 4.4 4.6 0.9 1.0 5 5

3 Digital strategy 4.4 4.3 0.8 0.5 5 5

4 Continuous innovation 4.2 4.2 0.7 1.3 5 5

Organizational infra-
5 4.1 3.4 0.9 1.2 4 4
structure

6 Organizational structure 3.7 3.8 0.4 0.5 4 4

Table 4: Internal organizational factors in adopting digital transformation technologies

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techniques and methods, followed by the ability to People (leaders) in the business who are not afraid to apply these
technologies and the support for customers if the technologies are
move quickly and easily (agility). Both the scholars not working optimally. (Scholarly Participant 2)
and SMEs rated having a digital strategy as very im-
portant. Continuous innovation was also rated as Three of the SME participants and two scholars
very important by both groups; however, the highest emphasized the need for flexibility and adaptability
standard deviation was within this construct (SD = when adopting digital technologies.
1.3 for SMEs), indicating that full consensus was not Both groups of participants were asked to rate the
reached among the SME participants. Organizational most important internal organizational factors in
structure and infrastructure were also deemed im- adopting digital transformation as a concept, again
portant, though their scores indicated that the par- using a 5-point Likert scale from 5 (most important)
ticipants did not think these were as important as to 1 (least important).
the other factors. The majority of scholars claimed
that infrastructure is very important, but it is inter-
esting to note that not all SMEs rated this as highly. Table 5 shows that both the scholars and SME par-
The participants were asked which additional inter- ticipants rated digital capabilities as most impor-
nal organizational factors they believed would assist tant, followed by customer needs and resources as
an SME in adopting digital transformation technolo- very important, and digital products that are digitally
gies. Two statements by participants captured the infused as important.
common opinions on these additional factors:

I think the education of the different types of digital technologies The participants were also asked to give their opin-
available will assist SMEs to understand the available options
while also aiding to adopt the usage. (SME Participant 1)
ion on whether the type of customer service played

Table 5.

Mean Standard Deviation Mode

No. Item Scholars SMEs Scholars SMEs Scholars SMEs

1 Digital capabilities 4.7 4.5 1.0 1.1 5 5

2 Customer needs 4.4 4.3 0.8 0.9 5 5

3 Availability of resources 4.2 4.0 0.5 0.6 4 4

4 Digital products 3.7 3.5 0.6 0.8 4 4

Table 5: Most important internal organizational factors when adopting digital transformation as a concept

a crucial role in the decision to adopt the digital of digital technologies (unconscious need). If neither of these is
true, a (more) digital technology-based product is likely to be
transformation concept, with 16 scholars and 10 SME incompatible with the business processes of your customer and
participants stating that it did. SME Participant 3 therefore undesirable. (SME Participant 3)
captured the common opinion of many participants
with the following response: SME participants were asked two additional ques-
Definitely. Depending on your customer, their needs are tions relating to their product offering and digital
successfully met through digital technologies to a varying transformation technologies (see Table 6).
degree. I think it mostly depends on both the expectation of your
customer (conscious need) as well as the potential added value
From Table 6, it is clear that the adoption process of
digital transformation technologies depends on the

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Table 6.

Number of par-
Question Response Percentage
ticipants

Does the product that you offer influ- Yes 12 77%

ence your decision to incorporate
No 3 23%
digital technologies into your daily
operations? Total 15 100%

Yes 10 67%
Do you think that having products on
a digital platform in the 21st century is No 2 13%
needed to competitively compete in
Unsure 3 20%
the existing business environment?
Total 15 100%

Table 6: Open-ended questions on adoption of digital transformation technologies

existing products offered, with 12 of the SME partici- It is clear from Table 7 that both the scholars and
pants stating yes. The majority of these participants SME participants rated dynamic capabilities as the
(10) stated that products should be offered on a most important. The need to be resilient and devel-
digital platform and three participants were unsure op a strategy aimed at innovation were rated as very
about the question. important across both groups. Furthermore, both
groups claimed that the business model innovation
Furthermore, to execute the adoption of digital process requires both digital capabilities and the
transformation technologies, it is important to introduction of digital products (either fully digital
identify the types of resources that an SME should or digitally infused); however, the scholars rated ca-
have. Most of the participants stated that the hu- pabilities over products, whereas SME participants
man resource aspect is most crucial since employ- rated products over capabilities. Lastly, the type of
ees should possess essential technological skills, an product offered was rated important.
open mindset, and decisiveness as a trait. SME Par-
ticipant 4 captured this as follows: The SME participants were also asked to give their
opinion on the open question of whether a new
Open-minded human resources. A business will need the obvious strategy should be crafted when deciding to pursue
funding for their digital transformation however the bulk of
resistance will come from employees. So, in short, the resources digital transformation-induced business model in-
needed are those for change management and digital (and other) novation. Only five stated outright that a new strat-
skills education. The training required is not just digitally focused egy is needed, claiming that it is a different way of
but soft skills and mindset shifting training and education. You
operating and decision-making. In contrast, ten par-
need employees to change the way they think about things before
any digital transformation can take place. (SME Participant 4) ticipants indicated that a new strategy is not need-
ed, giving the following justification:

The scholars and SME participants were asked to Depends on what your strategy is; digital technology should be
seen as an enabler; evaluate vision and see if it will need a change.
rate the internal organizational factors they consid-
(SME Participant 5)
ered most important for adopting business model
innovation (from 5 = very important to 1 = not impor- Only if the product is significantly different, otherwise keep it as
tant at all). is. Also, digital transformation is not a goal, but rather a means to
the end. (SME Participant 6)

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Table 7.

Mean Standard Deviation Mode

No. Item Scholars SMEs Scholars SMEs Scholars SMEs

1 Dynamic capabilities 4.6 4.1 1.1 0.9 5 4

2 Strategy for innovation 4.3 4.1 1.0 1.1 5 4

3 Resilience 4.0 4.0 0.9 0.8 4 4

4 Digital products 3.8 4.1 0.9 0.9 4 4

5 Digital capabilities 4.3 3.9 0.5 0.7 5 5

6 Product offering 3.8 3.9 1.0 0.8 4 4

Table 7: Most important internal organizational factors when adopting business model

To fully understand why and when digital transfor- important by both scholars and SMEs. Competitive
mation leads to business model innovation, the dif- pressure in the business environment also con-
ference between a traditional business model and a tributes to the desire of a business to adopt digital
business model that is underpinned by a collection transformation technologies, with both groups rat-
of digital transformation technologies needs to be ing it as important, but not very important. Resource
articulated clearly. This question was posed to the availability was rated as very important by the schol-
scholars, with seven participants clearly stating the ars, but only important by the SMEs. Furthermore,
main difference being that digital transformation- a mindset of creativity and innovation should be in-
induced business model innovation is more agile and stilled in employees in the process of adopting digi-
scalable, and allows continuous and rapid business tal transformation technologies, being rated as very
model innovation as the environment changes. Five important by both scholars and SMEs. The business
participants emphasized that speed is a differential culture should also be redesigned, with the majority
factor: of SMEs agreeing that this is very important, where-
as the scholars rated this as important. Change
Speed, speed, speed, and lower cost coupled with customer management and the right leadership were rated
convenience. (Scholarly Participant 7)
by both groups as very important for when a busi-
Results of round 2 ness decides to adopt digital transformation tech-
Each participant was required to rank the listed nologies. Collaboration and environmental scanning
internal organizational factors on a 5-point Likert were rated very important by the scholars; however,
scale. In terms of the most important internal organ- the SMEs rated it only as important, with the highest
izational factors in adopting digital transformation standard deviation at 1.2, indicating a lack of con-
technologies, the participants identified additional sensus among the group.
internal organizational factors that are critical for an
SME to consider (see Table 8). The SME participants were also asked to choose the
most important digital transformation technologies.
From Table 8, it is clear that training on the types Table 9 depicts the SA and NL SME perspectives on
of digital technologies, benefits, challenges and the types of digital transformation technologies that
how to use the technologies were identified as very are crucial for adoption by SMEs.

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Table 8.

Mean Standard Deviation Mode

No. Item Scholars SMEs Scholars SMEs Scholars SMEs

Training on types of digital

technologies, benefits, and
1 4.2 4.4 0.9 0.8 5 5
challenges and how to use
these technologies

2 Competitive pressure 3.8 3.7 0.6 0.9 4 4

3 Resource availability 4.3 3.8 0.7 0.9 4 4

4 Creativity and innovation 4.3 3.9 1.1 0.8 5 4

5 Business culture 3.8 4.2 1.1 0.8 5 4

6 Change management 4.0 4.2 0.9 0.8 4 4

7 Leadership 4.3 4.5 0.7 0.9 4 5

8 Collaboration 4.3 3.3 0.8 1.0 5 3

9 Environmental scanning 4.0 3.3 1.0 1.2 4 2

Table 8: Additional internal organizational factors in adopting digital transformation technologies

Table 9 indicates that there was agreement on the transformation compared to a traditional business
major types of digital transformation technologies model. The results are presented in Figure 2.
that should be adopted by SMEs; however, all five
SA SMEs rated machine learning as important, and Based on Figure 2, it can be substantiated that
two NL SMEs rating it as not important, with a high digital transformation-induced business model in-
standard deviation of 1.3 indicating a lack of consen- novation may result in an increase in speed from
sus. Robotics had mixed responses between the two production to customer relationship management
perspectives, with three SA and two NL SMEs rating while using limited resources. It may better allow an
it as important and one SA and two NL SMEs rating SME to operate in real time, be more agile, and ex-
it as not important, also indicating a lack of consen- ploit economies of scale, and may make it possible
sus, with another high standard deviation of 1.3. Fur- to increase value for their stakeholders. Taking on
thermore, SA SMEs rated blockchain as important, more risks was identified by only 17% of the partici-
but NL SMEs rated this as not important. pants as a distinguishable factor.

As mentioned previously, it is important to under-

stand the difference between a traditional busi- Discussion
ness model and a business model innovated by The ongoing digitalization of business and society
digital transformation technologies. The scholars has a considerable impact on organizations, and also
were asked what possible benefits or risks they on SMEs, which struggle to capitalize on opportuni-
saw of a business model innovated through digital ties presented by digital transformation (Kesting and

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Table 9.

SA SME’s NL SME’s

Stand-
ard Standard
No. Item Mean Mode Mean Mode
Devia- Deviation
tion

1 Digital applications 4.2 0.4 4 4.3 0.5 4

2 Cloud solutions 4.8 0.4 5 4.1 0.7 4

3 Sales automation 4.0 0.0 4 4.0 0.6 4

4 Cyber security 5.0 0.0 5 4.0 0.6 4

5 Machine learning 4.4 0.5 4 3.6 1.3 5

6 Big data 4.6 0.5 5 3.6 1.0 4

7 Artificial intelligence 4.4 0.5 4 3.4 1.3 3

8 Internet of Things (IoT) 4.8 0.4 5 2.7 1.0 3

9 Blockchain 3.8 0.4 4 2.4 0.5 2

10 Robotics 3.8 1.3 5 3.1 1.1 3

Table 9: SA and NL SME perspectives on adoption of digital transformation technologies

Günzel-Jensen, 2015). These opportunities require renewal of business strategy (e.g. Bharadwaj et al.,
SMEs to adapt and rethink their existing business 2013; Matt et al., 2015; Sebastian et al., 2017), and (b)
models through incorporating digital transforma- renewal of business culture (e.g. Hock et al., 2015;
tion technologies, and to bundle these technologies Tuukkanen et al., 2022; Vogelsang et al., 2019). Be-
coherently as a digital transformation concept or low we elaborate further on these and reflect on the
approach (Crowley et al., 2017). This study aimed to relevant literature framework.
answer the research question: Which internal organ-
izational factors drive the renewal of SMEs’ business Renewal of business strategy as an internal or-
strategy and culture to support their digital transfor- ganizational factor
mation trajectory? To answer the research question, The renewal of business strategy was identified as
a Delphi study sought consensus among SA and NL critical by the panel in our Delphi study, and empha-
scholars and owners/employees of SMEs regard- sis was placed on the need to develop a digital trans-
ing the concepts of and relationships between the formation strategy and an action plan to implement
concepts in this research question. The literature- and execute the strategy. The core internal organi-
based and Delphi-based empirical results indicate zational factors that drive digital transformation for
that digital transformation depends on several in- business model innovation for SMEs to renew their
ternal organizational factors linked to the following business strategy are (a) pursuing a digital transfor-
two organizational drivers for implementation: (a) mation strategy consisting of a coherent approach

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Figure 2:

for adopting and embedding digital transformation the consumers through the collection of customer
technologies (for the overview of digital transforma- feedback (Ruiz-Alba et al., 2019). According to Ches-
tion technologies see Table 9), and possessing the brough (2010), business model innovation is eventu-
(b) organizational structure, (c) dynamic capabilities ally about change management; this process takes
and (d) resources to embed this digital transforma- place through continuous experimentation and trial
tion strategy in the business activities of the SME. and error, which will ultimately be achieved with the
These specific factors found in the empirical study appropriate managerial support.
are in line with the more general insights from the
literature. Latifi and Bouwman (2017) argue that Renewal of business culture as an internal organi-
business models are the reflection of strategy ex- zational factor
ecution; following this argument, it can be substan- To execute and implement the change process,
tiated that business model innovation is a reflection the panel in our Delphi study identified that a well-
of an SME’s digital transformation strategy. When re- aligned strategy in harmony with the business cul-
newing an SME’s strategy, it is important to consider ture should be in place, as previously supported by
a variety of factors within the business model, such Sow and Aborbie (2018). The core internal organiza-
as the product offering, customer relationship and tional factors that drive digital transformation for
an organizational structure that allows for change, business model innovation as identified through the
flexibility, and skills development, as identified by Delphi study for SMEs to renew their business culture
the panel. Digital technologies allow businesses to are (a) continuous openness to the adoption and em-
build a close relationship with their customers and bedding of a coherent set of digital transformation
a fine-grained understanding of their needs (Klos et technologies (for the overview of digital transforma-
al., 2021). Thus, customer needs should remain cen- tion technologies see Table 9), and (b) leadership, (c)
tral by keeping the product offering in mind before training programmes, and (d) collaboration and (e)
and during the transformation process and deter- creativity incentives aimed at supporting this pro-
mining if the product can be used as is, should be re- cess of adoption and embedding.
designed, or if a completely new product is needed.
If a redesign is needed, it can be achieved through These specific business strategy and business cul-
digitally supported co-creation, as identified by the ture renewal-related internal organizational factors
panel, and in line with research of Khin and Ho (2018). found in the empirical study align with more general
Co-creation is defined as the joint development insights from literature. Demirkan et al. (2016) ar-
of new products, the ideas for which come from gue that digital transformation requires significant

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changes to the organization, which will require a Contributions, limitations, and avenues for future
change of the business strategy, and this can be research
difficult to achieve without major reworkings of the The literature calls for research that develops knowl-
business culture and processes. The transformation edge and insights regarding the internal organiza-
process of the business model should be implement- tional factors that drive digital transformation for
ed throughout the entire business; however, this will business model innovation in SMEs (e.g. Bin and Hui,
require employees to change and adapt (Latifi and 2021; El Hilali et al., 2020; Gasperlin et al., 2021; Li
Bouwman, 2017). The panel identified that leader- et al., 2018). This study addresses this call and finds
ship is critical in any change process, and the right multiple internal organizational factors pertinent
leadership in place should enable employees to em- to business strategy renewal and business culture
brace the adoption process more effectively (Sow renewal that can stimulate the process of digital
and Aborbie, 2018). To execute business culture transformation-induced business model innovation
changes effectively, companies will require leaders in SMEs. Researchers can take these findings as
who will frame a culture supporting digitalization in a basis for future research in SMEs in the same or
different forms (El Sawy et al., 2020). This is also in other countries and types of economies. They can
line with the need for creativity and innovation which also conduct in-depth research into the anteced-
will bring people and ideas together, allowing them ents of these factors and the more precise effects
to experiment and experience new technologies and of the factors on how digital transformation contrib-
capabilities in a safe environment (Ashwell, 2017). utes to and can be integrated with business model
innovation in SMEs. Managers and professionals in
Propositions and around SMEs in practice can benefit from the
The findings of the research led to the formulation research insights by considering the identified fac-
of the following literature-based and empirically tors when introducing, further developing, and inno-
grounded twofold proposition: vating the digital transformation-induced business
models in their SMEs.
Digital transformation-induced business model in-
novation in an SME is driven by: Next to the contributions, this research also had
its limitations. It was set up based on two internal
1. the renewal of the strategy of the SME, which en- organizational factors from the literature, i.e. busi-
tails (1a) pursuing a digital transformation strategy ness strategy and culture, and several factors within
consisting of a coherent approach for adopting and these two basic factors were found. This focus ex-
embedding digital transformation technologies, and cludes other possible literature- and theory-based
possessing the (1b) organizational structure, (1c) dy- search directions. The use of other theoretical start-
namic capabilities, and (1d) resources to embed this ing points in the search for internal organizational
digital transformation strategy in the business ac- factors, for example from the dynamic capability ap-
tivities of the SME; proach (see Teece et al., 1997), the resource-based
and view of the firms (see Barney, 1991), or from effec-
tuation theory (see Sarasvathy, 2001), would imply
2. the renewal of the culture of the SME in which (2a) a different starting point and lead to different out-
continuous openness to the adoption and embed- comes and clustering of outcomes. The results of
ding of a coherent set of digital transformation tech- this research are therefore indicative and further
nologies is central, and (2b) leadership, (2c) training research is needed to arrive at deeper analytically
programmes, and (2d) collaboration and (2e) creativ- valid insights. In addition, the research in this pa-
ity incentives are aimed at supporting this process per assumes overlap between digital transforma-
of adoption and embedding. tion and business model innovation (see Eksell and
Härenstam, 2017), but does not pay attention to con-
texts in which this overlap is thin or not present at
all. Follow-up research could study the possibility for

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SMEs to innovate their business model by using the embedding of a coherent set of digital transforma-
collection of digital transformation technologies as tion technologies is central, and (b) leadership, (c)
well as technologies, approaches, and methods that training programmes, and (d) collaboration and (e)
do not belong to this collection. Finally, the Delphi creativity incentives are aimed at supporting this
research was conducted with a limited number of process of adoption and embedding. Researchers
representatives of academic institutions and SMEs can use these drivers and factors as a basis for fu-
of an emerging (SA) and a developed (NL) economy. ture research. For practitioners, the findings pro-
This implies that results are indicative and have lim- vide a guideline for (re)arranging business activities
ited general analytical validity for SMEs in these and in SMEs to enable digital transformation-induced
other emerging and developed economies. Future business model innovation.
research is needed, in the same and other countries,
with different qualitative and quantitative research
methods to arrive at broader, deeper, and better
generalizable insights.

Conclusion
This study investigated which internal organization-
al factors drive the renewal of business strategy and
business culture to contribute to digital transforma-
tion for business model innovation in small and me-
dium-sized enterprises (SMEs). It built on a general
literature study and a Delphi study from both a South
African (emerging economy) and a Dutch (developed
economy) perspective. For the Delphi study a ques-
tionnaire was used to query the commonly cited
organizational drivers and internal organizational
factors that contribute to digital transformation
for business model innovation in SMEs in emerging
and developed economies. The literature and Delphi
study identified that there are two core internal or-
ganizational factors that drive digital transformation
for business model innovation in SMEs: (a) a renewal
of business strategy and (b) a renewal of business
culture. Various internal organizational factors
within these drivers were identified. The internal or-
ganizational strategic factors this literature-based
and empirically grounded study identified for SMEs
are (a) pursuing a digital transformation strategy
consisting of a coherent approach for adopting and
embedding digital transformation technologies,
and possessing the (b) organizational structure, (c)
dynamic capabilities, and (d) resources to embed
this digital transformation strategy in the business
activities of the SME. The internal organizational
cultural factors the literature-based and empirically
grounded study identified for SMEs are a culture in
which (a) continuous openness to the adoption and

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About the Authors

Chanté van Tonder is a lecturer and Programme Manager at IIE MSA. Her research
interests focus on innovation, digital technologies, transformation, and business
models.

Sandra Hasanefendic is an assistant professor in Breakthrough Tech Innovation

and Management at Vrije Universiteit Amsterdam, the Netherlands. Her research
focuses on urban resilience with the underlying topics of energy, transportation,
higher education and healthcare transitions.

Cecile Nieuwenhuizen is a full Professor and the Chairperson of the SARChI

Entrepreneurship Education. Her research is focused on entrepreneurship
development.

Prof Chris Schachtebeck is an Associate Professor in the Department of Business

Management at the University of Johannesburg. His research interests lie within
entrepreneurship and corporate entrepreneurship

Bart Bossink is full professor of Breakthrough Tech Innovation, Vrije Universiteit,

Amsterdam, Netherlands. His research covers R&D-driven and tech-induced
innovation in business, markets and society.

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