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Modern trends in Innovation
Digital Innovation and Transformation
Michal Hron, PhD
December 14th, 2023
Michal Hron
▪ Msc. Business Intelligence from
Aarhus (2018)
▪ Elite semester on digital
transformation,Aarhus BSS
▪ Dissertation on organising for
digital innovation (2022)
▪ AtVSE from February at the
Department of entrepreneurship
Publications on agile software
development, organising for
innovation, digital artefacts
2
hronmichal.net
michal.hron@vse.cz
3
New technologies generally
trigger changes in management
Technologies are connected with innovation of management models
5
Organizational
paradigm
Dominant
management model
Steam power and
railways
1861- 1913
Professionally
managed firm:The rationalized
management dispersed
enterprise
Line and staff, managers,
Industrial betterment
Steel and electric
power
1896-1945
Factory:The unitary, centralized
organization
structure
Scientific management, human
relations
Automobile and oil
1955-1992
Corporation:The multi-divisional
mass-production
corporation
Strategy-and-structure, Quality
management
Computers and
telecommunication
1990s-
Network: Linking and
rationalizing processes across
internal and external
boundaries
Business process redesign, open
innovation, knowledge
management
Bodrožić, Zlatko, and Paul S. Adler. "The evolution of management models: A neo-Schumpeterian theory." Administrative Science Quarterly 63.1 (2018): 85-129.
Digital innovation
research is articulating
management model for this
organizational paradigm
triggered by characteristics of
digital technology
6
7
The literature agrees that digital innovation
represents a distinct paradigm vis-a-vis
traditional innovation
8
Linear
value chains
Vertically
integrated hierarchy
Controlled
Enterprise Architecture
Digital
Ecosystem
Distributed Network
Organisation
Generative
Digital Platform
Drechsler, Katharina, et al. "At the crossroads between digital innovation and digital transformation." Communications of the
Association for Information Systems 47.1 (2020): 23.
Old logic New logic
Ecosystems
In place of value chains
Distributed Network
Organisation
In place of hierarchies
Generative platforms
In place of enterprise architectures
Disruptors
12
Digital entrants threaten
established firms across
industries due to their
ability to harness
affordances of digital
technology in an agile way
Disruptors
13
Innovating with digital
technologies unfolds
differently than traditional
innovation
Digital disruption
across all industries
14
Even in sectors where the research
suggests businesses are more insulated
from the digital storm, disruption is still
taking place.
In energy and utilities, for example –
which is bottom-ranked for the third time
in the past four studies – climate-change
imperative underpins the disruptive
imperative. The pace of change may be
slower, particularly in areas of the
industry that rely on signi
fi
cant physical
assets, but digital transformation in areas
such as energy management has become
an important theme.
https://www.imd.org/ibyimd/strategy/digital-vortex-2023-revealed/
Digital disruption
across all industries
15
Even in sectors where the research
suggests businesses are more insulated
from the digital storm, disruption is still
taking place.
In energy and utilities, for example –
which is bottom-ranked for the third time
in the past four studies – climate-change
imperative underpins the disruptive
imperative. The pace of change may be
slower, particularly in areas of the
industry that rely on signi
fi
cant physical
assets, but digital transformation in areas
such as energy management has become
an important theme.
https://www.imd.org/ibyimd/strategy/digital-vortex-2023-revealed/
16
17
Digital Innovation
Digital Transformation
A new paradigm
for innovation management
A new challenge for established organizations to seek resiliency
against digital disruptors
Digital Technologies
Layered modular, SMACIT
18
Digital Innovation
Digital Transformation
A new paradigm
for innovation management
A new challenge for established organizations to seek resiliency
against digital disruptors
Digital Technologies
Layered modular, SMACIT
Part 1
Part 2
Digital technologies and innovation
Part 1
Digital Innovation
Digital Innovation: carrying out of
new combinations of digital and physical
components
20
Yoo,Y., O. Henfridsson, and K. Lyytinen,“The new Organizing Logic of digital
Innovation:An Agenda for Information Systems Research”, Information Systems
Research 21(4), 2010, pp. 724–735.
We need to define digital technology,
which is what gets recombined.
Characteristics of digital innovation
▪ Generativity , or "a overall capacity of
technology to produce unprompted changes”
▪ Convergence: innovation with pervasive
digital technology brings previously separate
user experience and industries together
On the level of industries or products
21
Yoo, Y., Boland, R. J., Lyytinen, K., & Majchrzak, A. (2012). Organizing for
Innovation in the Digitized World. Organization Science, 23(5), 1398-1408.
https://doi.org/10.1287/orsc.1120.0771
Layered modular architecture
22
Yoo, Y., Boland, R. J., Lyytinen, K., & Majchrzak, A. (2012). Organizing for Innovation in the Digitized World. Organization Science, 23(5),
1398-1408. https://doi.org/10.1287/orsc.1120.0771
TECHNOLOGIES? SMACIT!
Social
Mobile
Analytics
Cloud
Internet of Things
Ross, Jeanne, et al. "Designing digital organizations." Working papers/Center for Information Systems
Research 406 (2016): 1-19.
TECHNOLOGIES? SMACIT!
Social
Mobile
Analytics
Cloud
Internet of Things
internal social networks
idea management systems
TECHNOLOGIES? SMACIT!
Social
Mobile
Analytics
Cloud
Internet of Things
TECHNOLOGIES? SMACIT!
Social
Mobile
Analytics
Cloud
Internet of Things
big data
business intelligence
marketing analytics
TECHNOLOGIES? SMACIT!
Social
Mobile
Analytics
Cloud
Internet of Things
Infrastructure as a Service
Scalability
TECHNOLOGIES? SMACIT!
Social
Mobile
Analytics
Cloud
Internet of Things
TECHNOLOGIES? SMACIT!
Social
Mobile
Analytics
Cloud
Internet of Things
+Current
“flavours of the month”
AI, Blockchain, Metaverse,VR/AR
THINK-PAIR-SHARE
▪ What are the layers of
layered modular
architecture?
▪ How would you analyse
Facebook through this lens?
(What would be on each
layer)
▪ Which layer is the most
important these days? Why?
Layered modular architecture
▪ For analysis of digital technology: Digital products
are assembled by channelling resources across the layers (i.e.
recombinations)
▪ For analysis of competition: Different companies in
the digital economy reside on different parts of the layered
stack (e.g. Data only players on contents layer or hardware
manufacturers the device layer)
31
(Henfridsson et al., 2018)
Henfridsson, O., Nandhakumar, J., Scarbrough, H., & Panourgias, N. (2018). Recombination in the open-ended Value
Landscape of digital Innovation. Information and Organization, 28(2), 89-100. https://doi.org/10.1016/
j.infoandorg.2018.03.001
What to remember from part 1
32
▪ Digital technologies as layered modular
▪ Digital innovation as recombination
▪ SMACIT acronym
Digital transformation
Part 2
French hospital intending to transform itself into
“the world’s most digitized hospital”
• Hospital that faced challenges in implementing an
Electronic Medical Record (EMR) system.
• The implementation process was slower and more expensive
than planned due to difficulties in integrating the EMR with
existing work practices.
• A compromise was reached, where secretaries and radiology
technicians would split indexing tasks in busy departments,
allowing secretaries to learn how to use the EMR effectively
and improve work practices.
• The EMR was eventually integrated into Alpha,
and the organization's core purpose of providing
healthcare services and research
Finnish manufacturing company aiming to transform itself into
a “leading provider of digital services”
• Beta is a Finnish hardware company that sold
machinery since its founding in 1901.
• The company was known for delivering
top-quality machinery and had a
reputation for quality, allowing it to sell its
products for high prices.
• In response to evolving technology, Beta
embarked on a transformation to
become a service supplier, involving a
digital transformation leading to a new revenue
model, redesign of departmental structure, and
change of organizational practices.
Finnish manufacturing company aiming to transform itself into
a “leading provider of digital services”
38
Think-pair-share
39
▪ 1.What happened in the hospital and the manufacturer?
▪ II. How does their approach to digital technology differ?
▪ III. If you work in and organisation, what kind of change did you encounter?
▪ More like the hospital or the manufacturer?
Digital transformation
“a process that aims to improve
an entity by triggering
significant changes to its
properties through combinations
of information, computing,
communication, and
connectivity technologies
40
Vial, G. (2019). Understanding digital Transformation: A Review and a research Agenda. Journal of Strategic Information
Systems, 28(2), 118-144. https://doi.org/10.1016/j.jsis.2019.01.003
DIFFERENT FROM IT-ENABLED ORG CHANGE
Wessel, Lauri, et al. "Unpacking the difference between digital transformation and IT-enabled organizational transformation." Journal of
Association of Information Systems (2020).
DIFFERENT FROM IT-ENABLED ORG CHANGE
Wessel, Lauri, et al. "Unpacking the difference between digital transformation and IT-enabled organizational transformation." Journal of
Association of Information Systems (2020).
Digital innovation
research is articulating
management model for this
DT leads to new value
propositions and revised
organizational identity
DIGITAL
DISRUPTEES
Executives across
industries expect
major transformative
impact
IMD, 2021
Obwegeser, N., Yokoi, T., Wade, M., & Voskes, T. (2020, April 1). 7 Key
Principles to Govern Digital Initiatives. MIT Sloan Management Review.
https://sloanreview.mit.edu/article/7-key-principles-to-govern-digital-
initiatives/
”A well-governed digital
program must satisfy
different stakeholders
across an organisation
and be flexible enough to
accommodate multiple
types of initiatives, while
ensuring enough rigidity to
achieve strategic
alignment and efficiency.”
Digital transformation
“a process that aims to improve
an entity by triggering
significant changes to its
properties through combinations
of information, computing,
communication, and
connectivity technologies
Vial 2019
45
Digital transformation
“a process that aims to improve
an entity by triggering
significant changes to its
properties through combinations
of information, computing,
communication, and
connectivity technologies
Vial 2019
46
usually an
established
company
Digital transformation
“a process that aims to improve
an entity by triggering
significant changes to its
properties through combinations
of information, computing,
communication, and
connectivity technologies
47
digital
technologies can
change culture!
Wessel, Lauri, et al. "Unpacking the difference between digital
transformation and IT-enabled organizational transformation." Journal of
Association of Information Systems (2020).
Digital transformation
“a process that aims to improve
an entity by triggering
significant changes to its
properties through combinations
of information, computing,
communication, and
connectivity technologies
Vial 2019
48
SMACIT, layered
modular
Example disruptees
49
170 year old company
threatened by changing consumer
attitudes and digitally native
companies transformed for natively
digital media business.
https://www.mckinsey.com/industries/technology-media-and-
telecommunications/our-insights/building-a-digital-new-york-times-
ceo-mark-thompson
125 year old company
refocusing from a broad consumer
electronics company to become
specialised in healthcare and
Internet of Things.
https://www.philips.com/a-w/about/news/archive/blogs/innovation-
matters/2020/20200224-embracing-healthcares-digital-
transformation-2-0.html
Sebastian, Ina M., et
al. "How big old
companies navigate
digital transformation."
Strategic information
management.
Routledge, 2020.
133-150.
operational
backbone
customer
engagement
digitalized
solutions
Services
platform
WHAT IS NEEDED?
OPERATIONAL BACKBONE
The technology and business capabilities
that ensure the efficiency, scalability,
reliability, quality and predictability of core
operations.
operational
backbone
customer
engagement
digitalized
solutions
Services
platform
WHAT IS NEEDED?
TECHNICAL ENABLERS
the technology and business capabilities
that facilitate rapid development and
implementation of digital innovations.
operational
backbone
customer
engagement
digitalized
solutions
Services
platform
Operational backbone Digital services platform
Managerial
objective
Business efficiency and
technological reliability
Business agility and innovation
Architecture
principles
Standardised
processes,transparency and data
access
Plug-and-play business and
technology components
Data
SIngle source of truth for
transactional data
Massive repositories of sensor/social
media data/purchased data
Key processes
Roadmaps, architecture reviews Cross-functional development, user-
centred design
Delivery Method
Fast waterfall / regular releases /
Software as a Service adoption
Agile and DevOps, minimum viable
products
Method major programs / investments continuous funding
STRATEGY 1: DIGITALIZED SOLUTIONS
A digitized solutions strategy aims to
reformulate a company’s value proposition
by integrating a combination of products,
services and data
operational
backbone
customer
engagement
digitalized
solutions
SCHINDLER GROUP
(FROM ELEVATORS TO MOBILITY)
“When you have our PORT technology on
your phone, the building will recognize you
and know where you want to go, so you
don’t need your badge. If you’re a visitor, we
send you a message on your smartphone,
and then you can flow into the building
without signing in at the reception desk.”
Michael Nilles "
Chief Digital Officer, Schindler Group
STRATEGY 2: CUSTOMER ENGAGEMENT
A customer engagement strategy
typically aims to create a seamless,
omnichannel experience that makes it
easy for customers to order, inquire, pay
and receive support in a consistent way
from any channel at any time.
operational
backbone
customer
engagement
digitalized
solutions
KAISER PERMANENTE
(HEALTHCARE PROVIDER)
1. Offering increased opportunities for
patient interaction with care delivery teams
by supplementing visits and calls with
channels like video, text and email
2. Investing in data analytics to identify
needs for—and most effective approaches
to— personalized outreach, particularly
patient compliance
3. Leveraging social media to develop
communities of patients who have similar
interests and to create care circles that
engage patients and their families with care
providers.
operational
backbone
customer
engagement
digitalized
solutions
Services
platform
60
How can we measure this?
An example from my research
A formal model….
61
62
Responde
nts
Percent
Banking / Finance 11 7.6%
Consulting / Business
services
23 15.9%
Distribution / Retail 3 2.1%
Government / Municipalities 26 17.9%
Education 4 2.8%
Healthcare 7 4.8%
Manufacturing 21 14.5%
Technology 18 12.4%
Transportation 2 1.4%
Telecommunication 4 2.8%
FCMG 5 3.4%
Other 14 9.7%
Construction 4 2.8%
Total 145 100.0
Respon
dents
Percent
Upper
management
outside IT
14 9.0%
Middle
management
outside IT
20 13.9%
Employee
outside IT
13 9.0%
Upper IT
management
25 17.4%
Middle IT
management
31 21.5%
Employee in IT 42 29.2%
Retired/
unemployed
0 0.0%
Total 145 100.0%
Data from Danish companies…
63
Partial Least Squares modelling…
64
Results?
Does flexibility help?
Flexibility helps for customer engagement strategy….
65
Path Original Sample
(O)
Sample Mean
(M)
P Values
Flexibility → digital products → impl →
org_perf
60 61 0.83
Flexibility → digital products → impl 0,0806 0,0799 0.043*
Flexibility → cust_str → impl → org_perf 83 87 0.043*
Flexibility → cust_str → impl 110 115 0.019*
✅
✅
✅
❌
Efficiency does not help….
66
Path
Original
Sample (O)
Sample
Mean (M)
T Statistics (|
O/STDEV|)
P
Valu
es
efficiency → digital products
→ impl → org_perf 9 9 0,450 359
efficiency → digital products
→ impl 17 17 0,484 338
efficiency → cust_str → impl
→ org_perf 29 32 1.331 128
efficiency → cust_str → impl 56 61 1.429 107
❌
❌
❌
❌
67
Work in progress….
I will publish one day :)
68
If you find this perspective restricting…
Recent special issue in JAIS significantly broadened
the scope of theoretical perspectives on DT
Rowe, Frantz, and M. Lynne Markus. "Envisioning Digital Transformation: Advancing Theoretical Diversity." Journal of the Association for Information Systems 24.6
(2023): 1459-1478.
A SYNTHESIS…
Leadership
operational
backbone
customer
engagement
digitalized
solutions
analytical
platform
Technological
competence
Westerman, George, Didier Bonnet, and
Andrew McAfee. Leading digital: Turning
technology into business transformation.
Harvard Business Press, 2014.
A SYNTHESIS…
Leadership
operational
backbone
customer
engagement
digitalized
solutions
analytical
platform
Technological
competence
Westerman, George, Didier Bonnet, and
Andrew McAfee. Leading digital: Turning
technology into business transformation.
Harvard Business Press, 2014.
Westerman, George, Didier Bonnet, and
Andrew McAfee. Leading digital: Turning
technology into business transformation.
Harvard Business Press, 2014.
Westerman, George, Didier Bonnet, and
Andrew McAfee. Leading digital: Turning
technology into business transformation.
Harvard Business Press, 2014.
Profitability
• EBIT margin
• Net pro
fi
t margin
Westerman, George, Didier Bonnet, and
Andrew McAfee. Leading digital: Turning
technology into business transformation.
Harvard Business Press, 2014.
Revenue
generation
efficiency
• Revenue/employee
• Fixed-assets
turnover
75
Digital Innovation
Digital Transformation
A new paradigm
for innovation management
A new challenge for established organizations to seek resiliency
against digital disruptors
Digital Technologies
Layered modular, SMACIT
Part 1
Part 2
What to remember
76
▪ Digital technologies as layered modular (layers and how the framework can be used)
▪ Digital innovation as recombination
▪ SMACIT acronym
▪ Focus on operations and agility
▪ Digital transformation as change of value proposition
▪ Digital transformation focus on customer engagement or digitalised products
What to remember… part 2
77
▪ Digital technologies as layered modular
▪ Digital innovation as recombination
▪ SMACIT acronym
▪ Focus on operations and agility
▪ Digital transformation as change of value proposition
▪ Digital transformation focus on customer engagement or digitalised products
Technologies are connected with innovation of management models
78
Dominant
management model
Steam power and
railways
1861- 1913
Line and staff, managers,
Industrial betterment
Steel and electric
power
1896-1945
Scientific management, human
relations
Automobile and oil
1955-1992
Strategy-and-structure, Quality
management
Computers and
telecommunication
1990s-
Business process redesign, open
innovation, knowledge
management
Bodrožić, Zlatko, and Paul S. Adler. "The evolution of management models: A neo-Schumpeterian theory." Administrative Science Quarterly 63.1 (2018): 85-129.
Technologies are connected with innovation of management models
79
Bodrožić, Zlatko, and Paul S. Adler. "The evolution of management models: A neo-Schumpeterian theory." Administrative Science Quarterly 63.1 (2018): 85-129.
Organizational
paradigm
Dominant
management model
Steam power and
railways
1861- 1913
Professionally
managed firm:The rationalized
management dispersed
enterprise
Line and staff, managers,
Industrial betterment
Steel and electric
power
1896-1945
Factory:The unitary, centralized
organization
structure
Scientific management, human
relations
Automobile and oil
1955-1992
Corporation:The multi-divisional
mass-production
corporation
Strategy-and-structure, Quality
management
Computers and
telecommunication
1990s-
Network: Linking and
rationalizing processes across
internal and external
boundaries
Business process redesign, open
innovation, knowledge
management
In the
fi
rst phase of
management innovation ,
innovators articulate a
widespread organizational and
management problem.
…inadequacy of prevailing
models of management
relative to the potentialities of
the new technologies. One
indicator of such a reverse
salient is ‘‘productivity
paradoxes’’.
80
Get in touch for master thesis work…
We are putting together a group to help each other out with research on generative AI in practice
Faculty of Business Administration
Prague University of Economics
and Business
W. Churchill Sq. 4
130 67 Prague 3, Czech Republic
Thanks and good luck at the exam!
Michal Hron, PhD
Assistant professor
michal.hron@vse.cz
hronmichal.net

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Lecture slides: Digital Innovation and Transformation

  • 1. Modern trends in Innovation Digital Innovation and Transformation Michal Hron, PhD December 14th, 2023
  • 2. Michal Hron ▪ Msc. Business Intelligence from Aarhus (2018) ▪ Elite semester on digital transformation,Aarhus BSS ▪ Dissertation on organising for digital innovation (2022) ▪ AtVSE from February at the Department of entrepreneurship Publications on agile software development, organising for innovation, digital artefacts 2 hronmichal.net michal.hron@vse.cz
  • 3. 3
  • 4. New technologies generally trigger changes in management
  • 5. Technologies are connected with innovation of management models 5 Organizational paradigm Dominant management model Steam power and railways 1861- 1913 Professionally managed firm:The rationalized management dispersed enterprise Line and staff, managers, Industrial betterment Steel and electric power 1896-1945 Factory:The unitary, centralized organization structure Scientific management, human relations Automobile and oil 1955-1992 Corporation:The multi-divisional mass-production corporation Strategy-and-structure, Quality management Computers and telecommunication 1990s- Network: Linking and rationalizing processes across internal and external boundaries Business process redesign, open innovation, knowledge management Bodrožić, Zlatko, and Paul S. Adler. "The evolution of management models: A neo-Schumpeterian theory." Administrative Science Quarterly 63.1 (2018): 85-129. Digital innovation research is articulating management model for this organizational paradigm triggered by characteristics of digital technology
  • 6. 6
  • 7. 7 The literature agrees that digital innovation represents a distinct paradigm vis-a-vis traditional innovation
  • 8. 8 Linear value chains Vertically integrated hierarchy Controlled Enterprise Architecture Digital Ecosystem Distributed Network Organisation Generative Digital Platform Drechsler, Katharina, et al. "At the crossroads between digital innovation and digital transformation." Communications of the Association for Information Systems 47.1 (2020): 23. Old logic New logic
  • 9. Ecosystems In place of value chains
  • 11. Generative platforms In place of enterprise architectures
  • 12. Disruptors 12 Digital entrants threaten established firms across industries due to their ability to harness affordances of digital technology in an agile way
  • 13. Disruptors 13 Innovating with digital technologies unfolds differently than traditional innovation
  • 14. Digital disruption across all industries 14 Even in sectors where the research suggests businesses are more insulated from the digital storm, disruption is still taking place. In energy and utilities, for example – which is bottom-ranked for the third time in the past four studies – climate-change imperative underpins the disruptive imperative. The pace of change may be slower, particularly in areas of the industry that rely on signi fi cant physical assets, but digital transformation in areas such as energy management has become an important theme. https://www.imd.org/ibyimd/strategy/digital-vortex-2023-revealed/
  • 15. Digital disruption across all industries 15 Even in sectors where the research suggests businesses are more insulated from the digital storm, disruption is still taking place. In energy and utilities, for example – which is bottom-ranked for the third time in the past four studies – climate-change imperative underpins the disruptive imperative. The pace of change may be slower, particularly in areas of the industry that rely on signi fi cant physical assets, but digital transformation in areas such as energy management has become an important theme. https://www.imd.org/ibyimd/strategy/digital-vortex-2023-revealed/
  • 16. 16
  • 17. 17 Digital Innovation Digital Transformation A new paradigm for innovation management A new challenge for established organizations to seek resiliency against digital disruptors Digital Technologies Layered modular, SMACIT
  • 18. 18 Digital Innovation Digital Transformation A new paradigm for innovation management A new challenge for established organizations to seek resiliency against digital disruptors Digital Technologies Layered modular, SMACIT Part 1 Part 2
  • 19. Digital technologies and innovation Part 1
  • 20. Digital Innovation Digital Innovation: carrying out of new combinations of digital and physical components 20 Yoo,Y., O. Henfridsson, and K. Lyytinen,“The new Organizing Logic of digital Innovation:An Agenda for Information Systems Research”, Information Systems Research 21(4), 2010, pp. 724–735. We need to define digital technology, which is what gets recombined.
  • 21. Characteristics of digital innovation ▪ Generativity , or "a overall capacity of technology to produce unprompted changes” ▪ Convergence: innovation with pervasive digital technology brings previously separate user experience and industries together On the level of industries or products 21 Yoo, Y., Boland, R. J., Lyytinen, K., & Majchrzak, A. (2012). Organizing for Innovation in the Digitized World. Organization Science, 23(5), 1398-1408. https://doi.org/10.1287/orsc.1120.0771
  • 22. Layered modular architecture 22 Yoo, Y., Boland, R. J., Lyytinen, K., & Majchrzak, A. (2012). Organizing for Innovation in the Digitized World. Organization Science, 23(5), 1398-1408. https://doi.org/10.1287/orsc.1120.0771
  • 23. TECHNOLOGIES? SMACIT! Social Mobile Analytics Cloud Internet of Things Ross, Jeanne, et al. "Designing digital organizations." Working papers/Center for Information Systems Research 406 (2016): 1-19.
  • 24. TECHNOLOGIES? SMACIT! Social Mobile Analytics Cloud Internet of Things internal social networks idea management systems
  • 26. TECHNOLOGIES? SMACIT! Social Mobile Analytics Cloud Internet of Things big data business intelligence marketing analytics
  • 27. TECHNOLOGIES? SMACIT! Social Mobile Analytics Cloud Internet of Things Infrastructure as a Service Scalability
  • 29. TECHNOLOGIES? SMACIT! Social Mobile Analytics Cloud Internet of Things +Current “flavours of the month” AI, Blockchain, Metaverse,VR/AR
  • 30. THINK-PAIR-SHARE ▪ What are the layers of layered modular architecture? ▪ How would you analyse Facebook through this lens? (What would be on each layer) ▪ Which layer is the most important these days? Why?
  • 31. Layered modular architecture ▪ For analysis of digital technology: Digital products are assembled by channelling resources across the layers (i.e. recombinations) ▪ For analysis of competition: Different companies in the digital economy reside on different parts of the layered stack (e.g. Data only players on contents layer or hardware manufacturers the device layer) 31 (Henfridsson et al., 2018) Henfridsson, O., Nandhakumar, J., Scarbrough, H., & Panourgias, N. (2018). Recombination in the open-ended Value Landscape of digital Innovation. Information and Organization, 28(2), 89-100. https://doi.org/10.1016/ j.infoandorg.2018.03.001
  • 32. What to remember from part 1 32 ▪ Digital technologies as layered modular ▪ Digital innovation as recombination ▪ SMACIT acronym
  • 34. French hospital intending to transform itself into “the world’s most digitized hospital”
  • 35. • Hospital that faced challenges in implementing an Electronic Medical Record (EMR) system. • The implementation process was slower and more expensive than planned due to difficulties in integrating the EMR with existing work practices. • A compromise was reached, where secretaries and radiology technicians would split indexing tasks in busy departments, allowing secretaries to learn how to use the EMR effectively and improve work practices. • The EMR was eventually integrated into Alpha, and the organization's core purpose of providing healthcare services and research
  • 36. Finnish manufacturing company aiming to transform itself into a “leading provider of digital services”
  • 37. • Beta is a Finnish hardware company that sold machinery since its founding in 1901. • The company was known for delivering top-quality machinery and had a reputation for quality, allowing it to sell its products for high prices. • In response to evolving technology, Beta embarked on a transformation to become a service supplier, involving a digital transformation leading to a new revenue model, redesign of departmental structure, and change of organizational practices. Finnish manufacturing company aiming to transform itself into a “leading provider of digital services”
  • 38. 38
  • 39. Think-pair-share 39 ▪ 1.What happened in the hospital and the manufacturer? ▪ II. How does their approach to digital technology differ? ▪ III. If you work in and organisation, what kind of change did you encounter? ▪ More like the hospital or the manufacturer?
  • 40. Digital transformation “a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies 40 Vial, G. (2019). Understanding digital Transformation: A Review and a research Agenda. Journal of Strategic Information Systems, 28(2), 118-144. https://doi.org/10.1016/j.jsis.2019.01.003
  • 41. DIFFERENT FROM IT-ENABLED ORG CHANGE Wessel, Lauri, et al. "Unpacking the difference between digital transformation and IT-enabled organizational transformation." Journal of Association of Information Systems (2020).
  • 42. DIFFERENT FROM IT-ENABLED ORG CHANGE Wessel, Lauri, et al. "Unpacking the difference between digital transformation and IT-enabled organizational transformation." Journal of Association of Information Systems (2020). Digital innovation research is articulating management model for this DT leads to new value propositions and revised organizational identity
  • 44. Obwegeser, N., Yokoi, T., Wade, M., & Voskes, T. (2020, April 1). 7 Key Principles to Govern Digital Initiatives. MIT Sloan Management Review. https://sloanreview.mit.edu/article/7-key-principles-to-govern-digital- initiatives/ ”A well-governed digital program must satisfy different stakeholders across an organisation and be flexible enough to accommodate multiple types of initiatives, while ensuring enough rigidity to achieve strategic alignment and efficiency.”
  • 45. Digital transformation “a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies Vial 2019 45
  • 46. Digital transformation “a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies Vial 2019 46 usually an established company
  • 47. Digital transformation “a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies 47 digital technologies can change culture! Wessel, Lauri, et al. "Unpacking the difference between digital transformation and IT-enabled organizational transformation." Journal of Association of Information Systems (2020).
  • 48. Digital transformation “a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies Vial 2019 48 SMACIT, layered modular
  • 49. Example disruptees 49 170 year old company threatened by changing consumer attitudes and digitally native companies transformed for natively digital media business. https://www.mckinsey.com/industries/technology-media-and- telecommunications/our-insights/building-a-digital-new-york-times- ceo-mark-thompson 125 year old company refocusing from a broad consumer electronics company to become specialised in healthcare and Internet of Things. https://www.philips.com/a-w/about/news/archive/blogs/innovation- matters/2020/20200224-embracing-healthcares-digital- transformation-2-0.html
  • 50. Sebastian, Ina M., et al. "How big old companies navigate digital transformation." Strategic information management. Routledge, 2020. 133-150.
  • 52. WHAT IS NEEDED? OPERATIONAL BACKBONE The technology and business capabilities that ensure the efficiency, scalability, reliability, quality and predictability of core operations. operational backbone customer engagement digitalized solutions Services platform
  • 53. WHAT IS NEEDED? TECHNICAL ENABLERS the technology and business capabilities that facilitate rapid development and implementation of digital innovations. operational backbone customer engagement digitalized solutions Services platform
  • 54. Operational backbone Digital services platform Managerial objective Business efficiency and technological reliability Business agility and innovation Architecture principles Standardised processes,transparency and data access Plug-and-play business and technology components Data SIngle source of truth for transactional data Massive repositories of sensor/social media data/purchased data Key processes Roadmaps, architecture reviews Cross-functional development, user- centred design Delivery Method Fast waterfall / regular releases / Software as a Service adoption Agile and DevOps, minimum viable products Method major programs / investments continuous funding
  • 55. STRATEGY 1: DIGITALIZED SOLUTIONS A digitized solutions strategy aims to reformulate a company’s value proposition by integrating a combination of products, services and data operational backbone customer engagement digitalized solutions
  • 56. SCHINDLER GROUP (FROM ELEVATORS TO MOBILITY) “When you have our PORT technology on your phone, the building will recognize you and know where you want to go, so you don’t need your badge. If you’re a visitor, we send you a message on your smartphone, and then you can flow into the building without signing in at the reception desk.” Michael Nilles " Chief Digital Officer, Schindler Group
  • 57. STRATEGY 2: CUSTOMER ENGAGEMENT A customer engagement strategy typically aims to create a seamless, omnichannel experience that makes it easy for customers to order, inquire, pay and receive support in a consistent way from any channel at any time. operational backbone customer engagement digitalized solutions
  • 58. KAISER PERMANENTE (HEALTHCARE PROVIDER) 1. Offering increased opportunities for patient interaction with care delivery teams by supplementing visits and calls with channels like video, text and email 2. Investing in data analytics to identify needs for—and most effective approaches to— personalized outreach, particularly patient compliance 3. Leveraging social media to develop communities of patients who have similar interests and to create care circles that engage patients and their families with care providers.
  • 60. 60 How can we measure this? An example from my research
  • 62. 62 Responde nts Percent Banking / Finance 11 7.6% Consulting / Business services 23 15.9% Distribution / Retail 3 2.1% Government / Municipalities 26 17.9% Education 4 2.8% Healthcare 7 4.8% Manufacturing 21 14.5% Technology 18 12.4% Transportation 2 1.4% Telecommunication 4 2.8% FCMG 5 3.4% Other 14 9.7% Construction 4 2.8% Total 145 100.0 Respon dents Percent Upper management outside IT 14 9.0% Middle management outside IT 20 13.9% Employee outside IT 13 9.0% Upper IT management 25 17.4% Middle IT management 31 21.5% Employee in IT 42 29.2% Retired/ unemployed 0 0.0% Total 145 100.0% Data from Danish companies…
  • 63. 63 Partial Least Squares modelling…
  • 65. Flexibility helps for customer engagement strategy…. 65 Path Original Sample (O) Sample Mean (M) P Values Flexibility → digital products → impl → org_perf 60 61 0.83 Flexibility → digital products → impl 0,0806 0,0799 0.043* Flexibility → cust_str → impl → org_perf 83 87 0.043* Flexibility → cust_str → impl 110 115 0.019* ✅ ✅ ✅ ❌
  • 66. Efficiency does not help…. 66 Path Original Sample (O) Sample Mean (M) T Statistics (| O/STDEV|) P Valu es efficiency → digital products → impl → org_perf 9 9 0,450 359 efficiency → digital products → impl 17 17 0,484 338 efficiency → cust_str → impl → org_perf 29 32 1.331 128 efficiency → cust_str → impl 56 61 1.429 107 ❌ ❌ ❌ ❌
  • 67. 67 Work in progress…. I will publish one day :)
  • 68. 68 If you find this perspective restricting… Recent special issue in JAIS significantly broadened the scope of theoretical perspectives on DT Rowe, Frantz, and M. Lynne Markus. "Envisioning Digital Transformation: Advancing Theoretical Diversity." Journal of the Association for Information Systems 24.6 (2023): 1459-1478.
  • 69. A SYNTHESIS… Leadership operational backbone customer engagement digitalized solutions analytical platform Technological competence Westerman, George, Didier Bonnet, and Andrew McAfee. Leading digital: Turning technology into business transformation. Harvard Business Press, 2014.
  • 70. A SYNTHESIS… Leadership operational backbone customer engagement digitalized solutions analytical platform Technological competence Westerman, George, Didier Bonnet, and Andrew McAfee. Leading digital: Turning technology into business transformation. Harvard Business Press, 2014.
  • 71. Westerman, George, Didier Bonnet, and Andrew McAfee. Leading digital: Turning technology into business transformation. Harvard Business Press, 2014.
  • 72. Westerman, George, Didier Bonnet, and Andrew McAfee. Leading digital: Turning technology into business transformation. Harvard Business Press, 2014. Profitability • EBIT margin • Net pro fi t margin
  • 73. Westerman, George, Didier Bonnet, and Andrew McAfee. Leading digital: Turning technology into business transformation. Harvard Business Press, 2014. Revenue generation efficiency • Revenue/employee • Fixed-assets turnover
  • 74.
  • 75. 75 Digital Innovation Digital Transformation A new paradigm for innovation management A new challenge for established organizations to seek resiliency against digital disruptors Digital Technologies Layered modular, SMACIT Part 1 Part 2
  • 76. What to remember 76 ▪ Digital technologies as layered modular (layers and how the framework can be used) ▪ Digital innovation as recombination ▪ SMACIT acronym ▪ Focus on operations and agility ▪ Digital transformation as change of value proposition ▪ Digital transformation focus on customer engagement or digitalised products
  • 77. What to remember… part 2 77 ▪ Digital technologies as layered modular ▪ Digital innovation as recombination ▪ SMACIT acronym ▪ Focus on operations and agility ▪ Digital transformation as change of value proposition ▪ Digital transformation focus on customer engagement or digitalised products
  • 78. Technologies are connected with innovation of management models 78 Dominant management model Steam power and railways 1861- 1913 Line and staff, managers, Industrial betterment Steel and electric power 1896-1945 Scientific management, human relations Automobile and oil 1955-1992 Strategy-and-structure, Quality management Computers and telecommunication 1990s- Business process redesign, open innovation, knowledge management Bodrožić, Zlatko, and Paul S. Adler. "The evolution of management models: A neo-Schumpeterian theory." Administrative Science Quarterly 63.1 (2018): 85-129.
  • 79. Technologies are connected with innovation of management models 79 Bodrožić, Zlatko, and Paul S. Adler. "The evolution of management models: A neo-Schumpeterian theory." Administrative Science Quarterly 63.1 (2018): 85-129. Organizational paradigm Dominant management model Steam power and railways 1861- 1913 Professionally managed firm:The rationalized management dispersed enterprise Line and staff, managers, Industrial betterment Steel and electric power 1896-1945 Factory:The unitary, centralized organization structure Scientific management, human relations Automobile and oil 1955-1992 Corporation:The multi-divisional mass-production corporation Strategy-and-structure, Quality management Computers and telecommunication 1990s- Network: Linking and rationalizing processes across internal and external boundaries Business process redesign, open innovation, knowledge management In the fi rst phase of management innovation , innovators articulate a widespread organizational and management problem. …inadequacy of prevailing models of management relative to the potentialities of the new technologies. One indicator of such a reverse salient is ‘‘productivity paradoxes’’.
  • 80. 80 Get in touch for master thesis work… We are putting together a group to help each other out with research on generative AI in practice
  • 81. Faculty of Business Administration Prague University of Economics and Business W. Churchill Sq. 4 130 67 Prague 3, Czech Republic Thanks and good luck at the exam! Michal Hron, PhD Assistant professor michal.hron@vse.cz hronmichal.net