Abstract
This paper aims to explore an in-depth understanding of digital transformation (DT); its process, initial conditions, dynamics, and successful outcomes within a single small business setting that presents a context-rich environment for microfoundational research. We employ inductive research and derive theory from experience. Our chosen case study shows that digital transformation is neither straightforward nor fast as the acquisition of digital technologies suggests. DT is a dynamic process that requires mindset and ST as co-mechanisms. Strategy transformation (ST) is about the strategic renewal of the business in response to changes in its environment through integrating all aspects of business strategies (i.e. human resources, market(ing), innovation, and networks). Mindset transformation (MT) as a construct that represents cognitive aspects is pivotal to microfoundations of DT. It has a process of its own and is at the core of microfoundations since it starts at the individual level (e.g. owner-manager); but for it to create a transformative effect at the organisational level, the management and the employees need to transform their mindsets. Overall, MT is needed to fight against rigid organisational routines and to alter the organisational culture for the better. Most importantly, all these transformation processes are endorsed with existing and emergent dynamic capabilities. Dynamic capabilities may initially reside in individuals, such as the founding/owner managers whose sensing and seizing capabilities come from their distinguishing entrepreneurial characteristics, yet a transfer of these capabilities to the organisational level over time is necessary and can be achieved through dynamics among MT, ST, and DT. Finally, we propose a ‘Digital Transformation Model’ that combines all these aspects.