The Digital Transformation - Challenges and Opportunities for IS researchers - 12th CONTECSI

Technische Universität München
© Prof. Dr. H. Krcmar
The Digital Transformation -
Challenges and Opportunities
for IS researchers
Prof. Dr. Helmut Krcmar
AIS President 2014-2015
Chair for Information Systems – www.winfobase.de
Vice Dean Informatics – www.in.tum.de
Academic Director EMBA Business and IT – tum.eec.de
TU München – www.tum.edu
Institute for Public Information Management (IPIMA) – www.ipima.de
fortiss gGmbH, München - www.fortiss.org
Co-Founder Initiative Digital Transformation – idt.in.tum.de

2 © Prof. Dr. H. Krcmar
Congratulations to
From

founded in 1994
4,128 members in 100+ countries and 36 chapters
(Summer 2014)
• 1751 in Region 1 Americas
• 1218 in Region 2 Europe
• 1169 in Region 3 Pacific Asia
Countries with more than 100 members:
• USA
• China
• Germany
• Australia
• Canada
• South Korea
• www.aisnet.org
AIS serves society
through
the advancement of knowledge
and
the promotion of excellence
in the practice and study
of information systems.

AIS conducts a wide range of activities
• Research
– Conferences: ICIS AMCIS PACIS MWAIS SAIS
– Journals: JAIS CAIS JITTA THCI TRR and more in the eLibrary
– Special Interest Groups: 36 different topics
– Research Conduct Committee: Research code of conduct
• Professional development
– Early career: PhD Consortium, Jr. Faculty Consortium
– Mid Career Workshop: “Tenure? Now what?”
– Late Career: AMCIS 2014 – Panel on late career and retirement issues
– Career spanning: Webinars and Colleges
• Advocacy
– AIS as the Business “STEM” Discipline
– AIS and Accreditation
– Awareness in Industry: Global Sponsors, “AIS Bright ICT Initiative”

What to expect from the AIS now that its 21?
• Continous Improvement from members for members
• Teaching and Undergraduate engagement
– Education committee aims for a teaching materials repository
– 74+ student chapters in all AIS regions with 200+ conference participants
• “Youth” movement: about 1/4 of AIS members are doctoral students
– Support Activities at conferences
• Colleges to support issues that cut across
– IS Women’s Network, Senior Scholars, Academic Leadership
• Member Recognition by Awards
– Doctoral Student Service, Early Career, Continuing Contribution to AIS
As ,,ambassador of the possible” please get involved

6

© Prof. Dr. H. Krcmar7
Industry 4.0 Smart Service Welt

What now?
Picture: jokatoons, Ostrich No Solution, fotolia.com
How will you act as a leader if „industry
4.0“ meets „smart service world“?
Either... remain in the board room or
ivory tower?
Or get to the technical details by
yourself again?
Or demand that government policies
guards your business against digital
competition?
Or let someone collect enough data,
you never know if Big Data might make
it some day ?

9
Digital Transformation

Digital
Transformation
Explanatory Model Leadership Behavior

Trends – my selection
• Demographic change
• Urbanisation
• Serviceation
• Predictability
 IT-Trends selection aka SMAC
 Social Media
 Mobility & Consumerization
 Analytics / Big Data
 Cloud Computing
 Cyber-Physical Service Systems (CPSS)
 Platform-based ecosystems
INTER-
ACTION
Production
Customer’s
value creation
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Inevitable
Digital
transformation
Explanatory model Leadership behavior

The innovator´s dilemma
• New techniques or business models
get (at the beginning) poorer results
(measured by traditional criteria), but
are usually less expensive (at least
later) and easier.
• Ignoring a disruptive techniques for a
long time can lead to an
insurmountable resistance to change
within the company.
• Openness to disruptive technologies
needs to be the goal of every
company's culture of innovation.

Disruptive innovations often add up over time
Efficient and personalized
communication incl. personal
meetings

Disruption, not immediate destruction enables
innovation and efficiency
time
performance
100%
t1 t2
30%
70%
New 100%
more
&
different
„Don´t confuse slow and
declining with not needed,
unnecessary, not being
reinvented“.
Ginni Rometty,
14-05-2014 FT

Internet-milieus in selected population groups Germany
Source: DIVSI 2013b

Inevitable
Irreversible
Digital
transformation

18 © Prof. Dr. H. KrcmarPhoto: AP/DPA - Source: Der Spiegel: Digitale Erleuchtung 2013
Papal election 2005
Photo: AP/DPA - Source: Der Spiegel: Digitale Erleuchtung 2013

Papal election 2013

Papal election 2005

Inevitable
Irreversible
Tremendously fast
Digital
transformation

2005: On whom would you lay your bets on?
Founded in 2003
(Tom Anderson)
Founded in 2004
(Zuckerberg et al.)
Founded in 2005
(Dariani/Behmann)

2005: On whom would you lay bets on?
Source: statista.de

2005: On whom would you lay your bets on?
2014: It‘s obvious
2023: ?
Source: statista.de

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
transformation

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
transformation
Service Dominant
Logic

Production and value creation
INTER-
ACTIONProduction
Customer’s
value creation
”Value Facilitation”
(Grönroos, 2008)
Production perspective
Added value perspective
“Joint production process: the Customer
participates as co-producer of resources
and processes with the provider”
(Eiglier & Langeard, 1975; Grönroos, 1978)
“Joint value creation process: the Provider
participates as co-creator of value (value-
in-use) with the customer”
(Grönroos, 2008; Grönroos & Ravald, 2011)
Grönroos (2011)

Disruption by Xaas: Release of existing industrial
silos by service ecosystems
• Smart Service World: From business-centric processes through to event-
centered process assistance
• Industry 4.0: From office-centered processes (coordinated centrally)
through to workpiece-centered production (self-organized)
Source:SmartServiceWelt,2014,S.18

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
transformation
Service dominant
logic
Ambidexterity

30
Innovation process: Exploitation and exploration
Exploitation
Utilization of existing potential in order to ensure
efficient operations.
Refinement, optimization, selection,
implementation and execution
Exploration
Generating alternative potentials to be able to react
more flexibly to changing environmental requirements
Search, variation, risk recording, experimentation,
play, flexibility, discovery and research
March 1991
“It was the best of times, it was the worst of times, ...” Dickens, C. 1859

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
transformation
Service dominant
logic
Ambidexterity
Open innovation on
platforms

Open innovation from the perspective of platform
Open innovation
(Gassmann/Enkel, 2004)
• Inside-out
• Outside-in
• Coupled-Process
Fit to Service Ecosystems
(Gassmann 2006)
• Reuse
• Knowledge exploitation
• New business models

„My individual service is my commodity”
„My individual service will be assembled through your commodity“
Consumer
Linkage layer
Producer
Effective use of platform for companies
(Efficiency, innovation, strategy, survival, ...)
Efficient advice on the use of and development
on the platform
(Supplier, composition, safety, ...)
Long-term development and maintenance of
reliable, large application environments and
platforms
(Cost-efficient production and delivery, ...)

34
Success of platforms: Governance as part of the operating
model of the technical platform
Legal factors Technical
factors
socio-economic
factors
Competitive factors
Stakeholder behavior
Platform provider
Platform
Third-party
supplier
Consumer
Platform
Platform
Platform

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
transformation
Service dominant
logic
Ambidexterity
Open innovation on
platforms
Real Options in the
portfolio

1
1
• Management flexibilities: also allows
a partial realization of projects
• Options entitle to, but not obligate to
buy or sell a specified asset for a
payment of an agreed price
Hull (2009)
Picture: www.strategispartners.com.au/real-options-for-tomorrows-growth/
• Expected cash flows are
interest-bearing with the market
rate at the time of investment
• Usually assumes one single
future scenario
From DCF (Discounted Cash flow) … to real options

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
transformation
Service dominant
logic
Ambidexterity
Open innovation on
platforms
Real Options in the
portfolio

Shift of the innovation limit
80s
Today
Competition uber industrial structures
Competition via business models
IT enables the use of Ubiquitous
Computing
Product- und process innovations
process efficiency
Strategic Information Systems
Any use of IT
Smart Service World
Cyber Physical Service Systems
IT/IS ecosystems
IS as platform
IT ecosystems
Proprietary IS
Proprietary IT

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model
Act „Value in use“
Live Exploit & Explore
Speed-on&Stability-in
the platforms
Explore options
Leadership Behavior

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model
the platforms
Explore options
Leadership Behavior
Towards a culture of (digital) transformation:
people and technologies matter!

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model
the platforms
Explore options
Leadership Behavior
people and technologies and law matter
Privacy
CyberSecurity
Trust
Principles
Requirements until now

Disruptive platform-based innovation
• Co-evolution in the entire-supply-ecosystem of single
suppliers, solution developers and operators in the service
ecosystem (in multilateral governance structure)
• Co-evolution in the supply-demand-ratio of single suppliers,
solution developers, operators and users throughout the
ecosystem service (for multilateral governance structure)
• Concept-context changes via (Re-)regulation

„new digital life“
“In face-to-face encounters, our interactions are
"private by default, public through effort."
With mediated technologies, the defaults are inverted.
Interactions are
"public by default, private through effort.“
danah boyd 2011. in (co://llaboratory,Gleichgewicht und Spannung zwischen digitaler Privatheit und Öffentlichkeit, 2011, p.
113)

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model
the platforms
Explore options
Leadership Behavior
people and society, technologies and law matter
Privacy and individualized services
CyberSecurity and convenience
Trust by regulation and markets
Principles and discourse
Requirements today

And now ? - a managerial view
• Design smart services
• on platforms existing and new
• in co-innovation with customers, suppliers, and competitors
• in agile steps
• by starting today

And now ? - a managerial view
“Any technology company not focused on speed will be disrupted from its
position. Wal-Mart as a technology company and innovator will be a tale
told on speed.” (Karenann Terrell, CIO Wal-Mart, 2015-May-6)
• Design smart services
• on platforms existing and new
• in co-innovation with customers, suppliers, and competitors
• in agile steps
• by starting today

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model Research Challenges

Some starting considerations
• You can count innovations only after they are conceived
– and the often come in Singularity
• Reality poses problems
– for those that see them
– it does no pose methods
– IS/IT might be one of the solutions
• Researchers research
– We all have our likes and skills
• IT/IS is an artifact
– which needs to be built and designed, and well to work
based on Briggs, R.; Krcmar, H.: The Simple Elegance of Scientific Inquiry in a Technical Field.
Workshop held at HICSS 2012

The context of IS research has changed
• The IT/IS-artefact is different today than just ten years ago
– the first iPhone was released on June 29, 2007
• People, organizations, and society use IT/IS-artefacts as embedded
tools and do not even call it “computing” anymore
– ubiquitous computing, ambient computing
• The users of today are consumers and organizational IS-users alike
- Any restrictiveness of user interfaces is easilyrecognized
• The companies of today are engulfed in their digital transformation
– AND THE DIGITAL CHALLENGERS ARE EVERYWHERE
Our knowledge is context based

New contexts – new topics – more interdisciplinarity while
„focussing“ on the individual, the organization, and society
Leimeister et al 2014 (DOI: 10.1007/s12525-014-0174-6)

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model
People first, but
holistically
Research Challenges

Outsourcing through the times –
From “Buyer-Beware” to “Expertise-Aware”
• What if the assumptions that informed outsourcing research
over the past decades do not hold (anymore)?
• Today we know
– In mature outsourcing markets client capabilities rather than vendor
capabilities are the primary drivers of BPO performance
– Vendor offerings converge, which requires that clients are flexible and adapt
themselves to the service offerings
• That means
– These Results challenge the assumptions that informed the early outsourcing
research (‘buyer-beware’ framing)
• Which other IS-(Management) knowledge is similarly situated?

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model
People first, but
holistically
revisit&reframe
Research Challenges

What is Design Research?
• Design Research tries to develop Artifacts that fulfill a certain
purpose
• „devising artifacts to attain goals“ (Simon, 1969)
• Design Research can be defined as identifying a unique or
innovative solution for a previously unsolved problem
• Revolutionary
• Evolutionary
• Not intuitive (Briggs, 2006)
Natural and
Behavioral Science
Design
Science
artificial
objects and
phenomena
observe create

What are possible results of Design Science Research?
Theory Theory
(Cause-Effect-Relationships)
Terminology Terminology
(Concepts, language)
Technology
(Goal-Means-Relationship)
Models Methods Systems
Design Theories and Principles
(Goal-Means-Relationship)

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model
People first, but
holistically
revisit&reframe
Design Principles
Research Challenges

Singularity of each Digital Transformation Process
• Singular, context-rich, dynamically complex and situated
– Sometimes all different and revolutionary, sometimes all similar and
evolutionary
• Implementation dominates DT effects
– contexts might be too diverse for contingency based approaches
• Researchers might need
– to act as ethnograpers to explore the details of the technical and
organizational implementation
– to perform documentation to start multicase surveys for EBM
– to design different technological solutions for different organizations

Inevitable
Irreversible
Tremendously fast
Uncertain in the
execution
Digital
Transformation
Service Dominant
Logic
Ambidexterity
Open innovation
on platforms
Real Options
in the portfolio
Explanatory Model
People first, but
holistically
revisit&reframe
Design Principles
Individual dynamics of
transformation
processes
Research Challenges

Now, what could be the impact of DT research

• More papers

Why do we want to do research?
The holy grail
Practically useful Scientifically useful
Relevatory
Incremental
Originality
Utility
adapted from Corley, K. G., & Gioia, D. A. (2011). Building Theory About Theory Building: What Constitutes A Theoretical Contribution?
Academy of Management Review, 36(1), 12-32.

The holy grail
Relevatory
Incremental
Originality
Utility
adapted from Corley, K. G., & Gioia, D. A. (2011). Building Theory About Theory Building: What Constitutes A Theoretical Contribution?
Academy of Management Review, 36(1), 12-32.

The holy grail
Relevatory
Incremental
Originality
Utility
adapted from Corley, K. G., & Gioia, D. A. (2011). Building Theory About Theory Building: What
Constitutes A Theoretical Contribution? Academy of Management Review, 36(1), 12-32.

• More papers
• More citations
• Change in the perception of actors (in academia and
practice, suppliers and customers, …)
• New product features, implementation processes, …
• New suppliers (Startups, Spinoffs, Business units, …)
• …

How to go about research in DT
• Technology oriented:
– design theory based research (DSR)
• Organizationally oriented:
– exploratory and confirmatory (work centered) research with
a longitudinal orientation
• Societally oriented:
– „culture changes“ from digital ignorants to digital natives,
from departmental orientation towards process orientation,
– new generations and paradigms come into play, yet it takes
a while to get a hold of those shifts

Unexplained
Effects
Avenuesof
Enquiry
Exploratory
Research
Experimental
Research
Applied
Research /
Engineering
Theoretical
Research
Treatments
Controls
Design
Guidelines
All Modes of Scientific Inquiry
for rigor AND relevance
From: Briggs, R.O., Schwabe, G. (2011) On
Expanding the Scope of Design Science Research. In
H. Jain, A.P. Sinha, and P. Vitharana (Eds.):
Proceedings of Design Science Research in
Information Systems and Technologies: DESRIST
2011, LNCS 6629, pp. 92–106, 2011.

Some Implications
• Collobaration in and with the „theatre of action“
– „in and out of the ivory tower“ with shared data sets
• With many cycles and on many levels over extended time
– „concatenated exploration“ (Stebbins, 2001,p.12)
• with different skills needed for each mode of scientific inquiry
– Methodological plurality and tolerance
• and different pitfalls to avoid for each mode of scientific inquiry
– Often spanning different academic communities
• In research programmes with an overarching question
– „How to make Digital Transformation work“
A non-trivial balancing act over time as research programmes are reality-driven, projects
are funding-driven, publications are outlet driven for each Knowledge nugget
based on individual researcher´s perspectives and motivation instead of just following
generally prescribed research as as craft prescriptions

“Everything can look like a failure in the middle.
Every new idea runs into trouble before it reaches fruition,
and the possibilities for trouble increase with the number
of ways the venture differs from current approaches.”
(Kanter 2001, S. 274).
Ambassadors of the Possible
enjoy, research, and engage!

Prof. Dr. Helmut Krcmar, Dean, TU München, Director SAP UCC Munich
November 11, 2011
SAP University Competence Centers
Educational Service Providers
TUM. The Entrepreneurial University.
“Talents are our assets, reputation is our return“
IDT Initiative for Digital Transformation
An initiative
to analyze, understand and support the design of
leadership, innovation, and motivation
in the Digital Transformation
Co-Founders
Gert Oswald, SAP
Helmut Krcmar, TUM & fortiss

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