Why Digital Transformation Fails Without Them
We know that digital transformation is hard. Statistics bear this out: many companies fail when attempting it. But why?
The standard explanation focuses on organizational capabilities—what companies can do collectively. Yet this macro-level view obscures the mechanics underneath. The real action happens at the individual level: a data scientist optimizing search algorithms in real-time, a development team building a customer app, an infrastructure engineer connecting systems through APIs.
These aren't just tasks. They're what researchers now call "sociotechnical micro-foundations"—the basic building blocks that enable transformation.
A Nordic hotel chain provided the testing ground for this theory. Facing competition from online travel agencies like Booking.com and Hotels.com, which were siphoning away customers and charging up to 30% commission per booking, the chain needed to act. Fast.
What emerged over five years wasn't a traditional IT project. It was a continuous learning process where individuals and digital resources evolved together.
The Ecosystem Problem
Online travel agencies had industrialized hotel booking through digital platforms. Convenient for travelers. Devastating for hotels.
These platforms didn't just take a cut of revenue. They positioned themselves between hotel and guest, accumulating the customer data that hotels needed for relationship management. One executive described the realization bluntly: "We had lost control over our distribution and customer data."
The hotel chain's response began with one person: a vice president who analyzed the digital hospitality ecosystem and identified the gap between what the company had and what it needed.
This analysis—an individual interacting with digital resources to produce insight—became the first micro-foundation.
Building From the Ground Up
Management approved a €20 million digital strategy. But money alone doesn't transform organizations.
The company established a new digital innovation unit, eBerry, and hired 40 IT specialists with new competencies: advanced technologists, UX designers, data scientists. Three teams formed: platform, app, and data science.
Each team developed its own micro-foundations. The data science team analyzed booking data and renegotiated contracts with travel agencies, reducing their commission share substantially. They also built algorithms to optimize the hotel chain's visibility in Google searches continuously—a moving target requiring constant adjustment as Google's logic shifted.
The app team developed customer applications aligned with a new loyalty program. The platform team established a robust internal digital infrastructure using service-oriented architecture and APIs to connect existing and new systems.
None of this was straightforward. As one manager noted: "Legacy systems are a big challenge. We need a flexible platform, which is difficult to create."
The Human Factor
Technology alone wasn't enough. The biggest surprise came from the social side.
"The biggest lesson we have learned over the past three years is that eBerry will not succeed if we do not get the employees in the hotels, our 16,500 employees, involved," the chief digital officer explained. "And it was an enormously tougher task than I had expected."
Getting desk personnel to align their practices with digital guest solutions required company-wide training campaigns. Check-in staff had to learn new routines. Guests who had booked through travel agencies discovered they couldn't earn loyalty points or receive newspapers—benefits reserved for direct bookings.
The hotel chain launched advertising campaigns encouraging direct booking through their app. Self-service check-in kiosks appeared in lobbies. Mobile room keys became standard. Each addition required new micro-foundations: people learning to work with new digital tools.
A Stockholm receptionist captured the energy: "We have been participating in the eBerry kick-off and got quite excited about the solutions. Actually, I applied for a position at Nordic Choice because I perceive them as the most innovative chain in the business."
What Actually Works
After five years, the results were substantial. The loyalty program gained 2.2 million members. The app reached 254,000 downloads. Digital bookings through the hotel chain's own channels increased 78%, generating €210 million in revenue.
Booking costs through direct channels ran at 3% of the room price, compared to 15-20% through travel agencies.
But the transformation didn't end. It couldn't. The owner made this clear at an internal conference: "If you think you are finished, then you are indeed finished. My message today is, we have just started."
This captures something essential about digital transformation: both the competence of actors and the technology are unstable. As technology changes, competence must change. As competence changes, technology use changes.
You cannot buy this capability. You must build it.
The Micro-Foundation Concept
What researchers observed in this case was a pattern: competent actors interacting with digital resources to enable higher-level organizational capabilities.
They define sociotechnical micro-foundations as "the interactions between competent actors and digital resources that enable the organization to build macro-level capabilities during a digital transformation."
This isn't just individuals using tools. It's an emergent phenomenon. When the data science team optimized Google visibility in real-time, the result depended on Google's shifting algorithms and the team's interactions with other actors. The outcome was never deterministic.
These micro-foundations are relatively stable processes that can be reused and adapted—repertoires of action that organizations develop through continuous learning.
The research extends understanding in two directions. First, it provides a basic building block concept for digital transformation that accounts for both social and technical elements and how they combine. Second, it shows how micro and macro levels interact throughout the transformation process.
Managers can use this framework to identify and develop the detailed mechanisms necessary to support transformation. It provides a structured way of establishing interrelated sociotechnical mechanisms: actors, interactions, and digital resources configured to specific organizational needs.
The Ongoing Challenge
Managing sociotechnical micro-foundations is an ongoing task. New technologies emerge constantly: platforms, AI, machine learning, robotics. Each requires new competencies and new interaction patterns.
In the hotel case, executives had to master tools for analyzing data streams in a complex ecosystem. They monitored hospitality technologies continuously, matching them with customer needs. This required detailed insights into employee routines and customer behavior.
The challenge is significant. But the concept offers predictive value. Organizations can use it to identify initiatives necessary for realizing digital strategy before embarking on transformation.
Digital transformation remains difficult. Many fail. But this research suggests the failures may stem from focusing too heavily on organizational-level capabilities while neglecting the underlying mechanisms—the individuals and teams interacting with digital resources that make those capabilities possible.
The invisible forces become visible. And once visible, they can be managed.
Credit & Disclaimer: This article is a popular science summary written to make peer-reviewed research accessible to a broad audience. All scientific facts, findings, and conclusions presented here are drawn directly and accurately from the original research paper. Readers are strongly encouraged to consult the full research article for complete data, methodologies, and scientific detail. The article can be accessed through https://doi.org/10.1080/0960085X.2024.2347950
