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THE CONCEPT OF DIGITAL MINDSET IN THE CONTEXT OF ENTREPRENEURSHIP
Aliabina E.
Novosibirsk State University, Associate Professor
Novosibirsk
ABSTRACT
Digitalization changes the context in which organizations operate creating both opportunities and threats for entrepreneurial firms. The developed concept of "digital mindset" embraces the areas where businesses are particularly exposed to the influence of digital technologies. Digital know-how relates to digital technologies and digital competences managed by means of special organizational mechanisms. Digital culture refers to the attitude that employees demonstrate regarding the practices of digital technologies usage as well as their involvement in the digital transformation process. Knowledge of value that digital technologies are able to deliver for improving customer experience and business process effectiveness is crucial for companies' competitiveness. Having applied "digital mindset" model for the case analysis of Bank, Telecom and Retail, it was found that the most important issue was not the diagnosis of current state of distinct areas, but rather congruence among three areas of "digital mindset" and internal consistency among the elements inside the areas.
Keywords: digitalization; digital technologies; digital mindset; digital know-how; digital culture.
INTRODUCTION
The modern society experiences an ever growing spread of digital technologies, or digitalization. Digital technologies influence people's quality of life in various domains: family, work, friendship, self-esteem, free time, financial security. In spite of the popularity of the 'digital' theme in today's business literature, the subject matter of the term is still to be defined. Thus, according to 2017 Global Digital IQ Survey, published by PwC, the most popular interpretations of the term 'digital' by managers of enterprises are as follows [1].
1. Digital refers to all technology innovation-related activities.
2. Digital is synonymous to IT.
3. Digital refers to all customer-facing technology activities.
4. Digital refers to all the investments we are making to integrate technology into all parts of our business.
5. Digital goes beyond technology alone to reflect a mindset that embraces constant innovation, flat decision-making, and the integration of technology into all phases of the business.
6. Digital refers to all data and analytics activities.
In my opinion, digitalization can be considered as a major process of digital economy - the type of economy, where the key production factor is digital data, the analysis of which enables it to increase the efficiency of production, technologies, equipment, storage, sales and delivery substantially, as compared with traditional economic forms. Thus, digitalization in the entrepreneurial context can be defined as the process of turning traditional production factors into a digital form.
Moreover, the pace of digitalization is growing. Consider, for example, the launch of mobile digital devices such as smartphones and tablets: they were launched on the cusp of the first two decades of the 21 century but have already become widespread as business tools in many industries and organizations. The instances of digital technologies interventions in everyday practices of entrepreneurial firms are numerous.
leading up to the idea of digital transformation as a substantial change in the form and content of business processes and management functions driven by digital technologies.
Not surprisingly, the researchers and practitioners look for recipes of successful digital transformation developing appropriate 'blueprints' and 'frameworks' [2, 3, 4, 5]. But for those companies that are already on the way there are questions which are rarely addressed by the external actors. Do entrepreneurs know about all possibilities offered by digital technologies for their customers and their business process effectiveness? Do they get the most from digital technologies and digital skills of their personnel? How do their employees feel while coping with the challenges posed by new digital technologies? Do entrepreneurs use managerial levers effectively to guide the process of digital transformation?
Thus, the research question can be formulated as follows:
How can entrepreneurial firms ensure that they achieve full potential of their personnel to gain maximum benefits of digital technologies?
To answer these questions, managers need a methodological concept based on the system approach embracing all aspects of the contribution that human resources provide for digital transformation. The elaboration of such a methodological approach and is the goal of my study.
THEORY AND HYPOTHESES
The framework that can be useful in the context of my research is Durand's "Competence Referential" [6]. If considered from the digitalization point of view, this model can be transformed into "Digital Mindset Model" presented in Figure 1. The three axes of the model correspond to Durand's concepts of knowledge - 'the structured sets of assimilated information which make it possible to understand the world', know-how -'the ability to act in a concrete way according to predefined objectives or processes', and attitudes - 'behavioral and social aspects of an organization' [6, p. 315].
Fig. 1. The Digital Mindset Model
The simplest way to describe how this model works is to simulate the behavior of specialists on jobs related to the usage of ICT with the help of "proof by contradiction". Thus, employees may perform jobs poorly or not perform at all due to the following reasons: 1) they do not know what needs to be done or why they need to do this (knowledge axis); 2) they do not possess necessary technologies and skills (know-how axis); 3) they do not want to (culture axis). Accordingly, entrepreneurs have three levers at their disposal to influence employees' performance: strategy, organizational mechanisms and motivation. The details of this model application are considered in the sections below.
METHODS
The methodological approach lying in the center of my 'Digital Mindset' model was developed based on deductive research. However, the most important part of my study was practical evaluation of the suggested approach, and I used multiple case studies for this purpose as 'case studies emphasize the rich, real-world context in which the phenomena occur' [7].
As a part of data collection and analysis, elements of quantitative approach were also used [8]. I used a relative frequency distribution to describe the set of data characterizing employees' digital skills, knowledge and attitude.
Case Selection
There were at least four reasons for selecting the companies for study, which were given assumed names Bank, Retail and Telecom designating their belonging to similarly named industries.
Firstly, all three companies stem from the industries that can be referred to as 'highly digital intensive'. According to Calvino et al., Telecomminications and Finance belong to the group of sectors in the top quar-tile of the distribution of the values underpinning the "global" taxonomy, and Wholesale & Retail belong to the second highest quartile [9]. A similar situation can be observed in the Russian economy: Telecommunications and Finance are considered to be the 'leaders' of digital transformation while Wholesale & Retail are among the sectors which belong to the second group of 'followers' [10]. Therefore, I could be sure that the problem of digital transformation would be of relevance to these companies.
Secondly, the companies are the key players on their markets: all of them are among top-five corporations in their industry ratings in terms of sales, and are included in the list of the largest Russian companies among top-50 leaders [11]. This fact is important to confirm the organizations' financial stability and their ability to invest in digital technologies.
Thirdly, the companies have divisional structures and are present in the city of the researchers' residence. This location created the opportunity of personal interviews with the companies' managers and facilitated high frequency of interaction.
Finally, all three companies operate in the service sector with the main focus on B2C markets. This fact provided comparability of results at the stage of data analysis.
Data Collection
It is worth mentioning that during the data collection stage I used the construct 'digital competences' instead of 'digital mindset'. The reason is twofold. Firstly, I relied on the approach of The Digital Competence Framework for Citizens where digital competence is the main category defined through areas of competence and proficiency levels [12]. I studied three of five competence areas - information and data literacy, communication and collaboration, digital content creation - leaving safety and problem solving to ICT professionals. Secondly, the need for a new construct such as mindset was realized after the majority of data was collected when I felt that something important had been missing.
I started to collect data from Bank by conducting the preliminary semi-structured interview with two managers from HR department of the Siberian subsidiary. The aim of the interview was to get the first sight of the importance of digital technologies and employee digital competences for Bank operations. I also attempted to conduct a survey to assess the level of digital competences of Siberian subsidiary's specialists and managers. However, a request for the survey was denied due to the lack of interest of Bank top managers in the external research from academics.
The second attempt was made at Telecom and it appeared to be more successful than the previous one. I also started from a preliminary semi-structured interview via Skype with the Head of Shared Services Center performing human resource management function for Telecom corporation. The questions concerned the definition of 'digital competences' at Telecom, the main areas of digitalization and the attitude of employees to digital technologies expansion.
At the next stage I used a questionnaire to collect data on digital competences of Telecom employees that was distributed in the electronic form in Telecom Siberian subsidiary. A questionnaire contained 20 questions aimed at the evaluation of employee digital skills and attitude to the issues of digital technologies usage. Nine questions were aimed at self-assessment of digital competences in three areas: 1) information and data literacy (here and after - information); 2) communication and collaboration (here and after - communication); 3) digital content creation (here and after - content).
One question was devoted to self-assessment of skills of software and digital devices usage. The list of software programs and applications included the range of standard Office products as well as special professional programs, ERP system, communication applications. The list of digital devices included traditional office equipment as well as mobile digital devices such as a smartphone and a tablet.
Eight questions concerned the practices of digital technologies usage at Telecom (e.g., 'Who teaches you the basics of new digital technologies?') and the attitude to digital technologies impact on work life (e.g., 'How do you feel about the necessity to be online 24/7?').
The questionnaire was distributed among two categories of personnel - specialists and line managers, and we got 138 and 12 answers respectively. I also got
access to data from some internal documents (e.g., strategy statements, annual reports, the model of corporate competences) and studied secondary sources data on types of digital technologies used at Telecom (company's website, articles in the media, videos on YouTube).
Simultaneously with the study at Telecom, I conducted a research at Retail company. Similarly, I started with a preliminary semi-structured interview with the HR manager to immerse myself in the 'digital atmosphere' of the human resource function of Retail. I also conducted a survey using a shorter version of Telecom's questionnaire: it was limited to 9 questions aimed at self-assessment of digital competences in three areas due to the requirement of HR manager 'not to distract employees from their work too much'. The questionnaire was distributed among managing directors of Retail stores in Siberian region, and I received 53 responses. I also collected data from secondary sources and got some internal documents (e.g., the Manual for developing computer literacy at Retail, a specialist job profile, etc.).
After receiving the filled questionnaires from Telecom and Retail, I performed the initial analysis and found out that the collected data were not sufficient to answer the research question. So, I decided to complement the research with more qualitative data gained through in-depth interviews with managers from Telecom and Retail. I organized the second round of semi-structured interviews and asked the questions regarding the specific requirements imposed on the companies' employees due to pervasive digitalization, the differences between these requirements and the competences that were necessary ten years ago, about the processes of assessment of digital competences during recruiting and regular evaluation procedures, etc.
By completing analysis of the second round of interviews, I got a refined questionnaire with an extended range of questions addressing behavioral and operational issues of digital technologies usage. I understood my mistake. When I approached Bank's managers for the first time, my 'value proposition' was too ambiguous: I intended to study such vague construct as 'employee digital competences', so I was refused to get access to Bank's data. But when I came for the second time eight months later with a well-developed survey questionnaire and promised to share the results from Telecom and Retail, I got immediate approval by CEO of the regional subsidiary.
Thus, the procedure tested at Retail and Telecom was repeated at Bank, and I collected 173 responses -147 from managers and 26 from specialists. I also collected data from secondary sources and got such internal documents as strategy statements, the 'Guide for competence development', the presentation of Intellectual Management System, etc.
Finally, I used 'digital mindset' model (Figure 1) to organize collected data from Bank, Retail and Telecom on three dimensions: digital know-how, digital culture and knowledge of digital value.
Data Analysis
As I used a quantitative approach along with the qualitative research, I need to explain both streams of my analytical procedure. I managed to collect survey data from Bank, Retail and Telecom, but only 9 questions regarding the level of employee digital competences were common for all three organizations. So, I decided to construct a relative frequency distribution to summarize the pattern in the levels of employee digital competences for each company. I assigned points from 1 to 5 to answers in these nine questions starting from 1 for the lowest level of digital competence (e.g., 'I do not use online resources to search for information') to 5 for the highest level (e.g., 'In addition to the stated above, I can use web feeds to access updates to online content'). Then I calculated the average point for each employee both for each competence area (information, communication and content) and for the overall digital competence level. I divided the respondents into five classes according to their digital competence level: beginner, elementary, intermediate, advanced, proficiency. After that i could build histograms to provide an easily interpreted visual representation of a relative frequency distribution [13].
The second course of my analysis involved the process of constant comparisons when qualitative data were broken into manageable pieces with each piece compared for similarities and differences [14]. Thus, when I looked for evidence of use of digital technologies, I needed a reference list. I decided to use the PWC's Industry 4.0 framework where consultants suggested the inventory of contributing digital technologies comprising mobile devices, IoT platforms, location detection technologies, advanced human-machine interfaces, authentication & fraud detection, 3D printing, smart sensors, big data analysis and advanced algorithms, multilevel customer interaction and customer profiling, augmented reality/wearables, cloud computing [15]. The only change was made when I replaced 3D printing on robots according to alternative Industry 4.0 list [16]. I called this final list 'core digital technologies'.
When I looked for the facts proving the employees' knowledge of digital value for customer experience and for effectiveness, first of all I paid my attention to the companies' strategy statements. I was interested to find out if digital transformation was among top priorities for the nearest future of the companies in question. The same procedure was performed when I analyzed the scripts of the interview: I looked for the facts confirming that employees used digital technologies for the benefit of customers (e.g., 'to speed up the services for our customers', 'to get deeper understanding of customer needs') or for the sake of effectiveness (e.g., 'to decrease labor costs', 'to communicate with colleagues more effectively').
Probably the most difficult task was to justify the orientation of companies' employees towards digital culture. I needed to find facts consistent with the idea that employees really wished to apply digital technologies and get the maximum value of them and that they expressed positive attitude to the process of use of digital technologies. I searched for the indicators of such
behavior in companies' internal documents and interview scripts (e.g., 'it's not my job to use this software', 'the cashiers are afraid of being substituted by self-checkouts').
To conclude, it is noteworthy that some questions from Telecom and Bank questionnaires (apart from those nine questions concerning digital competences) were also used to deliver information on 'digital culture' and 'knowledge of digital value' axis of our research. For example, the question 'Do you agree that a specialist of a modern bank must be able to program?' was interpreted as the indicator of employees' attitude in the area of digital culture.
CONCLUSION
I tested my concept in practice analyzing digital activities of three companies - Bank, Telecom and Retail - with the help of the 'digital mindset' framework. I revealed their main characteristics along each axis of analysis and answered the questions about the nature of processes taking place in these companies in the light of digital transformation. However, it may be of little sense just to diagnose the state of constituent elements. The interrelation between them and their internal consistency - that is the clue to success in the digital transformation process. Relying on Mintzberg's 'extended configuration hypothesis' approach, I argue that there should be congruence among three areas of digital mindset as well as internal consistency among their elements inside the areas [17].
As to future directions of the research, I see the potential of the 'digital mindset' approach to compare the results from large corporations with the results gained at smaller entrepreneurial firms. The observation and measurement of dynamics of a company's digital transformation may also be a field where the suggested approach is good enough.
Another direction is the expansion of the digital competence area to include such domains as 'safety' and 'problem solving'. This can be especially useful for companies where these functions are not concentrated in technical departments but distributed among all organizational units. This is especially true for small entrepreneurial firms.
Finally, a good way to increase accuracy of digital competence evaluation is to test employees' digital skills and knowledge rather than use self-assessment questionnaire.
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