Navigating Organizational Identity Crises: Exploring How Digital Transformation Affects Strategy Practice in the Auto Industry
The strategic shift toward more digital product offerings requires incumbent firms in various industries to transform into a different type of company. Existing studies show that identity- related tensions – i.e. a perceived mismatch between “what we do” and “who we are” as an organization – can either support or impede strategic renewal efforts. By contrast, we still know little about the underlying mechanisms that produce such tensions and how they affect strategy practice at multiple levels of the firm. In this paper, I draw on Identity Status Theory (Marcia, 1966) to propose an identity-based perspective on current strategic renewal phenomena. Integrating research on strategic renewal, organizational identity, and developmental psychology, I argue that strategy practice in incumbent firms is increasingly about navigating organizational identity crises. Based on an ethnographic case study of a large European car manufacturer’s digital transformation efforts, this paper makes three contributions: First, I shed new light on the subtle socio-psychological dynamics that underpin strategic renewal efforts in firms with a proud, long-standing legacy identity. Second, I identify four practices – bridgebuilding, enthusing, nudging, and dodging – that focal actors use to navigate identity-related tensions throughout the strategy process and shape outcomes at the product level. Third, the findings highlight the critical role of both organizational identity dynamics and individual actors in shaping incumbents’ transformation success. Overall, this study sensitizes both scholars and practitioners to the emotional dimensions of strategic renewal and draws attention to the notion of identity crisis as a key concept.