By Holt Hackney
A new academic study examining digital transformation in manufacturing small and medium-sized enterprises argues that many organizations continue to overemphasize technology while underestimating the strategic and human factors needed for successful transformation.
The paper, “Digital Transformation Strategy Alignment and Implementation in Industrial SMEs: A Taxonomy and Systematic Literature Review,” was published in the journal Strategic Business Research by researchers Jan Jakob Weber, Adrian E. Coronado and Lars Baumann. The researchers analyzed 701 journal articles to develop what they describe as a holistic taxonomy for digital transformation in manufacturing SMEs.
The study comes as companies across manufacturing sectors continue investing heavily in cloud computing, artificial intelligence, big data analytics and Industry 4.0 initiatives, despite persistent reports of high failure rates for digital transformation programs. The authors cited estimates placing unsuccessful transformation initiatives between 70% and 87.5%.
According to the researchers, much of the existing literature treats digital transformation primarily as a technological or operational exercise. The study argues that such an approach can lead organizations into what earlier researchers described as “Red Queen competition,” where companies adopt similar technologies and efficiency gains without creating meaningful competitive differentiation.
Instead, the authors propose viewing digital transformation through three interconnected dimensions: value-based transformation, organizational structures and processes, and human aspects. These dimensions correspond to what the researchers characterize as the “why,” “what,” and “how” of digital transformation initiatives.
The study found that organizational structures and processes — particularly technology and operational efficiency — dominated the research landscape. The researchers assigned weighted scores to the themes identified in the literature review and found that technology-oriented organizational dimensions received significantly greater attention than strategic value creation or human-centered transformation elements.
Within the organizational category, the most heavily emphasized topics included technology and Internet of Things deployments, operational processes, digital capabilities, big data, artificial intelligence and cloud connectivity.
By contrast, the human dimension — including leadership, organizational culture, change management and workforce skills — received substantially less attention, despite widespread acknowledgment in the literature that such factors are critical to successful implementation.
The authors concluded that the imbalance may help explain why many digital transformation efforts continue to struggle.
The paper also identified strategic alignment as a recurring challenge for manufacturing SMEs, which often face financial limitations, workforce shortages and uncertainty surrounding implementation priorities. The researchers noted that many smaller industrial firms lack comprehensive digital transformation strategies and instead pursue fragmented initiatives centered on individual technologies or operational improvements.
To address that problem, the study introduced the concept of “value-creation paths,” which are intended to help organizations align transformation efforts with broader strategic goals rather than isolated technology deployments. The researchers argued that digital transformation should begin with business objectives such as innovation, sustainability, financial performance or business model evolution, rather than starting with specific technologies.
One example presented in the paper focused on innovation-driven transformation. In that framework, technologies such as analytics, cloud systems and connected infrastructure support broader organizational goals, while leadership, communication, workforce development and culture act as enabling mechanisms for implementation.
Another section of the study explored business model innovation and servitization, where manufacturers combine physical products with digital services. The authors said these approaches require not only technological investment but also changes to organizational processes, ecosystem partnerships and leadership structures.
The researchers also argued that existing explanations for digital transformation failures may not go far enough. Although prior studies have documented barriers such as limited funding, insufficient skills, weak leadership and organizational resistance, the authors said those issues alone do not fully explain the persistence of high failure rates.
As a result, the paper introduced a “critical realism” perspective, suggesting that deeper organizational structures and causal mechanisms may shape transformation outcomes in ways that are not immediately observable. The authors proposed that future research examine organizations as socio-technical ecosystems shaped by both technology and human interaction.
The study concluded that digital transformation initiatives are unlikely to succeed through technology adoption alone. Instead, the researchers argued that long-term success depends on aligning technology investments with strategy, organizational capabilities and human-centered leadership approaches.
The full report can be viewed here: https://www.sciencedirect.com/science/article/pii/S3051064326001354