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Research Frontiers | Transformation from Traditional Intermediaries to Digital Intermediaries-A Study from the Perspective of Resource Orchestration

Abstract:The development of digital technology has forced more and more traditional intermediaries to transform to digital intermediaries in order to survive. This study uses a case study approach to explore the processes and mechanisms of digital transformation from a resource orchestration perspective. The conclusion of the study shows that the digital transformation of intermediaries requires a match between strategic logic, resource orchestration and capabilities, and reveals the role of information technology and strategic logic in the transformation process. This study provides a comprehensive theoretical framework for traditional intermediaries to reallocate resources and capabilities to meet the requirements of digital intermediaries, which contributes to the theoretical construction of digital transformation. Our research also provides valuable management insights for intermediaries to bridge the supply and demand sides using resource actions and resource combinations.

Key words:business intermediary; digital transformation; digital intermediary; organizational capability; strategic logic

1. Introduction

An intermediary is generally understood as an organization or institution that acts as a broker between a buyer and a seller of a product/service. They don't actually design, manufacture, or provide products or services themselves. Digital technology provides opportunities for disintermediation, making traditional intermediaries severely affected. For example, many manufacturing enterprises try to achieve disintermediation by establishing e-commerce platforms to directly contact customers. These challenges have forced many traditional intermediaries to either go out of business altogether or adopt digital technologies and transform into digital intermediaries. However, 66% to 84% of digital transformation projects fail. Therefore, it is very important to explore how traditional intermediaries transform into digital intermediaries.

Previous studies focused on the digital transformation of various industrial sectors, but ignored the digital transformation of traditional intermediaries. In addition, previous research has highlighted the role of digital transformation strategies in facilitating digital transformation. However, the existing literature also recognizes that implementing a digital transformation strategy is very difficult because it does not take into account the special conditions of the enterprise, such as resources and capabilities. To solve this problem, some studies use strategic logic instead of strategy. Finally, resources were identified as another key factor to support the transformation. Therefore, the study adopts the view of resource orchestration as a theoretical perspective. Its applicability is mainly reflected in the following two aspects: First, the transformation of traditional intermediaries involves coordinating the resources of multiple stakeholders, such as suppliers, customers, intermediaries, logistics, etc., to achieve the digital transformation of intermediary enterprises. Resource orchestration applies to how different organizations coordinate resources to achieve strategic goals. Second, strategic logic is "the operating principle of an organization to achieve its goals through the coordinated allocation of resources", which means a resource action. Resource orchestration, including resource combinations and resource-centric actions, can be used to reveal resource-centric actions that are consistent with strategic logic.

Therefore, the research question-"How can traditional intermediaries transform into digital intermediaries by using strategic logic and resource orchestration?" aims to reveal the process of digital transformation.

2. strategic logic, resource orchestration and capacity adaptation

At different stages of digital transformation, different strategic logic, resource orchestration and capability adaptation are required, as follows:

(I) capability logic, resource orchestration and adaptation to market response capabilities. When a traditional intermediary begins to transform into a digital intermediary, it inevitably lacks the resources needed for the new area. Therefore, to achieve transformation, traditional intermediaries must follow a capability logic that aims to develop complementary resources after identifying the strategic resources they have. After collecting the necessary resources (mainly customers, suppliers and logistics) and connecting them through IT resources, a simple link is formed that allows the intermediary to operate in the new field and obtain the ability to respond to the market. At this stage, intermediaries help to link the demand side and the supply side, which would not otherwise be linked.

The adaptation of (II) guerrilla logic, resource orchestration and agile response capabilities. Although the transformed intermediary has the basic functions and capabilities to respond to the market, it may be difficult to gain a competitive advantage compared to other e-commerce platforms. Therefore, in order to gain a foothold in the market, the intermediary just entering the new market must break the existing business model. At this point, the guerrilla logic will replace the logic of competence. Guided by guerrilla logic, intermediaries try to do something unusual and must therefore cooperate with other organizations to gain a temporary advantage. Therefore, intermediaries should enrich their partners and integrate them through information systems. Ultimately, cooperation will enable intermediaries to achieve responsiveness, competence, flexibility and speed, I .e. the ability to react with agility. At this stage, the intermediary works to connect multiple organizations to provide better products/services and facilitate transactions.

Adaptation of (III) complexity logic, resource orchestration and adjustment capabilities. As the intermediary develops rapidly, it may seek further development and superior performance. As a digital intermediary, it must build its own ecosystem. Complexity logic will thus replace guerrilla logic. In order to build an ecosystem, intermediaries must first expand the types of organizations within the system to achieve diversification. Then through a certain mechanism to coordinate the formation of ecological circle, the formation of sticky. Finally, the information system as the center to coordinate diversified members, the formation of a single central node and multi-layer peripheral node linkage, so that the intermediary can adjust the internal structure and mechanism to deal with internal and external challenges. Therefore, the adjustment ability is formed at this stage. At this point, the goal of the intermediary is to build a network to facilitate connections between partners and retain users. Intermediaries help suppliers gain access to a broader online customer base than direct transactions.

3. theoretical contribution

(I) examining the transformation process of intermediaries, the digital transformation process is revealed by identifying a three-stage process model. It is observed how traditional intermediaries achieve transformation through three stages and develop competencies at each stage accordingly. Capacity development requires strategic logic, resource orchestration, and capacity adaptation. Strategic logic, a set of principles that prescribe strategic objectives for perceived success by intermediaries after assessing the environment, can provide a sense of direction for resource actions. The result of resource-centric action manifests itself in changes in the mix of resources, which in turn will lead to the formation of corresponding capabilities. The resource combination indicates the accumulation of resources and the structure of resource elements. Different structures may result in different capabilities. Identifying the relationship between strategic logic, resource orchestration, and capabilities responds to the call for how the strategy development process occurs in digital transformation.

(II) advocate the use of strategic logic to replace digital transformation strategies in future research. Although the fundamental role of digital transformation strategies has received a great deal of attention, they still face challenges due to their uncertainty, complexity and disconnection from enterprise-specific conditions. Therefore, the concept of strategic logic is introduced to clarify the operational principles of the digital transformation strategy. That is, previous research on digital transformation strategies focused on its dependence on resources, but lacked an adaptive bridge between them. Strategic logic acts as a bridge, as it articulates the operational rationale for aligning resources to achieve specific strategic goals-a digital transformation strategy.

(III) building ecosystems and developing adjustment capabilities are essential for digital intermediaries. The newly formed business ecosystem integrates organizations from multiple industries to achieve the effect of complementary resources and provide one-stop service for consumers. An improved service experience enhances consumer stickiness, giving intermediaries a competitive advantage. The development of adjustment capacity indicates the successful formation of the business ecosystem. It enables intermediaries to freely coordinate their relationships with other organizations that provide complementary services (such as delivery and merchants) and lays the foundation for the provision of one-stop services.

4. Conclusion

From the theoretical perspective of resource scheduling, the relationship between strategic logic, resource scheduling and capabilities is studied, and a digital transformation process model is provided to help explain how traditional intermediaries transform into digital intermediaries. The process model suggests that capabilities are built through the formulation and implementation of resource-centric actions, guided by strategic logic. That is, under the guidance of the logic of ability, the ability to respond to the market is developed by identifying and developing resources; under the guidance of the logic of guerrillas, the ability to respond quickly is developed by enriching and cooperating resources; and the ability to adjust is developed by expanding and integrating resources under the guidance of the logic of complexity.

Introduction to the author:Cui Miao, Professor and Doctoral Supervisor of School of Economics and Management, Dalian University of Technology, Deputy Director of China Management Case Sharing Center, Director of China Science and Technology Policy Research Association, Secretary-General of Enterprise Innovation and Industrial Policy Professional Committee of China Science and Technology Policy Research Association. The research direction is digital empowerment. In recent years, it has undertaken 3 projects of the National Natural Science Foundation and Youth.

The article is contributed by the Enterprise Innovation and Industrial Policy Committee of the China Science and Technology Policy Research Association.


[Disclaimer] This article only represents the author's own views and has nothing to do with this institution. The Agency is neutral in its statements and opinions and does not provide any express or implied warranty as to the accuracy, reliability or completeness of the content contained herein.


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