Digital Transformation and Change Management: Challenges for Traditional Businesses

Abstract

In this study, we are exploring and analyzing the challenges faced by traditional businesses in terms of organizational and human aspects in regard to digital transformation, in particular, Artificial Intelligence (AI) integration. A mixed-methods sequential explanatory design was used, based on change management theory, with a survey of 300 managers and employees and 25 semi-structured interviews. Structural Equation Modeling (SEM) was used for quantitative data and Thematic Analysis for qualitative data. Results indicate that being ready for digital transformation positively impacts change management practices (ß = 0.52, p < .001) which in turn positively impacts organizational outcomes (ß = 0.45, p < .001). Adoption of AI has a negative relationship with outcomes in the organization (β = -0.38, p < .001). Importantly, change management practices mediate the relationship between readiness and outcomes (indirect effect = 0.31, p < .001) and moderate the negative impact of AI adoption challenges on outcomes (β = 0.22, p < .001). Leadership commitment, employee engagement, skills development, communication, and buffering effect of change management were found as critical success factors within the qualitative findings. This study has theoretical implications as it proposes change management as a mediation and buffering process in digital transformation and also has practical implications when it comes to the leaders' role in digital transformation in traditional business settings.