Digital Transformation in the Swedish Banking Industry: A Qualitative Analysis of the Development of an Organizational Capability for Digital Transformation

Abstract

The banking industry has during recent years been imposed by new regulations that have altered the way companies compete in the market. From being a traditional vertically integrated industry, to transition to a more platform-based, incumbent banks have been challenged by FinTech companies and are in need to adopt new ways of working in order to stay competitive. Theories relating to digital transformation highlight various organizational capabilities organizations can develop as a way to heighten their competitiveness. However, knowledge in regard to how such work practices can be implemented in an organization being highly governed by regulations are lacking in current literature. Therefore, this study complements existing theories on digital transformation and organizational capabilities through investigating how incumbent banks in the Swedish banking sector, operating in a regulated industry, build an organizational capability for digital transformation. A conceptual framework is constructed by combining different theoretical aspects of organizational capabilities of importance for an incumbent bank to heighten its competitiveness. Those capabilities are identified based on challenges presented by previous scholars in relation to incumbent banks in the banking industry. The framework consists of three dimensions identified as important aspects for an incumbent bank to establish in order to develop an organizational capability for digital transformation. The framework further creates the foundation for the analysis. The study constitutes a qualitative study with an abductive approach and is conducted through a comparative research design with a multi-case study approach including four incumbent banks. Further, the data analysis has been conducted in accordance with the method invented by Gioia et al. (2012). The study concludes that Swedish incumbent banks develop the organizational capability for digital transformation by following the dimension to Leverage Technology to Operate Efficiently and Enable More and Rapid Innovations. Further, the dimension of Leverage Agile Work Practices to Innovate More, cannot be considered as an approach taken by incumbent banks as they can be considered to be impeded by regulations. Lastly, incumbent banks in Sweden can be considered to partially Leverage External Stakeholders to Deliver Value as a way to develop the organizational capability for digital transformation but are impeded by regulatory restrictions, legacy IT-systems, and the risk of losing the customers.