How to realize value creation of digital transformation? A system dynamics model

How do enterprises create value? In the digital economy era, digital transformation (DT) is an answer. How can enterprises create value using DT? This remains an important issue. This study develops a system dynamics (SD) model to scientifically answer this question. The SD model incorporates five subsystems-data, technology, talent, value, and environment-are defined as system boundary. The parameters of data subsystem, technical subsystem, talent subsystem, and environmental subsystem serve as imaginary dials that can be manipulated to observe the responds of the value subsystem. Causal loop diagrams (CLD) and stock and flow diagrams (SFD) are used to visualize the dynamic process of value creation in the context of DT. By observing the flow of elements within the system, the specific implementation paths and key driving factors for value creation through DT are identified. The results of numerical simulation shows the practical viability of the developed model. This SD model contributes to the current conversation about DT and value creation by responding to recent calls to demystify the 'black box' of DT. It also provides a new theoretical basis and empirical support for the study of the influencing factors and economic consequence of DT.