DIVERSIFY OR DOUBLING DOWN: CHOOSING A DIGITAL GROWTH STRATEGY

Abstract

Digital transformation has led to several improvements in performance and efficiency, but its impact on growth patterns needs to be clarified. Two schools of thought dominate the literature on digital growth strategies. One stream advocates that digital firms should focus only on scaling their core position, while the other contends that firms should envelop into multiple complimentary markets. This seeming “paradox” in the strategic management literature, between advocates of a focus and a diversification growth strategy, shows a need for critical review and clarification of this literature. This paper synthesizes both views and argues that the distinct growth strategies are contextual and that a new catalyst, the relative level of digital transformation of firms in each market, influences their optimal strategy. A new conceptual model illustrates how digital firms may move between different strategies depending on their perceived market opportunities, competitive advantages, and the relative level of digital transformation of their competitors. Hereby, this paper contributes to a better understanding of the growth strategies of digital businesses.