20-AM-02: ST3.4 - Digital innovation
Digitization, digitalization, and digital transformation are all part of the evolving digital economy. As digital innovation may cut across all of these dimensions, it offers an interesting theoretical and empirical arena for exploring certain aspects of the innovation process. Digital innovation can be highly complex as it may incorporate both digitization and digitalization in the form of new digital products and services and parallel digitally based improvements of internal organizational processes. It may further extend beyond organizational boundaries, as suppliers and customers are affected by or become actively involved in the innovation process. Codifiable technological interfaces may indeed allow for an unusual amount of innovation efforts that cut across otherwise distinctive organizational boundaries, and they should make the innovation process relatively insensitive to geographical distances. In many cases, digital innovation calls into question attitudes to value creation and value capturing, as reflected in traditional and established business models.
Both the amount and direction of digital innovation may be dictated by institutional contexts and degrees of digital transformation, as it requires both acceptance and sustained efforts to embrace digitalization at the societal level. All in all, there are reasons to expect that digital innovation can expose salient and even unique elements of the innovation process, as compared to innovation processes that prevail in more traditional settings and industries. Specific issues and topics of the digital innovation track include but are not limited to:
- The nature of digital innovation
- Digital innovation across internal and external organizational boundaries
- The geographical boundaries of digital innovation
- Managing complex digital innovation
- Value creation and value capturing in digital innovation
- The interplay between digital transformation and digital innovation
- The sources, drivers and consequences of digital innovation
Digital innovation and design Transformations: re-framing design and development within the context of Internet of Things
Lancaster University, United Kingdom
By 2020, it is estimated that 30 billion devices around the world will be connected to the Internet (IEEE Spectrum, 2016). With the emergence of Internet of Things (IoT) as a new source of large volume of data, businesses face new opportunities as well as novel challenges (Porter & Heppelmann, 2014).
The IoT is regarded as a fertile field for commercial enterprises and that one in every six businesses is planning to roll out an IoT-based product (Burkitt, 2014). However, since then it has been revealed that nearly three-quarters of IoT device implementations are failing due to the lack of experience in development (Reichert, 2017). This is because the integration of software in physical products is challenging existing innovation processes and the creation of meaningful value (Lenfle and Midler 2009; Yoo et al, 2012; Hui, 2014). The subject of New Product Development (NPD) and risk management has gained considerable attention from product development professionals and researchers over the decades (Durisin et al, 2010; Smith & Merritt, 2002; Susterova et al., 2012). However, developing IoT products and services, and managing risks during the process raises challenges because IoT implementations are complex systems often combining a product with a service resulting in multifaceted architectural and abstraction layers.
Although the adoption of IoT is often, critically debated, little attention has been focused on the risk management and NPD process of IoT. Scholars from marketing and design argue that it is time to reframe traditional NPD processes for digital innovation within the era of IoT. (Ng & Wakenshaw, 2017).
1a) What are the characteristics of existing NPD processes and 1b) how they could be related to their counterparts within the process of digital innovation?
2) How could design and development processes for IoT be reframed?
3) What are the inherent risks associated with IoT products and the service(s) development process?
In this study, it was important to explore how value for IoT is created through NPD processes, as such; the authors adopted a qualitative research methods approach. Three qualitative research methods were utilised, including an extensive examination of current literatures, exploratory interviews and a comprehensive case study. As part of the literature review, search terms used, included 1) “NPD processes”, and “Risk management”, 2) “IoT”, “Digital innovation”, and “Digital artefact”. The exploratory interviews were recorded, transcribed, coded and analysed for emergent themes that were then clustered into defined categories and then compared across interviews, data from engagement tools and the literature review.
In order to explore NPD processes and develop ideas on value creation for IoT, empirical materials were collected through semi-structured interviews and a pilot case study. Firstly, several exploratory semi-structured interviews were conducted in November 2017. Leading academics in the PETRAS project* participated for the interviews, lasting on average 45 minutes. Target interviewees were recruited for diversity in terms of their specialties within the sample group. Interview questions were developed focusing on themes about value creation for IoT, and attendant issues around IoT development in general.
The SPHERE project** was selected as a primary case study that is part of a pilot study prior to subsequent larger case-study activities. In line with an exploratory approach, it was selected due to its aim which is aligned to the central area of focus for the research study. The case study was conducted via a series of semi-structured interviews lasting up to two hours in July 2018. The recruitment criteria for participants for the case study featured industry experts who have knowledge and practical experience over 10 years; who understand the whole system of IoT products and services development; and who hold the authority to drive the project and to make strategic decisions.
Existing NPD models are continuously evolving and supported by emergent trends. However, they could be regarded as obsolete for IoT products and services within the role of digital innovation, as they do not reflect several factors, which influence value creation, and NPD processes for IoT, such as: the characteristics of digital technologies, the dimensions of data, and the characteristics of digital artefacts.
Through the case study, a new NPD model for IoT products and services was developed which contains three distinctive phases: a. Discover and define, b. Develop, and c. Deliver. The underlying development stages of process are not significantly different to existing NPD processes. However, due to particular characteristics of digital artefacts, the feature and value proposition of IoT offerings can continuously evolve.
Finally, the critical development risks over the NPD process were identified as follows: challenging customers to articulate and define their requirements; being unable to test feasibility until sufficient data has been collected; never being able to complete the design; difficulties in maintaining IoT products and services; challenges in quality control; the unexpected increased time to completion; barriers in building the partnership within the whole eco-system; and risks in scaling-up and so forth.
Contribution to Scholarship
The authors argue that the research study offers a series of important contributions for wider debate. The research will provide insights to marketing and R&D management research with regard to augmenting the body of literature regarding new approaches to the IoT product development process, whilst serving as starting point of future in-depth research on IoT NPD processes. Through doing this, the practical and theoretical design and development knowledge will be aligned together in a way to discuss how design can contribute to digital innovation process. By relating design and development process to business strategy and process theory, this research study will respond to an increasing call for interdisciplinary research from multiple disciplines for investigating digital innovation within the context of the IoT.
Contribution to Practice
This study serves as a tool to guide as to how IoT products and services could be developed specifically when a company decides to adopt IoT technology into a specific value proposition. Through identifying new NPD process for IoT and inherent risks over the development process, business and project managers will make strategic business decisions and manage development risks. In addition, design managers will effectively orchestrate and utilize designers during the stages of NPD process, embracing a user-centred approach.
This research is highly relevant to digital innovation as it will provide a unique range of insights through identifying new perspectives on value creation and design, and expanding the areas of NPD studies for IoT.
IEEE spectrum (2016) Popular Internet of Things Forecast of 50 Billion Devices by 2020 is Outdated, https://spectrum.ieee.org/tech-talk/telecom/internet/popular-internet-of-things-forecast-of-50-billion-devices-by-2020-is-outdated, accessed 17 January 2019
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devices is today’s most dynamic business opportunity, PWC, Issue 77, Winter, 2014
Reichert, C. (2017) Cisco: Most IoT projects are failing due to lack of experience and security. 13th Nov, 2017. ZDNet Available at: https://www.zdnet. com/article/cisco-most-iot-projects-are-failing-due-to-lack-of-experience-and- security/ Accessed on: 11th May 2018.
Yoo, Y., Boland, R. J., Jr., Lyytinen, K., and Majchrzak, A. (2012). Organizing for innovation in the digitalized world. Organization Science, 23(5), 1398-1408.
Hui, G. (2014) How the Internet of Things Changes Business Models, Harvard Business Review.
Durisin, B., Calabretta, G., and Parmeggiani, V. (2010) The Intellectual Structure of Product Innovation Research: A Bibliometric Study of the Journal of Product Innovation Management, 1984-2004, Journal of Product Innovation Management 2010; 27:437-451
Smith, P.G., and Merritt, G.M. (2002) ‘Proactive Risk Management - Controlling Uncertainty in Product Development’, Productivity Press, New York.
Susterova, M., Lavin, J., and Rives, J. (2012) Risk Management in Product Development Process. Annals of DAAAM for 2012 and Proceedings of the 23rd International DAAAM Symposium, vol 23. No 1.
Ng, C.L. I., and Wakenshaw, Y.L. S. (2017) The Internet of Things: Review and Research Directions, International Journal of Research in Marketing, 34 3-21, pp. 4-21
* PETRAS project is a research hub consortium of nine leading UK universities and over 48 partners explore critical issues in privacy, ethics, trust, reliability, acceptability and security.
** SPHERE project is an EPSRC funded interdisciplinary research collaboration with the aim to develop a multipurpose, multimodal sensor platform for monitoring people’s health inside their homes.
Reconstruction of institutionalized professions: A response to digital transformation in Swedish newspapers
Jönköping University, Jönköping International Business School, Sweden
In the media industry, technological innovations are not just new channels of distribution but methods of production e.g. tools for automated text generation, programmatic advertising algorithms. These digital technologies provide more nuanced transformative changes in the components, system parameters and user needs of newspaper companies.
Organizing for digitalization challenges firm innovation capabilities in that it requires transcending existing knowledge boundaries (Carlile, 2004), purposefully allowing and encouraging new and old skills and competences to meet, fuse, and alter established organizational practices. Digitalization also requires organizations to stretch out their knowledge competences to embrace new technological skills, but also integrate them to transform their own organization. For example, Yoo et al., (2012) explained digital innovation requires new forms of collaboration and knowledge recombination to connect the boundaries of different ‘epistemic cultures and knowing in practice’ (Dougherty & Dunne, 2012). In some sectors, digital transformation has continued to push towards new technological innovations (e.g. digital imaging, manufacturing, medicine), however, in other sectors such as media, innovations remain largely incremental in that they mainly transferred the existing product (i.e. news) and journalistic practices to new digital distribution channels (e.g. by creating a website, an app) (Boczkowski, 2005)
Research has explained how digital transformation has affected market offerings, business models, and the digital capabilities that underline the effective orchestration of digital transformation (Nambisan, Lyytinen et al., 2017). Academic research, however, has not explained how companies leverage the integration of digital technologies and maintain the institutionalized professional practices.
The purpose with this study is to arrive at a better understanding of how established companies (more than 100 years old) can organize to meet future demands of digital technologies?
We chose a comparative qualitative case study to examine how two Swedish newspaper companies were affected by digital transformation: integrate journalist practices with digital technologies and build processes for knowledge recombination. A theoretical and purposive sampling strategy was used to select a case that would provide access to empirically relevant and information rich data. Consequently, our sampling decision was based on the following criteria: 1) selected middle-sized newspaper companies i.e. a mature firm being affected by digitalization; and 2) the company would have implemented new practices to overcome digital disruption in Sweden.
We selected two Swedish newspaper media companies. First, we selected HallMedia and the newspaper Jönköping Posten. The company was established in 1865 and it is the largest newspaper company. The second media company is MittMedia and the newspaper is Östersunds-Posten. This company was established in 1877 in the region of Jämtland. Between January 2018 and June 2018, we conducted 4 semi-structured interviews in each newspaper company (8 in total) with the directors, the chief journalist, digitalization–, IT– managers, and Human resource–managers all of whom had been involved in developing a digital strategy for the newspaper companies. Interviews lasted between 45 and 90 minutes and were transcribed verbatim. We also collected information via both participant observation of routinized staff meetings at the companies. Additionally, we conducted researcher-led workshops and group discussions, and collected secondary data. We also drew on a range of other sources of data including a research project about the personalization of news and robot journalism. These multiple sources allowed data-triangulation, and helped us to generate a holistic picture of the digital transformation in each newspaper company. We applied qualitative content analysis to the data which facilitated their organization and coding, and identification of key events.
The purpose with the study is to arrive at a better understanding of how established companies (more than 100 years old) can organize to meet future demands of digital technologies. In this paper, we explain how and why managers of two regionally-leading Swedish media companies – Hall Media and Mitt Media– that were affected by digital transformation: (i) decide between expanding knowledge boundaries (building internal digital capabilities) or connecting knowledge boundaries (acquiring digital capabilities); and (ii) integrate firm specific knowledge (i.e. journalist) with digital technologies (e.g. machine learning). We do this using a qualitative, narrative interview approach with employees (directors, managers, journalists) to unravel key activities and attitudes which enable and hinder expansion and connection of knowledge boundaries. For newspaper organizations, this is manifested in a realization that whereas newspaper articles will continue to be both relevant and important products, the organizational processes of operation are unsustainable in their traditional form.
Contribution to Scholarship
Our findings contribute to existing theories of innovation capabilities and knowledge integration. We argue that the combination of competence-enhancing and competence-creating capabilities results in digital innovations (Abernathy & Clark, 1985; Henderson & Clark, 1989) which satisfy new user needs, create new product connections and solutions. For newspaper companies, recombination of capabilities e.g. journalistic and digital capabilities is necessary for the creation of digital innovations. Our preliminary findings suggest that digitalization enables specialization of journalistic and advertisement of processes, creation of new digital capabilities and internal and external recombination of knowledge. This paper contributes to the emerging discussion on the role of artificial intelligence on innovation (Cockburn et al., 2018).
Contribution to Practice
This study set out to explore: 1) how mature companies leverage the integration of digital technologies while maintaining the institutionalized professional practices, and 2) presents two strategies to build digital innovation capabilities in established media companies in Sweden. The studied newspaper companies recombined knowledge about traditional journalism with internally created digital technologies OR externally acquired digital technologies to reconfigure the system around an essentially stable set of components and customer needs.
Our results are of great relevance for the scholarly and practitioner community that need to organize to develop new digital capabilities. Moreover, we show that digitalization does not only entail technological changes but also changes in the professional practices.
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How to prevent it from turning into just another organizational silo? – Task scope, structural set-up, and integration mechanisms in corporate digital labs
University of Bamberg, Germany
As digital value propositions and business models usually diverge from the traditional core business, many established firms struggle to find adequate forms of organization for fostering digital innovation. Corporate digital labs, i.e. separated organizational units in which digital business ideas are developed and tested, may present a viable option.
To realize the opportunities entailed by business digitization, firms need to simultaneously cope with two diametral tasks: (1) improving and exploiting the current core business, and (2) exploring and commercializing new digital value propositions and business models (Nylen & Holmström, 2015). One way to achieve such organizational ambidexterity is creating a physically and structurally separated unit, a corporate digital lab, to accomplish exploration while the operational business continues to deal with exploitative tasks (Lewis & Moultrie, 2005). Still, whereas such differentiation of innovative tasks can be advantageous, “the crucial task here is not the simple organizational structural decision in which the exploratory and exploitative subunits are separated, but the processes by which these units are integrated in a value enhancing way” (O’Reilly & Tushman, 2007, p. 17). To grasp the potential benefits of digital labs, firms thus need adequate integrative practices (e.g. Chen & Kannan-Narasimhan, 2015; Gassmann et al., 2012).
The very few studies dealing with integration mechanisms in innovation labs take a rather broad firm-level perspective focusing on corporate policies and neglecting integration mechanisms on the project and individual level. Also, extant literature does not examine if different structural set-ups and tasks of innovation labs require different integrative measures.
Introducing a perspective of integration as a multi-layered phenomenon, we address the following research questions: (1) Which mechanisms on corporate, project and individual level allow for integration between digital labs and operational business? (2) Do different task scopes and structural set-ups of the lab require different patterns of integration mechanisms?
Given the limited theoretical knowledge on the interplay between the task scope, structural set-up, and integration mechanisms in innovation labs in general and corporate digital labs in specific, we conducted an inductive, multiple case study (Eisenhardt, 1989). An inductive case study design is particularly useful for developing novel theoretical insight in a research context not adequately addressed by current theory. By analysing and comparing a number of different cases, we were able to collect comparative data so that more accurate and generalizable theoretical insight might be obtained (Yin, 2017).
We collected archival and interview data from six German organizations which operate in high-tech and professional service industries. We conducted twelve interviews with experts involved in the respective digital labs (two for each firm) with an average duration of around 50 minutes. Three of the interviewees served as CEO in their organization, five were leading the observed digital labs as departmental heads in the corporate ranks of a director or vice president, four were senior project managers responsible for three or more projects and innovation initiatives conducted in the organizational structure of the digital lab. For Analysis, we followed a four-step theory building process (Glaser & Strauss, 1967; Miles & Huberman, 1994). First, we used the obtained interview data to create a thorough documentation of every research case. Second, we applied conceptual coding to uncover recurring concepts, patterns, and relationships between the uncover concepts. Third, we conducted a cross-case analysis in which we compared the research cases for similarities and differences in the occurring patterns. Fourth and finally, we iteratively analysed the case study material in the light of prior literature and further secondary data in order to help us reﬁne our understanding of subject at hand.
Concerning the corporate level, we identified five major integration mechanisms: (1) vision of synergy; (2) integrative planning; (3) coordination responsibility on the top management level; (4) communication infrastructure; (5) education and mentoring programs. On project level, there were six core integrative practices: (1) active improvisation and recombination; (2) shared-responsibility structures; (3) iterative development processes; (4) recurrent showcasing; (5) third-party consultation; (6) rotating project assignment. Finally, the results indicate four integration mechanisms on the individual level: (1) proactive boundary spanning; (2) mobilizing personal contacts and informal networks; (3) “both/and”-thinking; (4) crafting “common ground”. Concerning how firms combine integrative practices, four firms follow a “directive”-paradigm (i.e. use a combination of rather “top-down” mechanisms on project and corporate level). In all those firms, the digital lab focuses on developing “digital” extensions to the core business (task scope), is located at the company headquarters, and headed by company veterans (structural set-up). The other two firms follow a “liaison”-paradigm (i.e. use a combination of rather “soft” mechanisms on individual and corporate level). Their digital labs differ from the others in that they are located in metropolitan areas away from the company headquarters, are led by external hires, and aim at creating completely new business fields.
Contribution to Scholarship
Extending previous works on integration mechanisms in innovation labs or similar forms of structural ambidexterity (e.g. Durisin & Todorova, 2012; O’Reilly et al., 2009), our findings offer some important theoretical implications. On the one hand, we followed Lewis and Andriopoulos’ (2013) assumption that paradoxes emerging from parallel organizational structures for exploitation and exploration require to be handled on different layers in the firm. Thus, we complement previous frameworks of integration mechanisms (e.g. Chen & Kannan-Narasimhan, 2015) by exploring further integrative practices on the individual and the project level. On the other hand, Gassmann et al. (2012) outline that based on current research, “only limited statements can be made on which internal and external constraints (e.g., industry dynamics, company size, corporate culture) favor or determine certain transition modes” (p. 129). Investigating task scope and structural set-up of digital labs as internal context factors, we provide pioneering insight concerning this research gap.
Contribution to Practice
From a leadership perspective, previous research suggests that top and middle management might need to make direct personal efforts to foster integration in the context of digital labs. Our findings indicate that also more indirect forms of leadership such as encouraging social and informal integration on the project and individual level and setting a context that enables employees to do so are important. From an organizational design perspective, we demonstrate how different types of digital labs require different integration mechanisms. Corporate strategists should become aware of the purpose fulfilled by the digital lab and create corresponding formal and informal integrative measures.
Our paper addresses the following issues stated in the call: (1) “Digital innovation across internal and external organizational boundaries”, (2) “The sources, drivers and consequences of digital innovation”. By examining a relevant practical phenomenon and extending existing theory, we hope to make a valuable contribution to the theme track.
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Nylén, D., and J. Holmström. 2015. “Digital Innovation Strategy: A Framework for Diagnosing and Improving Digital Product and Service Innovation.” Business Horizons 58 (1): 57-67.
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Digital Transformation in SMEs: the case of Smart District 4.0
1LUM - Libera Università Mediterranea Jean Monnet - Casamassima (Italy); 2University of Salento, Italy
The diffusion of digital technologies is causing a radical reconfiguration of firms’ organizational and strategic models. This process results to be more challengeable in SMEs where the adoption of models inspired to the principles of collaboration and networking is mandatory to overcome the limitations in terms of resources and capabilities.
Digital transformation is a topic of great actuality and interest in the agenda of scholars and practitioners (Cha et al., 2015: Li et al., 2018). The increasing use of advanced digital technologies is transforming innovation activities and production (Alcacer et al., 2016). Defined as the result of the introduction of “transformational information technology” (Lucas et al., 2013, p. 372), it involves fundamental changes in the configuration and execution of business processes (Venkatraman, 1994), operational routines (Chen et al., 2014), organizational capabilities (Tan, Pan, Lu, & Huang, 2015), and market innovation (Dehning, et al., 2003). Despite this, it continues to be afforded mainly in terms of IT Information Technology (Lucas et al., 2013) by disclosing the need of a deepen comprehension of its business and managerial implications, mainly in the context of SMEs.
The literature highlights the need of a deepen comprehension of business and managerial implications of digital transformation, mainly in the context of SMEs, that are characterized by limited resources and present gaps in terms of cognitive and organizational assets (Li et al., 2018).
Accordingly, the paper tries to answer to the following research questions: Which are the drivers of digitalization in SMEs? How do digital technologies impact on the traditional configuration of SMEs’ business model?
The paper adopts a qualitative approach based on case study (Eisenhardt, 1989; Yin, 1984), as suitable methodology to analyze a contemporary phenomenon in its natural setting. The case is represented by Smart District 4.0, a joint venture launched by LUM Enterprise and Noovle, and aimed to design and realize processes of digitization in supply chains with a specific target related to SMEs operating in the agrofood, textile, clothing, footwear, mechatronics and mechanics. For its characteristics and features, the case identified can be classified as an extreme case study (Eisenhardt, 1989; Yin, 1984).
Data collection has been conducted through the embracement of multiple sources of evidences. Specifically, interviews with key informants, analysis of official documents and reports, web based desk analysis.
The case study allowed to comprehend the main limitations and obstacles at the implementation of digital technologies by Apulian SMEs, with a specific focus on the agrofood, textile, clothing, footwear, mechatronics and mechanics industries. The case Smart District 4.0 showed the importance of networking and intellectual capital into the achievement of a process of digital transformation. Despite the technology is essential into such a process of digitization, critical for the successful transition of SMEs business models towards a digital configuration have been the human and social capitals.
Contribution to Scholarship
The analysis of the case offers interesting insights about the limits and obstacles that SMEs present into the implementation of digital technologies in their organizational and strategic models. Additionally, the paper sheds new lights on the role that Intellectual Capital, and mainly human and social assets, can provide at the achievement of a successful process of digital transformation by demonstrating as technology is necessary but not sufficient to assure it. Moreover, cross-regional analysis can be conducted in order to identify patterns at local level. All these items disclose new roots for the development of a cross disciplinary research agenda.
Contribution to Practice
By allowing to identify the antecedents and consequences of digitalization in the context of SMEs, mainly in terms of value drivers and process of reengineering, the paper offers several implications for the practice by allowing to identify common and distinctive industrial patterns and to make a trade-off on the meaning of digital transformation in SMEs and big corporations.
The contribution at the comprehension of conditions and processes required to make successful the implementation of digital technologies in the context of SMEs as well as the empirical evidences presented make the study coherent with the track's goal identified.
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Li, L., Su, F., Zhang, W., & Mao, J. Y. (2018). Digital transformation by SME entrepreneurs: A capability perspective. Information Systems Journal, 28(6), 1129-1157.
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