Effect of digital-related capabilities on companies’ sustainability

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architectures to achieve sustainability performance. The real-time data generated in digital transformation offers many opportunities that are relevant to businesses in dissimilar fields and results in enhanced productivity and environmental and social sustainability performance (Singh and El-Kassar, 2019).

Operational capabilities can support firms in flexibly allocating their resources with various numbers of alternatives. This creates greater potential to design more sustainable offerings such as investment in technologies that require fewer energy resources and produce lower toxic emissions (Gelhard and von Delft, 2016). Through the deployment of digital tools and digital solutions at the operational level, a digital business strategy will enhance strategic flexibility and provide superior sustainability performance for firms (Benitez et al., 2018).

According to Holmström et al. (2017), enlarging digitalization in each phase of the manufacturing enhances the sustainability of products and services through changes in operational practices (e.g., digital prototyping, digital part manufacturing, digital customization) in different phases, such as product design, distribution, use, and after-sale services. Digital prototyping is one of the operational practices in the design phase, conducted by design iteration, which results in advanced designs for assessing a prototype and also minimizes costs and lead time in the product design phase. Furthermore, digital prototyping can be applied in manufacturing process changes, which facilitates engineering changes of a design in production and leads to incremental growth in the productivity of tools and equipment. Digital part manufacturing involves the manufacturing of spare parts based on demand, which results in a lower volume of spare parts during market entry, as well as a reduction in time spent on repairing and refurbishment. Digital customization enables the production of a variety of parts based on customers’ specifications and interest, which results in customer satisfaction.

2.1.3 Effect of digital-related capabilities on companies’ sustainability performance

Because of the vast number of changes in business processes and methods (Kohtamäki et al., 2020), digital transformation involves fundamental transitions not only in the types of technologies (Fichman et al., 2014; Yoo et al., 2012; Yoo, 2010) and strategies (Bharadwaj et al., 2013; El Sawy et al., 2016; Grover and Kohli, 2013; Li et al., 2018;

Mithas et al., 2013; Matt et al., 2015) but also in companies’ capabilities (Berman, 2012;

Kohtamäki et al., 2020; Vial, 2019). The important roles of human capability, collaboration capability, innovation capability, and technical capabilities in digital transformation have been highlighted by many scholars (Berman, 2012; Büyüközkan and Göçer, 2018; Hess et al., 2016; Vial, 2019). The combination of these capabilities represents digital-related capabilities. Digital transformation through digital-related capabilities is associated with the sustainability performance of companies in such areas as innovativeness (Hess et al., 2016; Jackson, 2019; Svahn et al., 2017), financial performance (Karimi and Walter, 2015;Kohtamäki et al., 2020), firm growth (Berman,

2012; Setia et al., 2013), reputation (Berman, 2012), cost reductions (Hess et al., 2016) and competitive advantages (Büyüközkan and Göçer, 2018; Vial, 2019).

Digital transformation through human capabilities can support the achievement of sustainable competitive advantages, including a quick and accurate decision-making process (Bharadwaj et al., 2013; Büyüközkan and Göçer, 2018; Vial, 2019), the ability to quickly develop business solutions (Büyüközkan and Göçer, 2018; Dremel et al., 2017), profitability (Berman, 2012), and social sustainability (Vial, 2019). For instance, human capabilities through employees’ support, readiness, and advanced digital skills can facilitate and accelerate the decision-making process (Bharadwaj et al., 2013; Hess et al., 2016) and enable a more rapid response to complex business challenges (Dremel et al., 2017). Furthermore, staff members who are well-trained in utilizing digital tools can easily support remote working, which enables social sustainability performance through flexible working hours and employee comfort (Pramanik et al., 2019) and environmental sustainability through reduced commuting and traveling for work (Bekaroo et al., 2016).

In addition, working in an environment with employees who are ready to use and accept digital processes actualizing innovation and business growth is less challenging (Berman, 2012). In a digital supply chain, the employees’ ability to utilize data in an efficient way can support companies to predict upcoming demands and develop decision-making processes, as well as find solutions for unresolved issues (Büyüközkan and Göçer, 2018).

According to Fischer et al. (2020), as tasks become more complex, companies need digital expertise and motivated specialists to tackle with reformation of economic, social, and environmental benefits.

Digital transformation through collaboration capabilities (Büyüközkan and Göçer, 2018;

Vial, 2019) can help sustain a firm’s performance in terms of efficiency (Vial, 2019), social sustainability (Büyüközkan and Göçer, 2018; Berman, 2012), efficient resource consumption (Büyüközkan and Göçer, 2018), customer satisfaction (Berman, 2012), and relationship performance (Büyüközkan and Göçer, 2018). For instance, collaboration among stakeholders and customers in digital channels can enhance a firm’s profitability through customer participation and engagement (Setia et al., 2013). Furthermore, collaboration capability through resource- and knowledge-sharing both inside and outside of the companies enhance a firm’s performance (Li et al., 2018).

According to Berman (2012), collaboration through engaging customers and communities in every phase of the business process in which value is created (i.e., not only in marketing and sales but also in supply chain management, product design, human resources, finance, and IT) can differentiate companies from being customer-centric businesses. Furthermore, collaboration through digital channels and integration among customer touchpoints are vital to effectively manage digital operations. A diversity of digital and social channels enhances customer expectations, and continuously providing different user experiences through social channels is expected in order to support reputation, branding, and customer satisfaction.

2.1 Drivers of digital transformation influencing companies’ sustainability performance

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According to Büyüközkan and Göçer (2018), a digital supply chain with digital cooperation from other companies as well as information-sharing and openness not only can optimize performance but also minimizes risks. A digital supply chain is also associated with social sustainability through the development of an alignment between supplies, which results in building trust and development, as well as promotion in reliability, agility, and efficiency by global information-sharing, superior collaboration, and interaction via digital platforms. Moreover, companies with a positive attitude toward collaborating with stakeholders both internally and externally can support sustainability performance through reducing failure (Fischer et al., 2020; Hess et al., 2016).

Digital transformation through innovation capabilities can help companies sustain competitive advantages, such as organizational performance and operational efficiencies (Oliveira and Roth, 2012; Vial, 2019), financial performance (Berman, 2012; Kohtamäki et al., 2020), social sustainability (Boons et al., 2013), and efficiency (Berman, 2012).

According to Kohtamäki et al. (2020), through new products and services, digitalization can ensure value creation, value capture, and, ultimately, positive financial performance.

Furthermore, innovative digital solutions support the enhancement of customer value and efficient solution delivery, leading to transaction cost savings and providing financial performance and sustainability (Sjödin et al., 2019).

Through the continual exploration of new solutions, firms are able to capture revenue and competitive advantages (Berman, 2012). According to Fischer et al. (2020), openness and innovation capabilities can support sustainability performance by facilitating creativity and risk-taking. Innovative activities, namely, the creation and development of new products and services, can assist firms in risk-taking activities to reap the benefits of a digital supply chain (Oliveira and Roth, 2012; Xue, 2014). Furthermore, companies seek to make sustainable differentiation through innovation and digital specialization by developing digital solutions regarding social well-being and environmentally friendly initiatives (Boons et al., 2013).

Digital transformation through technical capabilities (Hess et al., 2016; Pramanik et al., 2019; Vial, 2019) can optimize operational performance, including automation (Büyüközkan and Göçer 2018; Andriole, 2017), business process improvement (Gust et al., 2017), social sustainability (Agarwal et al., 2010; Pramanik et al., 2019), efficient resource use (Berman, 2012), cost savings (Hess et al., 2016; Pagani, 2013; Pramanik et al., 2019), and advanced productivity (Hess et al., 2016). As an example, technical capabilities through borderless activities in cloud computing enable on-demand and flexible resource allocation without human intervention (Kane, 2016). Moreover, technical capabilities can enhance the value of products and services in health care and in social life through electronic prescriptions and medical advice based on an individual’s real-time data and records, which promotes an individual’s quality of life (Agarwal et al., 2010). In the banking industry, cost savings and growth by streamlining banking systems and workflow optimization have been realized through technical capabilities. Technical capabilities in banks also enable operational benefits associated with business advantages, such as quicker processing, simplification, fewer errors, which results in better financial

performance (Pramanik et al., 2019). In a supply chain, technical capabilities through embedded sensors and real-time data can optimize resource consumption based on supply and demand forecasting (Berman, 2012). According to Hess et al. (2016), sustaining operations in digital transformation requires an assessment of current technical capabilities and a recognition of new technical capabilities that will increase value.

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