Design thinking as a practice system for knowledge-enabled digital transformation: microfoundations of dynamic capabilities

Abstract

Purpose Digital transformation (DT) demands more than technology adoption; it reshapes organisational routines, knowledge and decision structures, and the capabilities firms rely on to compete. Yet many firms fail to move DT beyond pilots, revealing a deeper problem: organisations lack the knowledge mechanisms needed to sustain transformation at scale. Design/methodology/approach This paper positions design thinking (DTk) as a knowledge practice system: an interrelated set of methods, mindsets and artefacts that shapes the microfoundations of dynamic capabilities (DCs) during DT. Drawing on semi-structured interviews with 14 practitioners in the Dutch financial services sector, the authors inductively identify and elaborate three DTk-shaped microfoundations: Adapting (sensing through problem framing bounded by strategic intent and short, iterative experiments), Governing (seizing through user evidence, structured decision checkpoints, role clarity and contracting mechanisms) and Conveying (reconfiguring through storytelling, boundary artefacts and shared vocabulary that transfer and translate knowledge across organisational boundaries). Findings The authors demonstrate how these mechanisms address key DT challenges – strategic misalignment, decision risks, legacy-system constraints and cross-functional coordination failures – that are, at their core, knowledge management (KM) challenges. The analysis further specifies the knowledge processes each microfoundation enacts, a configuration logic among the three microfoundations and the failure modes that arise from imbalanced enactment. Practical implications For managers, this paper provides guidance for embedding DTk as a practice system to strengthen knowledge transfer, strategic alignment and coordinated organisational change. Organisations in regulated, legacy-intensive settings are encouraged to emphasise Adapting to manage integration risk, Governing for compliance-robust decisions and Conveying to coordinate across stakeholder groups. Originality/value This paper contributes to DC, DTk and KM literature in four ways, it offers a mechanism-level specification of how DTk practices serve as the microfoundations of DCs during DT; repositions DTk as a knowledge practice system connecting DC theory and KM scholarship; articulates a configuration logic and failure modes arising from imbalanced enactment and incorporates a monitoring loop consistent with capability dynamisation that sustains transformation momentum without disrupting core operations; and identifies boundary conditions as simultaneously KM conditions that intensify specific knowledge processes in highly regulated, legacy-intensive contexts.