Management and Information Technology after Digital Transformation 0367612763, 9780367612764

Table of contents :
Cover
Half Title
Series Page
Title Page
Copyright Page
Dedication
Table of Contents
List of figures
List of tables
List of contributors
Preface
Foreword
1 Perspectives on management and information technology after digital transformation
2 Digital transformation: towards a new perspective for large established organisations in a digital age
PART 1 The transformation of society and markets
3 Managing digital servitization: a service ecosystem perspective
4 Caught on the platform or jumping onto the digital train: challenges for industries lagging behind in digitalisation
5 Digitalisation for sustainability: conceptualisation, implications and future research directions
6 Reaching new heights in the cloud: the digital transformation of the video games industry
7 Hyper-Taylorism and third-order technologies: making sense of the transformation of work and management in a post-digital era
8 Why space is not enough: service innovation and service delivery in senior housing
9 Challenges in implementing digital assistive technology in municipal healthcare
PART 2 Managerial and organisational challenges
10 Modern project management: challenges for the future
11 Managing the paradoxes of digital product innovation
12 When external reporting goes social: new conditions for transparency and accountability?
13 Robotic process automation and the accounting profession’s extinction prophecy
14 Managing digital employee-driven innovation: the role of middle-level managers and ambidextrous leadership
15 Digital gamification of organisational functions and emergent management practices
16 Leveraging digital technologies in Enterprise Risk Management
PART 3 Framing digitalisation
17 The end of business intelligence and business analytics
18 ‘Deleted User’: signalling digital disenchantment in the post-digital society
19 The role of boundary-spanners in the post-digitalised multinational corporation
20 The effect of digital transformation on subsidiary influence in the multinational enterprise
21 Understanding information system outsourcing in the digital transformation era: the business-relationship triad view
22 Transforming the management/profession divide: the use of the red–green matrix in Swedish schools
23 Integrating research in master’s programmes: developing students’ skills to embrace digitally transformed markets
Index

Citation preview

Management and Information Technology after Digital Transformation

With the widespread transformation of information into digital form throughout society – firms and organisations are embracing this development to adopt multiple types of IT to increase internal efficiency and to achieve external visibility and effectiveness – we have now reached a position where there is data in abundance and the challenge is to manage and make use of it fully. This book addresses this new managerial situation, the post-digitalisation era, and offers novel perspectives on managing the digital landscape. The topics span how the post-digitalisation era has the potential to renew organisations, markets and society. The chapters of the book are structured in three topical sections but can also be read individually. The chapters are structured to offer insights into the developments that take place at the intersection of the management, information systems and computer science disciplines. It features more than 70 researchers and managers as collaborating authors in 23 thought-provoking chapters. Written for scholars, researchers, students and managers from the management, information systems and computer science disciplines, the book presents a comprehensive and thought-provoking contribution on the challenges of managing organisations and engaging in global markets when tools, systems and data are abundant. Peter Ekman is an associate professor of marketing at Mälardalen University and deputy dean of the Swedish Research School of Management and IT hosted by Uppsala University. His research focuses on firm digitalisation within business networks and service ecosystems, often in a sustainability or globalization context. Peter Dahlin is an associate professor of business at Mälardalen University, Sweden, and honorary visiting scholar at the University of Exeter, UK, and is affiliated to the Business School. His research interests include applied analytics, network analysis and business performance. Christina Keller is the dean of the Swedish Research School of Management and IT at Uppsala University and professor in informatics at Lund University School of Economics and Management. Her main research interests include online learning, design science research and information systems in healthcare.

Routledge Studies in Innovation, Organizations and Technology

Sustainable Innovation Strategy, Process and Impact Edited by Cosmina L. Voinea, Nadine Roijakkers and Ward Ooms Management in the Age of Digital Business Complexity Edited by Bill McKelvey Citizen Activities in Energy Transition User Innovation, New Communities, and the Shaping of a Sustainable Future Sampsa Hyysalo How Ideas Move Theories and Models of Translation in Organizations John Damm Scheuer Managing IT for Innovation Dynamic Capabilities and Competitive Advantage Mitsuru Kodama Technological Change and Industrial Transformation Edited by Vicky Long and Magnus Holmén Sustainability, Technology and Innovation 4.0 Edited by Zbigniew Makieła, Magdalena M. Stuss and Ryszard Borowiecki Management and Information Technology after Digital Transformation Edited by Peter Ekman, Peter Dahlin and Christina Keller For more information about this series, please visit: www.routledge. com/Routledge-Studies-in-Innovation-Organizations-and-Technology/ book-series/RIOT

Management and Information Technology after Digital Transformation Edited by Peter Ekman, Peter Dahlin and Christina Keller

First published 2022 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 selection and editorial matter, Peter Ekman, Peter Dahlin and Christina Keller; individual chapters, the contributors The right of Peter Ekman, Peter Dahlin and Christina Keller to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-0-367-61276-4 (hbk) ISBN: 978-0-367-62878-9 (pbk) ISBN: 978-1-003-11124-5 (ebk) DOI: 10.4324/9781003111245 Typeset in Times New Roman by codeMantra

Dedicated to Lars Engwall Professor emeritus at the Department of Business Studies, Uppsala University The first chairman of the Swedish Research School of Management and IT

Contents

List of figures List of tables List of contributors Preface Foreword 1 Perspectives on management and information technology after digital transformation

xi xiii xv xxiii xxv

1

PE T E R E K M A N , PE T E R DA H L I N A N D C H R I S T I NA K E L L E R

2 Digital transformation: towards a new perspective for large established organisations in a digital age

8

A L A N W. BROW N

PART 1

The transformation of society and markets 3 Managing digital servitization: a service ecosystem perspective

21 23

DAV I D S ÖR H A M M A R , BÅ R D T RON VOL L A N D C H R I S T I A N KOWA L KOWSK I

4 Caught on the platform or jumping onto the digital train: challenges for industries lagging behind in digitalisation

33

PE T E R E K M A N , M AGN US BE RGL I N D A N D S T E V E N T HOM P S ON

5 Digitalisation for sustainability: conceptualisation, implications and future research directions E L E NA A NA S TA SI A D OU, L I N DA A L K I R E A N D J I M M I E RÖN DE L L

43

viii

Contents

6 Reaching new heights in the cloud: the digital transformation of the video games industry

53

K E V I N WA LT H E R A N D DAV I D S ÖR H A M M A R

7 Hyper-Taylorism and third-order technologies: making sense of the transformation of work and management in a post-digital era

63

C H R I S T OF F E R A N DE R S S ON , LUC I A C R E VA N I , A N E T T E H A L L I N , CA ROL I N E I NGVA R S S ON , C H R I S I VORY, I N T I JO SÉ L A M M I , E VA L I N DE L L , I R I NA P OP OVA A N D A N NA U H L I N

8 Why space is not enough: service innovation and service delivery in senior housing

72

PE T T E R A H L S T RÖM , G ÖR A N L I N DA H L , M A R KUS F E L L E S S ON , B ÖR J E B J E L K E A N D F R E DR I K N I L S S ON

9 Challenges in implementing digital assistive technology in municipal healthcare

81

A N N S V E N S S ON , L I N DA BE RGKV I S T, C H A R L O T T E BÄC C M A N A N D S USA N N E DU R S T

PART 2

Managerial and organisational challenges

91

10 Modern project management: challenges for the future

93

K L A S S U N DBE RG , BI RGE R R A PP A N D C H R I S T I NA K E L L E R

11 Managing the paradoxes of digital product innovation

105

F R E DR I K S VA H N A N D BE N DI K BYG S TA D

12 When external reporting goes social: new conditions for transparency and accountability?

119

C E C I L I A GU L L BE RG

13 Robotic process automation and the accounting profession’s extinction prophecy

129

M AT T H I A S HOL M S T E D T, F R E DR I K J E A N S ON A N D A NGE L I NA SU N D S T RÖM

14 Managing digital employee-driven innovation: the role of middle-level managers and ambidextrous leadership I Z A BE L L E BÄC K S T RÖM A N D PE T E R M AGN US S ON

138

Contents ix 15 Digital gamification of organisational functions and emergent management practices

149

E DWA R D GI L L MOR E

16 Leveraging digital technologies in Enterprise Risk Management

159

JA S ON C R AW FOR D A N D JA N L I N DVA L L

PART 3

Framing digitalisation

173

17 The end of business intelligence and business analytics

175

M AT T H I A S HOL M S T E D T A N D PE T E R DA H L I N

18 ‘Deleted User’: signalling digital disenchantment in the post-digital society

185

C R I S T I NA GH I TA , C L A E S T HOR É N A N D M A RT I N S T OJA NOV

19 The role of boundary-spanners in the post-digitalised multinational corporation

195

H E N R I K DE L L E S T R A N D, OL OF L I N DA H L A N D JA KOB W E S T E RG R E N

20 The effect of digital transformation on subsidiary influence in the multinational enterprise

206

NOUSH A N M E M A R , U L F A N DE R S S ON , PE T E R DA H L I N A N D PE T E R E K M A N

21 Understanding information system outsourcing in the digital transformation era: the business-relationship triad view

217

C E C I L I A E R I XON A N D PE T E R T H I L E N I US

22 Transforming the management/profession divide: the use of the red–green matrix in Swedish schools

228

A N T ON B OR E L L , JOH A N K L A A S SE N , ROL A N D A L MQV I S T A N D JA N L ÖWS T E D T

23 Integrating research in master’s programmes: developing students’ skills to embrace digitally transformed markets

238

T ODD DR E N NA N , C E C I L I A T H I L E N I US L I N DH A N D E M I L I A ROV I R A NOR DM A N

Index

249

Figures

10.1 10.2 10.3 13.1 16.1 17.1 19.1 20.1 20.2 21.1 22.1 23.1

A comparison between the stages in traditional and agile project management (adapted from Keller et al. 2017) How uncertainty and complexity favour different approaches for project management (adapted from Lensges et al. 2018: 29) Factors favouring different approaches to project management Number of RPA-related publications in Google Scholar The technologies, boundaries and dimensions of ERM Trends in the use of the concepts BI and BA A common view of boundary-spanners The relationship between the subsidiary’s activity portfolio and its influence within the MNE The impact of digital transformation on subsidiary influence through internal embeddedness Four types of IS outsourcing business-relationship triad (inspired by Vedel, Holma and Havila 2016: 144) Example of an RG matrix Representation of the effect of digitalisation on the questionnaire construction process

97 99 103 133 162 179 198 210 213 223 232 242

Tables

4.1 Industrial digitalisation barriers 6.1 Summary of business model innovations and technological advancements in the three eras 10.1 The PMBOK guide: a guide to the project management body of knowledge 11.1 Paradoxes of digital product innovation and constituent tensions between innovation regimes 13.1 Perceptions of occupations that will disappear in future (BBC.com) 13.2 Accounting tasks in a two-by-three matrix (authors’ own representation) 14.1 Comparison of the two sites based on the number of employee ideas that have been submitted to the joint digital innovation platform

35 60 94 110 130 132 143

Contributors

Petter Ahlström, PhD and CEO of CLA Sweden AB, is an advisor, entrepreneur and researcher whose interest is in the areas of real estate economics, management control, organisation, strategy, service management and innovation. He now runs a company in concept for senior housing and services. Linda Alkire is an assistant professor of marketing at Texas State University. Her research explores transformative service research and technology in services. She is an editorial director of the Journal of Service Management and an associate editor of the Journal of Services Marketing and the Service Industries Journal. She is also co-chair of SERVSIG. Roland Almqvist  is a professor at Stockholm Business School, Stockholm University. His research is mainly oriented to management control in the public sector, with a special focus on the outcomes of New Public Management in public sector organisations. His current research is focused on the next phase of management control in the public sector. Elena Anastasiadou  is a PhD candidate at Mälardalen University and in the Swedish Research School of Management and IT. She has a master’s degree in international marketing from Mälardalen University and is currently studying actor engagement in a sustainability context within business networks. Christoffer Andersson is a PhD candidate in the Department of Organization and Management at Mälardalen University. His research interest is in use of digital technology to automate work and how digital technology changes the way knowledge about work is produced. Ulf Andersson is a professor at Mälardalen University, an adjunct professor in BI Norwegian Business School and an elected fellow of the Academy of International Business. His research centres on multinational enterprise subsidiaries, external embeddedness, knowledge transfer, and power and network theory. He has published over 80 articles, books and book chapters on these issues.

xvi Contributors Charlotte Bäccman is an assistant professor of psychology in CTF (Service Research Centre), Karlstad University. Her research focuses on how digitalisation can assist behaviour changes to promote better health and well-being. Her interest spans from the individual level to societal and health care institutions. Izabelle Bäckström  is an assistant professor of industrial innovation and management at Lund University, Sweden. Her research interests include innovation management more generally and, particularly, non-R&D innovation and new forms of collaborative organisation of innovation in both private and public entities. Linda Bergkvist  is an assistant professor of information systems in the Karlstad Business School and CTF (Service Research Centre), Karlstad University. Her research focuses on digitalisation and special business developments based on information technology and implementation and adoption of digital technology. She has long experience in teaching, research and collaborations in the area of digitalisation. Magnus Berglind  is a PhD candidate at Mälardalen University and associated to the Swedish Research School of Management and IT. He has a master’s degree in industrial engineering and management from Linköping University and experience of business development in several multinational enterprises. He is currently conducting field studies focused on systemic sustainability transition from a multi-level perspective. Börje Bjelke, MD, PhD,  is a professor and specialist in geriatrics at Oslo University. His basic science training was in neuroscience and extracellular biochemical signal transduction. He has conducted research in the field of experimental brain damage and repair using MRI and nanotechnology. His clinical interest is in geriatrics and memory clinic activity. He held research positions at the Karolinska Institutet, the Robert Wood Johnson Med School, and Rutgers and Copenhagen Universities. His current research is on “Optimised Ageing.” Anton Borell  is a doctoral candidate in the Stockholm Business School, Stockholm University. His research interest is in management control in public sector settings, with a focus on the interplay among welfare, new public management and accounting in the public sector. Alan W. Brown is a professor in digital economy in the University of Exeter’s Business School. His research focuses on agile approaches to business transformation and the relationship between technology innovation and business innovation in today’s rapidly evolving digital economy. He has published five books and numerous papers on software engineering, systems design and digital business transformation. He appeared in the apolitical.co 2018 list of the world’s 100 most influential people in digital government.

Contributors  xvii Bendik Bygstad  is a sociologist and a professor in the Department of Informatics at the University of Oslo and is an adjunct professor in the Norwegian School of Economics. His main research interests are digital innovation, the relationship between information systems and organisational change, and critical realism as theory and method. Jason Crawford  is an assistant professor in the Department of Business Studies, Uppsala University. His research interests are enterprise risk management, strategy, management control and cognition. He is part of a European research network, involved in several research projects and was recently awarded the Wallander Scholarship for his research. Lucia Crevani  is an associate professor in business administration and is head of research in Industrial Economics and Organisation at Mälardalen University. Her research critically explores the sociomateriality of emerging processes of organising and leadership, to contribute to increased social justice and inclusion at work. Henrik Dellestrand was awarded his PhD degree from Uppsala University, Sweden, in 2010. Currently, he is an associate professor of international business in the Department of Business Studies, Uppsala University. He is interested in management issues in multinational enterprises, with a particular focus on headquarter–subsidiary relations. Todd Drennan is a PhD candidate at Mälardalen University and is enrolled in the Swedish Research School of Management and IT. He has a master’s degree in international marketing from Mälardalen University and currently studies the cross-border purchasing behaviour of consumers online, in relation to the internationalisation of small- and medium-sized enterprises. Susanne Durst is a professor of management and head of the Unit Organisation and Management in the Department of Business Administration at Tallinn University of Technology. Her research interests include small business management, knowledge (risk) management, innovation management and sustainable business development. Before joining academia, she worked with private enterprises. Cecilia Erixon  is an assistant professor at Mälardalen University and an alumnus of the Swedish Research School of Management and IT. Dr Erixon returned to academia after spending some time working in the software industry and since then she has been conducting research on the effects of information technology on business relationships, with a focus on the role played by information system providers in business networks. She collaborates frequently with regional business partners, and these projects have provided both theoretical insights and led to undergraduate courses in digital business development.

xviii Contributors Markus Fellesson  is an associate professor in business administration at Karlstad Business School and the Karlstad University Service Research Centre. His research investigates the development of service concepts and a strategic service perspective in organisations, industries and society. He has studied the consequences of this perspective for service work and customer behaviour. Cristina Ghita is a PhD candidate studying information systems in the Department of Informatics and Media at Uppsala University. Her research focuses on the points of convergence between users and technology, which result in digital disconnection practices. She is interested, also, in new materialism theoretical frameworks and every-day ethnographies of technology use. Edward Gillmore  is an assistant professor of strategy and director of the business administration bachelor’s programmes at Jonkoping International Business School. Before pursuing an academic career, he worked as a communications professional for several technology multinationals in Sweden and the UK. His research focuses on strategic practices and digitalisation transformation in multinational enterprises. Cecilia Gullberg is a senior lecturer in business administration at Södertörn University. Her research covers many facets of accounting, including both accounting per se and the social processes underlying the production and use of accounting. She is particularly interested in how digital technologies reshape the conditions for accounting and accountability. Anette Hallin  is a professor of organisation and management at Åbo Akademi University and Mälardalen University. She is the director of DIGMA, a six-year research programme focused on digitalisation of management. She has a long-standing interest in sustainable processes of organising, for example, managing cities, projects and change – particularly in the post-digital era. Matthias Holmstedt is a senior lecturer and head of accounting at Mälardalen University. His research focuses on business development and includes studies related to decision-making and accounting information. He was previously a financial manager and controller, and his teaching focuses on statistical analysis and management control. Caroline Ingvarsson  is a postdoctoral researcher, on a three-year research scholarship, and senior lecturer in organisation and management at Mälardalen University. She is interested in work organisation processes, specifically location-independent processes, in a post-digital era. Chris Ivory is a professor of technology and organisation in the Faculty of Business and Law at Anglia Ruskin University. He is also the director of the Innovation and Management Practice Research Centre (IMPact). His research focuses on sustainable futures in both work and technology.

Contributors  xix Fredrik Jeanson is a lecturer at Mälardalen University. He has studied professions related to management accounting and teaches management accounting, financial accounting and management control. He also works on internationalisation of both students’ and faculty exchanges in various management fields. Johan Klaassen is a doctoral candidate studying management at Stockholm Business School, Stockholm University. His research is on technology use in professional work. His forthcoming thesis is on digitalisation in school organisations and examines teachers’ work and how it is changing with the introduction of different types of digital technologies. Christian Kowalkowski is a professor of industrial marketing at Linköping University, Sweden. His research interests include service growth strategies, service innovation, business-to-business customer solutions and subscription business models. He is servitisation editor for the Journal of Service Management and an associate editor of the Journal of Services Marketing. Inti José Lammi is a postdoctoral researcher and senior lecturer in organisation and management at Mälardalen University. His research interest is in empirical and theoretical investigation of how work and managerial practices are reconfigured in a post-digital age. Göran Lindahl is a professor of architecture and civil engineering at Chalmers University of Technology, and is head of Division Building Design and director of the Centre for Healthcare Architecture. He has worked in both academia and public client organisations. His research focuses on design processes, facilities management and project management, often in a healthcare context. Olof Lindahl  was awarded his PhD from Uppsala University, Sweden, in 2015. He is an associate senior lecturer in international business in the Department of Business Studies, Uppsala University. His research revolves around the management of knowledge in multinational corporations, internationalisation and reshoring, and innovation and policy in the antibiotics industry. Eva Lindell  is a researcher and senior lecturer in business administration at Mälardalen University. Her research focuses mainly on the effects of digitalisation on the labour market with a particular interest in the flexibilisation of work. Jan Lindvall is an associate professor in the Department of Business Studies, Uppsala University. His research interests are in management, decision-making and business intelligence/analytics. He has extensive experience in these areas as a consultant and a public speaker, in both industry and the public sector.

xx Contributors Jan Löwstedt is a professor in the Stockholm Business School, Stockholm University, and co-founder of the Swedish Research School of Management and IT. He has been conducting international comparative research projects and has a special research interest in the processes of organisational change and the interplay between technology, people and organisations, and in work–life development. Peter Magnusson is chair professor at Karlstad University, Sweden, and is affiliated to the Service Research Centre. His research focuses on innovation management and servitisation. He has published in leading journals, including Journal of Product Innovation Management, Journal of Service Research and Journal of the Academy of Marketing Science. Noushan Memar is a lecturer at Mälardalen University and a PhD candidate in the Swedish Research School of Management and IT, and affiliated with the Nordic Research School of International Business. Before returning to the academy, she worked for a few years in marketing. Her research focuses on subsidiary management and mandating consequences in multinational enterprises. Fredrik Nilsson is a professor of business studies, especially accounting, at Uppsala University. He was previously a professor of economic information systems at Linköping University. He is also the chairman of the Swedish Research School of Management and IT. His research focuses on how different information systems (e.g., related to financial accounting, management control and production control) are designed and used in formulating and implementing strategies. Irina Popova is a lecturer in human resources management and organizational behaviour in the Faculty of Business and Law at Anglia Ruskin University. In 2017, after completing her PhD on start-up incubation, she joined the DIGMA project as a research fellow. She is interested in digital, wider organisational and personal transformation. Birger Rapp  is a professor emeritus in economic information systems at Linköping University. He helped found the Swedish Research School of Management and IT, and was its first dean. He is currently an acting professor at the Institute for Management of Innovation and Technology (IMIT), and his research focuses on information technology and change. Jimmie Röndell is an assistant professor of marketing and academic director of the international business studies programmes at Mälardalen University. His research focuses on actor roles, resource integration and value co-creation related to digitalisation and sustainability developments within service ecosystems. He previously studied the music and gaming industry and is currently engaged in research on smart buildings and their related services.

Contributors  xxi Emilia Rovira Nordman is an associate professor of international marketing at Mälardalen University and an affiliated research fellow at the Stockholm School of Economics. Her fields of specialisation include the effects of personal interaction on the internationalisation of small- and medium-sized enterprises and international new ventures. David Sörhammar is an associate professor of marketing at the Stockholm Business School. He currently supervises three PhD students enrolled in the Swedish Research School of Management and IT. His research interests include service innovation, co-creation and user innovations, and he is currently working on the interplay between digitalisation and servitisation. Martin Stojanov is a PhD candidate in information systems in the Department of Informatics and Media at Uppsala University. His research focuses on datafication in public health, and he has conducted empirical research on self-tracking and public health surveillance. Klas Sundberg  is a senior lecturer in business administration at Dalarna University, and director of the School of Education, Health and Social Studies, also at Dalarna University. His research focuses on management control and accounting in different contexts. Angelina Sundström is a senior lecturer at Mälardalen University. She is interested in accounting and product development-related issues, and her current research focuses on product deletion. She has also been involved in education research with a specific focus on gamification. Fredrik Svahn is an associate professor at the University of Gothenburg and researcher in the Swedish Centre for Digital Innovation. He has a background in industry and experience in the defence, telecommunications and automotive sectors. His research addresses digital innovation in incumbent firms, including studies of organisational capability, platform design, generativity and innovation strategy. Ann Svensson is an associate professor of information systems at University West, Sweden, and director of the Health Academy West. Her research focuses on digitalisation and business development and includes knowledge management, learning and collaboration, in both public healthcare organisations and private businesses. Fredrik Tell  is a professor and chair of business studies at Uppsala University. He is also deputy chairman of the Swedish Research School of Management and IT. His research involves strategic temporal work and the relationship between the future and the present, development of organisational knowledge and capabilities, intellectual property rights and markets for technology, digitalisation and changing organisational

xxii Contributors routines, temporary and distributed organisational forms in innovation and multinational management during change. Peter Thilenius  is a professor of business studies, especially international business, at Uppsala University, Sweden. His research interests are in business relationships at the intersection of various marketing and international business fields, with a special focus on the impact of information technologies on business in an industrial setting. Cecilia Thilenius Lindh is an associate professor of business administration at Mälardalen University. Her research focuses on the areas of industrial economics, marketing and digitalisation, especially the industry business relationships of business-to-business enterprises and e-commerce in international consumer markets. Steven Thompson  is a professor of management in the Robins School of Business at the University of Richmond. He conducts research on the value-creating potential of various forms of information technology and their related services in the areas of healthcare and the real estate sector. Claes Thorén  is an associate professor of information systems in the Department of Informatics and Media, Uppsala University, Sweden. His research primarily addresses the intersection between informatics and cultural studies, particularly with regard to digitalisation, and what constitutes a meaningful technological encounter for individuals, groups and organisations. Bård Tronvoll is a professor of marketing in Inland Norway University of Applied Sciences, and the CTF-Service Research Centre at Karlstad University, Sweden. His research interests include marketing theory, service innovation, customer complaining behaviour/service recovery and digital transformation/servitisation. Anna Uhlin  is a PhD candidate in the Department of Organization and Management at Mälardalen University. Her research interest is in the work organisation processes and practices and how inclusion is accomplished in contemporary work life. Kevin Walther is a PhD candidate in the Department of Business Studies at Uppsala University. Prior to starting his doctoral studies, he was working in the cloud computing and digital payments industry. His current research interests include internationalisation in a digital context and the video games industry. Jakob Westergren is a PhD candidate in international business in the Department of Business Studies at Uppsala University. His research interests include the impact of distance-based and technology-mediated work for actors such as boundary-spanners. He enjoys pondering on the role of philosophical pessimism in business studies.

Preface

Management and Information Technology after Digital Transformation is a book about the transformative effects and outcomes digitalisation has on organisations, markets and society. The chapters constituting the book offer different perspectives on digital transformation, in the intersection of management and information technology. This has been possible thanks to the great contributions and commitment from a large number of researchers. We, the editors of this volume, would like to extend our sincere gratitude to everyone who submitted a text in response to our call for chapters. Furthermore, we would like to thank all reviewers, who made sure that all chapters could benefit from constructive peer reviews. The team at Routledge – Guy Loft, Julia Pollacco and Matthew Ranscombe – offered a fantastic platform for these texts to reach the right audience and has guided us through the process. The book benefited from initial comments from several domain experts and received financial support from the Swedish Research School of Management and IT. We are very grateful for all this input and support helping this book to be published. Finally, we hope that you will find the chapters inspiring, challenging and rewarding to read. Peter Ekman Hallstahammar June 2021

Peter Dahlin Exeter June 2021

Christina Keller Lund June 2021

Foreword

It is winter in 2002 and one of us is on a bus, together with fellow supervisors and PhD students. We are on our way to the Gimo Mansion in northern Uppland. In 2000, the Swedish government granted funding to start the Swedish Research School of Management and IT. We feel like pioneers, embarking on a journey of discovery into partly unknown territory. The old and very traditional Gimo mansion provides a fitting contrast with the vibrant intersection between management and information technology we plan to study. Although the group is small, expectations are high that we will achieve a lot together. Almost 20 years later, memories of the conference in Gimo are remarkably clear, although much has changed. The leadership provided by Professors Lars Engwall (Chairman) and Birger Rapp (Dean) saw the school expand rapidly in its first ten years (Dahlin and Ekman 2012), a development that continued under the guidance of the Deans Professor Pär Ågerfalk and later Professor Christina Keller. Today, the school, hosted by Uppsala University, embraces 12 tertiary member-institutions that are located across Sweden. Since the inception of the school, and according to its latest annual report, 263 PhD students have been enrolled, including 83 current doctoral candidates. A total of 119 doctoral and 53 licentiate theses have been defended successfully (The Swedish Research School of Management and IT 2020). This background demonstrates that the longevity and success of the research school mirrors the general and favourable development of practice and research in the intersection between information technology and management. These developments are similarly very visible in the contributions to this edited volume. The editors’ efforts to combine contributions and authors that reflect current developments in the area of management and information technology are impressive. This edited collection includes 23 chapters and over 60 authors, many of whom have connections to the research school. The chapters discuss the latest findings in a field that – like the Swedish research school – has matured, but remain more vibrant and important than ever. In the following paragraphs, we reflect on some of these general developments and tendencies.

xxvi Foreword At the start of the new millennium, information technology seemed to promise new and significant improvements in the management of organisations. Some of these possible improvements had been discussed for a long time (see, for example, Haig 2001). We now know that not all of these expectations have been met. At the same time, we have seen unexpected developments in some areas that could not have been dreamt of two decades ago. Information technology has permeated society and has become such a natural part of everyday life that we sometimes overlook its existence. However, from time to time, we are reminded acutely about its importance, for example, if mail servers go down or if we are unable to log into and use a digitalised support system. We are also seeing, perhaps most visibly in social media, the force of information technology to create a sense of what is and is not true. It is fascinating, but perhaps, and more so, also terrifying. There are countless other examples of these developments, which reveal how information technology has changed our private and professional lives irreversibly. As clearly indicated by the contributions in this volume, there is great value in discussing the processes, effects and challenges associated with digital transformation. The force of digital transformation and its impact on society have led, also, to an increased need for researchers to specialise to remain at the knowledge frontier. The increasing sophistication of theories and empirical methods affect researchers’ publication strategies and create strong incentives for knowledge specialisation and formalisation of disciplines. These developments are not unique to the broad field of information technology and management; they are occurring in science more generally (Whitley 1984; Engwall and Hedmo 2016). However, in this particular context, there is a need to combine knowledge from several disciplines to achieve in-depth understanding of the processes, effects and implications related to the rapid development of advanced technical solutions and information technology applications. For example, the almost eternal question of how to coordinate knowledge and action in organisations continues to attract interest (Tell 2011). Some implications are discussed in this volume. Through an impressive breadth and depth of contributions, the book discusses knowledge and the challenges related to management using information technology, through a multitude of approaches. It provides new insights at the intersection between management and information technology. A long-term perspective on management and information technology, unsurprisingly, reveals that there is a continuing and strong interest in the effects of digital transformation, and we expect this interest to persist. The use of big data and especially artificial intelligence (AI) will likely drive this interest and these developments. Some observers are referring to the Fourth Industrial Revolution in relation to the societal and economy-wide upheaval envisaged (Schwab 2017; Li et al. 2021). Based on this, we foresee increased interest in the performativity of information technology, which will require careful theoretical analysis of the intersection between information

Foreword xxvii technology and relevant social practices and organisational routines. Although in academia information technology solutions have for long been considered major actors (Kjellberg and Sjögren 2020), the ontological status of these artefacts has evolved from being abstract to becoming more concrete. There is a need to study digital transformations from several perspectives; we consider the perspective of the intersection between management and information technology, adopted in this volume, to be especially promising. Finally, we want to express our sincere appreciation of the work undertaken by both the editors of and the contributors to this volume. It will undoubtedly attract a wide audience and make a significant contribution to the field of management and information technology. We are especially grateful to Professor Emeritus Lars Engwall, who was instrumental in establishing and developing the Swedish Research School of Management and IT. As Chair and Deputy Chair we have always appreciated his strong support for all our undertakings. We are delighted, therefore, that the editors have chosen to dedicate this book to Lars Engwall and, by doing so, to acknowledge his huge importance to the development of the research school and the field in Sweden and abroad. Fredrik Nilsson Professor of Business Studies, especially Accounting, Uppsala University Chairman of the Swedish Research School of Management and IT Fredrik Tell Professor of Business Studies, Uppsala University Deputy chairman of the Swedish Research School of Management and IT

References Dahlin, P. and Ekman, P. (eds) 2012. Management and Information Technology: Challenges for the Modern Organization. Routledge studies in innovation, organization and technology. New York: Routledge. Engwall, L. and Hedmo, T. 2016. The organizing of scientific fields: The case of corpus linguistics. European Review 24(4): 568–591. Haigh, T. 2001. Inventing information systems: The systems men and the computer, 1950–1968. The Business History Review 75(1): 15–61. Kjellberg, H. and Sjögren, E. 2020. Actor-network theory: Delight in the details. In Eriksson-Zetterquist, U., Hansson, M. and Nilsson, F. (eds). Theories and Perspectives in Business Administration. Lund: Studentlitteratur: 247–270. Li, D., Liang, Z., Tell, F. and Xue, L. 2021. Sectoral systems of innovation in the era of the fourth industrial revolution: An introduction to the Special Issue. Industrial and Corporate Change 30(1): 123–135. Schwab, K. 2017. The Fourth Industrial Revolution. London: Portfolio Penguin.

xxviii

Foreword

Tell, F. 2011. Knowledge integration and innovation: A survey of the literature. In Berggren, C., Bergek, A., Bengtsson, L. and Hobday, M. (eds). Knowledge Integration and Innovation: Critical Challenges Facing International TechnologyBased Firms. Oxford: Oxford University Press: 20–58. The Swedish Research School of Management and IT. 2020. Annual Report for the Academic Year 2019/2020. Uppsala: Uppsala University. Whitley, R. 1984. The Intellectual and Social Organization of the Sciences. Oxford: Oxford University Press.

1

Perspectives on management and information technology after digital transformation Peter Ekman, Peter Dahlin and Christina Keller

Information technology (IT) has had profound effects on people, organisations and society at large, and the solutions it brings have evolved from requiring specialist handling to being accessible to the majority of the population and being used regularly in everyday life. Over the decades, the spotlight has been on different forms of IT, which has developed from e-mail and the worldwide web being novelties at one point in time to the current frontier with artificial intelligence and big data. Views related to the effect of digitalisation on businesses range from a “silver bullet,” promising revolutionary results, to claims that digitalisation has had very little impact on business. For example, the article “Reengineering Work: Don’t Automate, Obliterate” by Michael Hammer, which was published in the Harvard Business Review in 1990, points out that efficient digitalisation is not just about letting IT automate existing routines. Rather, companies should use the capabilities offered by IT to transform their business processes. His article can be seen as an early contribution to the idea of Business Process Reengineering, which emphasises the enabling effects of digitalisation and was adopted by many organisations in the 1990s. Around the turn of the new century and following the financial crisis, many organisations became strongly cost-oriented and resulted in digitalisation being considered primarily as a cost rather than a strategic benefit and source of competitive advantage. For instance, Nicholas Carr’s (2003) article, entitled “IT Doesn’t Matter,” also published in the Harvard Business Review, argues that organisations should not seek to be IT leaders; rather, they should invest in already well-established IT solutions and adopt a “follow, don’t lead logic.” In the past few decades, we have witnessed consolidation of global IT firms, greater reliance on cloud solutions and virtualisation and increased sophistication of technologies being adopted and used in organisations. These changes can be described as the result of digital transformation. Digitalisation can be defined as “a sociotechnical process of applying digitising techniques to broader social and institutional contexts that render digital technologies infrastructural” (Tilson et al. 2010: 749). Legner et al. (2017: 301) distinguish between digitalisation and digitisation: “While digitization puts emphasis on digital technologies, the term digitalization has been DOI: 10.4324/9781003111245-1

2  Peter Ekman et al. coined to describe the manifold sociotechnical phenomena and processes of adopting and using these technologies in broader individual, organizational, and societal contexts.” Various forms of digitalisation have been steadily implemented since the global recession around the millennium. The importance of digitalisation has been underlined and the process has intensified during the Covid-19 pandemic, as a result of the restrictions on social interaction and travel (Financial Times 2020). Evidence of digitalisation can be seen almost everywhere, but its long-term effects remain difficult to fully grasp. It is not difficult to see that digitalisation has changed our everyday lives through the provision of new innovative services (Barrett et al. 2015), restructuring of both national and international infrastructures (e.g., the travel and banking industries; Sharma et al. 2020; Worthington and Welch 2011) and the opening up of education systems through massive open online courses (MOOCs; Martin 2012). How we interact with one another has changed due to the use of smartphones and social media (Alaimo et al. 2020), and smart homes are providing new opportunities for how we live and how society is structured (Shin et al. 2018). At the same time, digitalisation has changed the way organisations are structured (Baptista et al. 2020) and how professional activities are performed (Sennett 1999), and has promoted the development of new business models (Kavadias et al. 2016). While the effects of digitalisation on people and their homes are very evident, its effects on organisations can be less visible but are subject of much academic research. This book is a result of continuous research by and recurrent discussion among researchers active at the intersection of the management and information systems disciplines, who are interested in the effects of digitalisation on management practice and theory. Researchers have always been fascinated by new phenomena and have an ongoing interest in evidence of change. Organisations are in a state of constant flux – including incorporation of various IT – and this constant change needs to be acknowledged (Gaskin et al. 2014). In management-oriented research, cross-sectional studies as well as longitudinal studies are used to create an understanding of the history, the present and the future. The chapters in this edited collection are based on work conducted by over 60 researchers, who are jointly reflecting on and drawing insights from their ongoing research into the integration of management practices with IT, which is both a cause and an effect of digital transformation. Despite some outstanding progress, this transformation is far from complete. Therefore, rather than focusing on the process of digitalisation, our intention, in this book, is to highlight the opportunities and challenges that accompany or follow digital transformation. Regardless of whether digital transformation is seen as an enabler or a cost, its potential value and benefits depend on entrepreneurial and well-managed integration with the organisation and its goals. The chapters in this book work to condense the researchers’ insights into how digitalisation has changed, and is changing, organisations, their

Management after digital transformation  3 markets, and the society at large. Some chapters discuss what is causing organisations to lag in this development and why some would like to withdraw from the digitalised world. Taken together, the chapters in this book offer a smorgasbord of perspectives on and insights into the management of IT after digital transformation. They cover multiple industries and span across the individual, organisational and societal levels. They show that the digitalised landscape is no longer an unexplored territory but one that presents a variety of experiences, opportunities and challenges for individuals, organisations and societies. The book is organised into three sections, and the chapters in each section have a common theme. Each chapter is aimed at inspiring managerial thinking, providing insights into digitalisation and its potential transformative effects and suggesting directions for future research. The chapters in this book should be appreciated by professionals searching for a fresh perspective on managerial practices, MBA students working on their capstone projects and graduate students preparing for a career in the frontline of digital transformation. The chapters in this book do not need to be read sequentially; each is written as a stand-alone text. To emphasise the managerial perspective, each chapter concludes with a short takeaway section that summarises the implications. To start this collection of insightful texts, we invited Alan Brown, Professor in Digital Economy at the University of Exeter, to reflect on the challenges and opportunities organisations face through and after digital transformation. Chapter 2 “Digital transformation: towards a new perspective for large established organisations in a digital age” frames the topic in an excellent way and should make the reader well prepared for a continued dive into different perspectives on management and information technology after digital transformation. It is followed by three parts focusing on (1) the transformation of society and markets as a result of digitalisation, (2) managerial and organisational challenges related to digitalisation and (3) framing digitalisation.

1.1 Part 1 – The transformation of society and markets The section starts with Chapter 3 “Managing digital servitization: a service ecosystem perspective,” by David Sörhammar, Bård Tronvoll and Christian Kowalkowski. The authors suggest that digitalisation should be seen as taking place in ecosystems, which require firms to manage both weak and strong relationships with other actors. Thus, digitalisation affects value creation among stakeholders, which is best understood from a systemic perspective. Chapter 4 “Caught on the platform or jumping onto the digital train: challenges for industries lagging behind in digitalisation” is by Peter Ekman, Magnus Berglind and Steven Thompson and discusses the reasons why some industries are lagging in terms of digitalisation. Chapter 5 “Digitalisation for sustainability: conceptualisation, implications and future

4  Peter Ekman et al. research directions” by Elena Anastasiadou, Linda Alkire and Jimmie Röndell argues that digitalisation and sustainability should be linked in order to achieve the highest potential value and highest market transformation potential. Kevin Walther and David Sörhammar offer a retrospective odyssey through the gaming industry and discuss the close relationship between technological and business model innovations in Chapter 6 “Reaching new heights in the cloud: the digital transformation of the video games industry.” Chapters 7–9 suggest that the dominant view of labour in modern markets needs to be updated. Chapter 7 by Christoffer Andersson, Lucia Crevani, Anette Hallin, Caroline Ingvarsson, Chris Ivory, Inti Lammi, Eva Lindell, Irina Popova and Anna Uhlin is entitled “Hyper-Taylorism and third-order technologies: making sense of the transformation of work and management in a post-digital era.” Chapter 8 entitled “Why space is not enough: service innovation and service delivery in senior housing” is by Petter Ahlström, Göran Lindahl, Markus Fellesson, Börje Bjelke and Fredrik Nilsson and discusses how digitalisation allows seniors to become co-creators of their own well-being. In a similar context, Chapter 9 by Ann Svensson, Linda Bergkvist, Charlotte Bäccman and Susanne Durst, entitled “Challenges in implementing digital assistive technology in municipal healthcare” concludes Part 1 by discussing digitalisation in the context of healthcare.

1.2 Part 2 – Managerial and organisational challenges The second section elaborates on the managerial and organisational challenges that emerge after digital transformation. It is introduced by Klas Sundberg, Birger Rapp and Christina Keller in Chapter 10 “Modern project management: challenges for the future” where they argue about the need for new project management methods that can adapt to a situation of rapid technological change and flexibility. They discuss how traditional and more modern (agile) project management methods can be combined into hybrid methods, as a means to deal with the needs of contemporary digitalisation. Chapter 11 “Managing the paradoxes of digital product innovation” by Fredrik Svahn and Bendik Bygstad examines how product innovation practices must go hand in hand with digital innovation, which they concede is a difficult task. In Chapter 12 “When external reporting goes social: new conditions for transparency and accountability?” Cecilia Gullberg elaborates on how the characteristics of accounting, which, traditionally, have been periodic, holistic and historical, are changing to become continuous, fragmented and forward-looking. These changes are being promoted by use of social media which are having an effect on transparency and accountability. Chapter 13 “Robotic process automation and the accounting profession’s extinction prophecy,” written by Matthias Holmstedt, Fredrik Jeanson and Angelina Sundström, addresses the transformation of the accounting profession as the digital transformation progresses. Chapter 14 “Managing digital employee-driven innovation: the role of middle-level managers

Management after digital transformation  5 and ambidextrous leadership” by Izabelle Bäckström and Peter Magnusson analyses the factors for success or failure in the process of integrating idea management systems to deal with employee’s ideas about new products and services. In Chapter 15, “Digital gamification of organisational functions and emergent management practices,” Edward Gillmore presents the case of gamification whose introduction changed the managerial practices in an organisation. Part 2 concludes with Chapter 16 “Leveraging digital technologies in Enterprise Risk Management” by Jason Crawford and Jan Lindvall who argue that, by leveraging digital technologies to enhance risk computation, interpretation and coordination, enterprise risk management can play a valuable business partnering role in the organisations.

1.3 Part 3 – Framing digitalisation Part 3 includes chapters that discuss different ways to frame digitalisation and its transformative effects. It starts with Chapter 17 “The end of business intelligence and business analytics” by Matthias Holmstedt and Peter Dahlin, who discuss how the concepts of “business intelligence” and “business analytics” have become obsolete and are limiting organisations’ creation of value using analytics, after digital transformation. In Chapter 18 “‘Deleted User’: signalling digital disenchantment in the post- digital society,” Cristina Ghita, Claes Thorén and Martin Stojanov observe the “r/nosurf” community and derive some lessons related to how humans might react to the agency challenges raised by digitalisation. Henrik Dellestrand, Olof Lindahl and Jakob Westergren in Chapter 19 “The role of boundary-spanners in the post-digitalised multinational corporation” discuss the effects of digitalisation on the role played by individuals or units in multinational corporations that act as boundary-spanners and facilitate knowledge transfer within and beyond the organisation. Chapter 20 “The effect of digital transformation on subsidiary influence in the multinational enterprise” also focuses on international enterprises, and the chapter’s authors, Noushan Memar, Ulf Andersson, Peter Dahlin and Peter Ekman, continue the discussion on how digitalisation affects global organisations. In Chapter 21 “Understanding information system outsourcing in the digital transformation era: the business-relationship triad view” Cecilia Erixon and Peter Thilenius discuss information system outsourcing and why it is not enough to consider just the outsourcing firm and the information system provider. They propose a triad view, which includes other business partners, in order to understand the full effects of the outsourcing decision. Chapter 22 “Transforming the management/profession divide: the use of the red–green matrix in Swedish schools” by Anton Borell, Johan Klaassen, Roland Almqvist and Jan Löwstedt provide some insights from Swedish schools and an illustrative case that shows that digital transformation can have unintended consequences. Chapter 23 “Integrating research in master’s programs: developing students’ skills to embrace digitally

6

Peter Ekman et al.

transformed markets,” is the final chapter in this section in which Todd Drennan, Cecilia Thilenius Lindh and Emilia Rovira Nordman show how higher education can exploit the possibilities offered by digitalisation to enable student learning.

1.4 Concluding remarks For the engaged and curious reader, given the richness of the field and the potential exciting future developments, the chapters in this edited collection are likely to raise more questions than they answer. Although much of the research on which the chapters in this book are based was carried out before 2020, most texts were written during 2020, when the Covid-19 pandemic limited our ability to meet in person, discuss our ideas using whiteboards and gestures and to further our arguments in the ways that scholars have relied on for thousands of years. Instead, as has been the case for many projects, this work had to swiftly become a fully digital process, in which all the contributing authors could be involved equally regardless of their geographic location. This challenging period of the Covid-19 pandemic has resulted in many impressive examples of continuing and rapid digital transformation by individuals, organisations and societies. There is no doubt that, in the coming years, there will be a plethora of similar opportunities and challenges and further developments. Learning from experience and from the examples in this book, and challenging established ways of thinking and doing, will be key for successful management and information technology after digital transformation.

References Alaimo, C., Kallinikos, J. and Valderrama, E. 2020. Platforms as service ecosystems: Lessons from social media. Journal of Information Technology 35(1): 25–48. Baptista, J., Stein, M.K., Klein, S., Watson-Manheim, M.B. and Lee, J. 2020. Digital work and organisational transformation: Emergent digital/human work configurations in modern organisations. Journal of Strategic Information Systems 29(2): 1–10. Barrett, M., Davidson, E., Prabhu, J. and Vargo, S.L. 2015. Service innovation in the digital age: Key contributions and future directions. MIS Quarterly 39(1): 135–154. Carr, N. 2003. IT doesn’t matter. Harvard Business Review 81(5): 43–39. Financial Times. 2020. Pandemic boosts automation and robotics, 10 October. Retrieved from https://www.ft.com/content/358f6454-e9fd-47f3-a4b7-5f844668817f. Gaskin, J., Berente, N., Lyytinen, K. and Yoo, Y. 2014. Toward generalizable sociomaterial inquiry. MIS Quarterly 38(3): 849–872. Hammer, M. 1990. Reengineering work: Don’t automate, obliterate. Harvard Business Review 68(4): 104–112. Kavadias, S., Ladas, K. and Loch, C. 2016. The transformative business model. Harvard Business Review 94(10): 91–98.

Management after digital transformation

7

Legner, C., Eymann, T., Hess, T., Matt, C., Böhmann, T., Drews, P., Mädche, A., Urbach, N. and Ahlemann, F. 2017. Digitalization: Opportunity and challenge for the business and information systems engineering community. Business and Information Systems Engineering 59(4): 301–308. Martin, F.G. 2012. Will massive open online courses change how we teach? Communications of the ACM 55(8): 26–28. Sennett, R. 1999. The Corrosion of Character. New York: WW Norton Co. Sharma, A., Sharma, S. and Chaudhary, M. 2020. Are small travel agencies ready for digital marketing? Views of travel agency managers. Tourism Management 79, https://doi.org/10.1016/j.tourman.2020.104078. Shin, J., Park, Y. and Lee, D. 2018. Who will be smart home users? An analysis of adoption and diffusion of smart homes. Technological Forecasting and Social Change 134: 246–253. Tilson, D., Lyytinen, K. and Sørensen, C. 2010. Research commentary – Digital infrastructures: The missing IS research agenda. Information Systems Research 21(4): 748–759. Worthington, S. and Welch, P. 2011. Banking without the banks. The International Journal of Bank Marketing 29(2): 190–201.

2

Digital transformation Towards a new perspective for large established organisations in a digital age Alan W. Brown

For more than a decade, industry commentators have heralded the disruptive forces inherent in the use of digital technology. Yet, for many, particularly those working within or receiving services from large established organisations (LEOs), the impact has been much less dramatic. While traditional ways of working have been automated and digital channels of communication established, the fundamental processes and practices of most organisations have remained intact. Digital technologies have replaced manual tools in management and support activities, but few of these have had significant impact for the creators and consumers of services in large parts of our economy such as education, utilities, retail, professional services and the public sector. They have experienced substantial digitisation without commensurate digital transformation. Although corporate leaders have increasingly regarded digital transformation as essential to their future survival, delivering substantive change across established businesses and industries has been found to be expensive, complex and unpredictable. While commonly discussed in boardrooms, high-profile examples of failed businesses, such as Kodak, Blockbuster and Nokia, reveal a great deal about the difficulties involved in delivering organisational change in the face of digital disruption. Leaders in LEOs understand the need to take advantage of the constant flow of new digital technologies to automate complex, error-prone manual tasks, to shift their business towards online channels, to support the dynamic of collaborative virtual teams and to drive Information Technology (IT) departments to simplify operational tasks through cloud-hosted services (Brynjolfsson and McAfee 2016). However, they find themselves facing the “innovators dilemma” (Christensen 1997) of needing to maintain their existing business practices to satisfy their current clients and operating models while at the same time revolutionising what they do to deliver for a very different future. As a consequence, while the digital transformation of commerce and industry currently underway has the potential to revolutionise core elements of the organisation’s operating practices and business models, from how it serves customers to the nature of the products and services it provides, many internal and external pressures constrain such a strategy to something DOI: 10.4324/9781003111245-2

Digital transformation  9 much less radical. Most organisations find themselves trapped between the low-risk, short-term digital optimisation of today’s ways of working and the uncertainty that comes from redefining their strategies and operating models for a substantially different future state. Addressing this challenge is critical to their future and has been increasingly prioritised in senior leadership strategy. However, over the past 12 months the urgent need for a change of pace in this digital shift has become apparent. The Covid-19 pandemic has precipitated a mass transition to remote working and distributed operations, driven new approaches to supply chain agility and fostered rapid innovation techniques to bring solutions from idea to delivery in a few days. In all of these areas, digital technology has been recognised as instrumental in the response to and recovery from the shockwaves created by the pandemic (World Economic Forum 2020). Along with ensuring business continuity through uncertain times, a much broader and deeper transformation of society towards substantive digitally powered approaches has been unleashed. The response has been rapid with claims of several years of progress in meaningful transformation accomplished within just a few months (McKinsey 2020). In the absence of viable alternatives, businesses have adjusted to using digitally derived data to understand the rapidly evolving operating environment, reshaped working practices to support digital collaboration, created new online services to monitor product supply and delivery, rewritten employee and client contracts to support digital forms of engagement and much more. The way humans work, interact and view the world has been altered forever, with lasting impacts that go beyond simple conversion of manual tasks into online, digitised versions of their analogue processes. In many LEOs, the pandemic has forced open the doors to digital transformation that, previously, were resolutely closed. It is not surprising that this new sense of urgency is renewing the emphasis on digital transformation in every organisation. By building on earlier experiences, organisations are trying to accelerate the journey to a new operating model in which digital technology supports emerging practices that are better adapted to a post-pandemic business environment and are aligned more clearly with the societal values that the pandemic has created. The commonly heard rallying cry of “Building Back Better” implies more than a return to business as usual: it promises a digital future that is fairer, more sustainable and purposeful. In recognition of this context, this chapter considers digital transformation against the backdrop of the progress made over the past decade but reconsidered through a newly emerging post-pandemic lens. It offers a perspective on previous approaches to digital transformation by focusing on three key areas: •

The differing views and perspectives on digital transformation that form the context for organisational change activities;

10  Alan W. Brown • •

The challenges that LEOs undergoing digital transformation will face as they deliver substantive, meaningful change; The opportunities that will help digitally transformed organisations to succeed as they move beyond their current ways of working.

In much of this chapter, the primary focus is on LEOs. We believe that consideration of the role and impact of digital transformation in LEOs, where change is inhibited by their size, heritage, complexity and structure, provides some specific insights. While the observations and analysis we offer have broad applicability, LEOs form the primary reference point for this discussion and are used as illustrations throughout this chapter.

2.1 Understanding digital transformation From the earliest days of computing, there is a long history of use of digital technologies to support organisations’ operational tasks. Culminating in the IT revolution, from the 1970s onwards (Perez 2010), the need to digitise the workplace has been central to business strategy and investment. However, despite long-term interest in the transformative power of digital technologies, in practice, the fundamentals of digital transformation remain widely misunderstood with digital transformation used as an umbrella term to cover a seemingly endless collection of ideas (McQuivey 2013). The challenge for most organisations is finding ways to frame digital strategy discussions to enable a consistent, shared understanding of digital transformation to galvanise a broad constituency. From a practical perspective, the operational view of digital transformation emphasises adoption of digital technologies to replace manual tasks. For example, McKinsey’s global survey in 2015 highlighted that while “going digital is quickly becoming common practice, or at least a common mandate, at many companies,” it found that “most executives say their programs focus on strengthening the existing business” (McKinsey 2015). This global survey indicated, also, that most companies receive little value from these initiatives and struggle to understand and adapt digital technologies to complex, volatile environments. These findings were reinforced by a 2017 Gartner CEO survey, which concluded that, while CEOs are becoming better at understanding the benefits of a digital business strategy, many still align digital transformation with ongoing e-commerce and digital marketing programs rather than viewing it more generally, in terms of digital product design, service innovation or business model redesign, to take advantage of digital platforms and ecosystems (Gartner 2017). Academic studies of digital transformation further highlight the broad interpretation and diffuse focus adopted by organisations. For instance, a recent review (Vial 2019) identified 23 different definitions of digital

Digital transformation  11 transformation, across 28 published articles. In general, these definitions highlighted five common characteristics: • • • • •

Applying new digital technologies such as emerging 5G mobile communications, artificial intelligence, cloud-hosted services, blockchainmanaged transactions and connected devices via the Internet-of-Things; Allowing major business improvements by increasing the efficiency of existing business processes and enabling entirely new ones; Enhancing customer experience through more accessible and available online services; Streamlining operations by eliminating manual steps and replacing them with automation and using data to enhance predictive interventions; Creating new business model opportunities that encourage innovation in how value is created, managed, shared and maintained.

Each of these characteristics extends the way the term is applied. Therefore, in our research, we adopt a broad, intuitive definition that combines the diverse viewpoints encountered in both practical and academic studies: Digital transformation describes a broad set of activities aimed at improving efficiency, value, and outcomes in delivering sustainable change through the use of digital technologies for the benefit of business, organizations, individuals, and society. In addition to the scope of their digital transformation, organisations engaged in change programmes highlight specific actions and priorities in their approach. Existing studies and our own experience with organisations undergoing digital transformation reveal three clear traits in how they undertake their work which signal success: •

•

•

Strategy: They encourage an experimental approach to the adoption of digital technology, based on agile design and delivery principles. Work involving rapid iterations allows multidisciplinary teams to achieve desired outcomes based on frequent feedback from stakeholders and redirecting, as necessary, to ensure optimal results. Focus: They actively explore digital business model alternatives by investigating a variety of approaches to value creation, management and sharing. These business models frequently challenge current thinking by proposing innovative ways to meet client needs, monetise resources and scale up adoption rapidly. Mind-set: They assist their employees to become more change-ready in the face of digital disruption. While all organisations can be said to be in constant flux, digital transformation requires particular attention to shifts in working practices, decision-making and operations.

12  Alan W. Brown Finally, in common with all change, it is important to understand that radical reform requires perseverance. Efforts to deliver digital transformation programmes at most organisations require substantive, multifaceted approaches over long periods. They involve not only challenges related to redesigning the organisation’s operating and business models but also accomplishing these changes while the organisation, the digital technology and the business environment are rapidly evolving. This is not easy, and there is no single approach that fits every business. As a result, a programmatic, managed, multi-phased approach is generally adopted to ensure that everyone, across the organisations involved in the change, understands where to start, where to go next and how to align their digital transformation efforts.

2.2 The challenge The overwhelming feedback from industry reviews and analyses of digital transformation experiences highlights that the challenges faced range far beyond technology adoption issues (Tabrizi et al. 2019). Consequently, organisations engaged in digital change programmes are recognising that the technology is only one element in the complex set of issues that must be addressed to succeed in a digital world. In recently formed organisations, this recognition is pushing many towards new, wholly digital approaches, involving lightweight processes, minimal investment in capital assets and a flexible workforce. However, LEOs face a rather different set of challenges. Careful consideration needs to be given to the migration of existing investments in staff and equipment, revisions to well-understood operating procedures and roll-out of enhancements to support mechanisms for existing and new clients with diverging expectations about the products and services they consume. For LEOs, in particular, this involves accurate identification and development of the individual and organisational capacities required for successful change. Research suggests that a focus on technical capabilities is a vital part but is only one part of the solution. Leaders need to have a broader view of developmental needs within the digital ecosystem. For LEOs, a healthy transformation depends as much on human as on technological evolution. 2.2.1 LEOs – why size matters The past 20 years have seen an intense focus in all organisations on the opportunities and challenges related to the use of digital technology. This has changed how these organisations operate to automate and accelerate dayto-day activities; provided new insights into what the organisations know about their products and services, in production and in use; and, often, has revolutionised the nature of the products and services they deliver to make them more virtual, personalised and responsive.

Digital transformation  13 In many cases, the toll on the organisation undergoing this transition is heavy. In the case of LEOs, several critical tensions have built up – to the point that a rethinking of their ongoing digital transformation has become central to their strategy and their success. LEOs are rife with technology-led change initiatives, agile delivery squads, experiments with new business models, piloting of cloud-based services and much more. Yet current studies confirm that executives in LEOs remain confused about how to bring these activities together, at scale, to achieve meaningful results. In practice, LEOs are experiencing a growing gap between state-of-the-art use of digital approaches in small silos and a predominant state-of-the-practice across large parts of the organisation. This gap is threatening the organisation’s sustainability in markets that are being redefined by faster-moving competitors. Beyond digitising their current products and practices, LEOs need to address several critical questions: • • • •

How to direct their digital transformation efforts to deliver greater value while adapting to demands for greater responsibility and sustainability in the delivery and use of existing products and services; When to compete in evolving markets where sharing and cooperation within ecosystems may be a better strategy than directly challenging market entrants; Where to prioritise the drive for greater efficiency in current working practices through automation, without dehumanising the workplace; How to deliver effective leadership for a new workforce generation and engender flexibility and agility to ensure employees feel engaged, included and supported.

Addressing these questions is not just a problem for the individual organisation; it has repercussions for all industries and the whole economy. For example, in the UK, LEOs (i.e., firms with over 250 employees) are responsible for over 60% of employment. LEOs include government agencies responsible for national institutions and national infrastructure and third sector groups that play a critical role in maintaining the UK’s social fabric. Across these organisations, application and use of digital technologies is forcing a reskilling of the workforce, threatening the sustainability of existing business models and creating a vastly different competitive landscape for new market entrants. The wide-ranging implications of these changes are evident in legal activities, such as the UK Digital Economy Bill (UK Government 2017), taxation debates in both the USA and Europe (Sweney 2020) and the growing unrest about the future implications for employment (Press 2019). As a result, there are several related concerns that LEOs must address. First, to accelerate the digital transformation, they need to understand the relationship between technology innovation and business model innovation. The move away from current value models, which emphasise traditional

14  Alan W. Brown approaches to product ownership and use, is providing opportunities for LEOs to create knowledge frameworks and strategies that highlight the business impact of digital technology. Emerging digitally inspired approaches are increasing the focus on responsible and sustainable techniques, allowing for shared ownership of assets, usage-based pricing models and mutually beneficial outcomes from product and service deployment. The impacts of these approaches are particularly relevant in the manufacturing, health, retail and insurance sectors. Second, LEOs need to focus on consistency across large parts of their diverse business portfolio. Managing internal tensions across different parts of the organisation is distracting and costly. Standardisation is particularly important in infrastructural areas where cross-cutting concerns require alignment between product and service delivery to ensure uniform and systematic application across the digital landscape and across multiple domains. Advances in connected devices, 5G and big data, along with understanding and addressing security and privacy issues, are particularly critical to organisational success. Third, at the personal level, digital technologies have a major impact on the individuals in the workplace. The automation of manual tasks has changed the nature of work for many. An organisation’s success requires new worker skills that emphasise use of digital technologies to ensure fast-paced adaptability, decision-making agility and collaborative problem-solving. Furthermore, for many workers, the boundaries between work, home and leisure activities have become blurred. All of these changes are placing additional stress on many aspects of employees’ lives and are changing the employer–employee relationship and raising significant questions about the individual’s role in the workplace. While many employees are embracing the opportunities and freedom enabled by digital transformation, for others it is confusing. Organisational resilience and sustainability are being interpreted more widely and seen as including consideration of how to build a high-performing workforce while undergoing radical changes to working practices over extended periods of time. 2.2.2 Digital dilemmas Meaningful transformation, at scale, involves a wide range of activities at all levels of the organisation. Work with LEOs, over the past few years, to explore their digital transformation experiences has highlighted three high-impact digital transformation dilemmas, each of which demands significant attention. The first dilemma that LEOs face is related to a shift from digitising current ways of working to broad adoption of new approaches optimised for digital products and services. As the “digital maturity” of organisations increases, we are seeing the emergence of a much more complex and subtle dynamics. Current change management processes are being disrupted by

Digital transformation  15 greater agility and flexibility and accelerated feedback from all stakeholders, enabled by the digital era. The second dilemma is caused by the fact that much of the existing research downplays the importance of organisational and cultural inhibitors to change and, particularly, in the context of LEOs where embedded structures and deep-rooted practices hinder change and limit the impact that disruptive ideas can have beyond their originators. The experience of leaders in LEOs highlights the need to address the broader cross-domain themes impeding their digital transformation – both in theory and in practice. Similarly, many organisations have been affected by the speed at which digital disruption is changing organisational boundaries and emphasising the importance of considering business ecosystems in LEOs’ strategies. Business ecosystems are emergent alliances of organisations with no predetermined, centralised or hierarchical governance models, which work together to create and capture value and share it with their customers. These collaborative systems play an important role in LEO success but are undervalued by many LEOs. The third dilemma is related to the increased need for LEOs to understand the fundamental paradox between rapid deployment of emerging digital technologies to improve working life and the increased volatility, uncertainty, complexity and ambiguity that accompanies these developments. Much of the current focus in LEOs is on understanding responsible approaches to innovation that reduce individual stress, provide individuals with greater agency over their personal identity and data and highlight where trust relationships are being eroded and manipulated within and across firms and between the firm and the individual. Recent experience shows a new emphasis on sustainability – of the environment, of people and of business approaches. 2.2.3 Beyond digital products and services Much of the focus on the adoption of digital technologies is on product and service delivery. In production-oriented environments, digital technologies are becoming critical to how products are created, manufactured, tested and distributed. However, the adoption of digital technologies has been shown to have more widespread effects on business and society. The emergence of digital technologies is triggering dramatic changes to the nature and structure of many previously established working practices. Common experience highlights that exploiting an extensive range of digital technologies in the workplace is allowing organisations to become more flexible in their hiring, role definition, workforce development and decisionmaking processes. For both individuals and teams, increased digitisation has revolutionised communication, collaboration and creativity and reshaped what individuals do, how they spend their time and where they focus their skills and capabilities.

16  Alan W. Brown Consequently, deployment of digital technology has opened new possibilities. For most organisations, use of digital technology is not new and the implications of digital technology adoption are evident in primarily three areas: • • •

Driving operational efficiencies through increased automation of business processes to streamline routine activities; Connecting multiple stakeholders in business ecosystems to encourage cooperative approaches to information sharing and new value creation; Increasing transparency within and across business silos to redefine roles and responsibilities for the delivery of products and services.

The dynamics of digital business transformation is demanding a different approach from the classic change management methods, traditionally aimed at moving the organisation from one steady state to another steady state (Kotter 2014). In contrast, digital transformation takes place in a context of significant volatility, uncertainty, complexity and ambiguity. Speed, agility and experimentation are highly prized during rapid change and, perhaps, never more so than today.

2.3 What matters now There is little doubt that the Covid-19 pandemic has changed aspects of our view of the world quite substantially, and, in many respects, the world will not revert to how it was before. If this crisis has taught us anything, it has emphasised that the “great dispersion” induced by the pandemic, as characterised by Scott Galloway (2020), means that remote working, agile supply chains and distributed service delivery are here to stay. Previous notions of what was stable and could be relied upon have broken down. LEOs and their operating structures were not designed to cope with the uncertainty brought by the pandemic. The extraordinary ability, demonstrated by the majority of LEOs, to evolve rapidly and to continue to operate, has been seen as huge success by those advocating adoption of new ways of working powered by digital technologies (Fitzpatrick et al. 2020). As a result, many of the objections and misunderstandings that were hindering digital transformation were found to dissolve. Digital transformation initiatives have been accelerated to ensure business continuity, keep employees and clients connected and manage distributed, diverse activities without the need to travel. Digitisation and digital delivery are at the forefront of the discussions and plans in all organisations, during 2021 and beyond. However, more fundamental to digital transformation, the pandemic that started in 2020 has forced a recalibration of at least three key areas: •

Risk. Many monitoring and assessment scenarios regarded remote, Internet- connected digital technologies as unproven and a major source of risk. However, they are now seen as an essential part of risk mitigation

Digital transformation  17

•

•

strategies in times of turbulence. For example, in the case of elderly care, anyone considering a carehome, long-stay residence or home help will ask about digital remote sensing support and automated interventions. This digital support is not optional; it has become essential for survival. In many cases, the risks of not using digital technologies are much higher than the move to a less familiar digital-first approach. Trust. We are not only seeing that our trust in various norms and institutions has been misplaced, many are also questioning whom to trust over the things they value most: health, family, businesses, the economy, and so on. Many more are worrying that their trust is being manipulated at the individual, group and societal level. Somewhat confusingly, the digital world both increases the ease and speed with which this happens and helps us to see through it by democratising our ability to find more information and to find out how third parties are using our personal information. For many people, this has been a wake-up call and led to demands for business leaders to have greater skills and knowledge about how to find, assess and act quickly on volatile, conflicting digitally derived data. Beyond the previous focus on the mechanics of data privacy via the UK General Data Protection Regulation and other rules, businesses are realising the importance of business ethics and their role in decision-making, and the importance of building on this newfound understanding as they move forward. Value. A critical open question is: what will people value when the pandemic is over? This has been addressed by leading academics (Mazzucato 2017) and by the former governor of the Bank of England, Mark Carney, in his 2020 Reith Lectures (Reith Lectures 2020). One issue is to decide which data we value and how we use them to make better decisions. Many are understanding, for the first time, the huge impact of digital technology in reshaping our thinking about the role and influence of up-to-date, accurate information, from many sources, and the real-time decision-making that these data support. Never has the phrase “information is power” been more potent than it is today. In addition, there is increasing scrutiny of who should be allowed to monetise our data and with what consequences. Fears have been growing about the extensive storage of personal data and their use by large companies. Will these fears now be subsumed by increased pressure to use digital data to support personalisation of services, allow agile redesign processes on the fly and increase individual accountability for behaviour? The implications for businesses are and will continue to be substantial.

2.4 Takeaway Organisations face many challenges as they seek to reinvent themselves to compete in an increasingly digital world. The introduction of digital technologies across organisations opens opportunities to design new kinds of

18

Alan W. Brown

products and services, produce them using optimised processes, deliver them in new ways, obtain fresh insights into their impact in use and build more intimate relationships with consumers. However, as highlighted in this chapter, successful digital transformation requires attention to several areas: (i) creating a narrative that is meaningful to the whole organisation, which emphasises why change is essential and engenders support from key constituencies for a maintained focus on digital transformation; (ii) establishing an appropriate alignment between technology-led pressures to digitise existing practices and business-led pressures to design new business models to support new ways of working; (iii) encouraging meaningful dialogue about the organisation’s role in a post-pandemic world and its responses to new sets of values that prioritise responsibility, resilience and sustainability for the benefit of all. How each organisation addresses these areas will determine their success in exploiting the opportunities and dealing with the challenges imposed by a digital world.

Acknowledgement This work was partially supported by UK Research Grant: EP/T022566/21.

References Brynjolfsson, E. and McAfee, A. 2016. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W.W. Norton and Co. Christensen, C. 1997. The Innovator’s Dilemma. Boston, MA: HBR Press. Fitzpatrick, M. et al. 2020. The digital-led recovery from COVID-10: Five questions for CEOs. McKinsey Digital, 20 April. Retrieved from https://www.mckinsey. com/business-functions/mckinsey-digital/our-insights/the-digital-led-recoveryfrom-covid-19-five-questions-for-ceos [Accessed January 18, 2021]. Galloway, S. 2020. Post Corona: From Crisis to Opportunity. London: Bantam Press. Gartner. 2017. Gartner survey shows 42 percent of CEOs have begun digital business transformation. Gartner Press Release. April 24. Kotter, J. 2014. XLR8: Building Strategic Agility for a Faster Moving World. Boston, MA: HBR Press. Mazzucato, M. 2017. The Value of Everything: Making and Taking in the Global Economy. London: Penguin Books. McKinsey. 2015. Cracking the digital code. Retrieved from http://www.mckinsey. com/business-functions/digital-mckinsey/our-insights/cracking-the-digital-code, McKinsey, September 2015. [Accessed January 18, 2021]. McKinsey. 2020. How Covid-19 has pushed companies over the technology tipping point. Retrieved from https://www.mckinsey.com/business-functions/ strateg y-and- cor porate-f inance/our-insights/how- covid-19-has-pushedcompanies-over-the-technology-tipping-point-and-transformed-business-forever [Accessed January 18, 2021]. McQuivey, J. 2013. Digital Disruption: Unleashing the Next Wave of Innovation. Amazon Publishing.

Digital transformation

19

Perez, C. 2010. Technological Revolutions and Financial Capital. Cheltenham: Edward Elgar. Press, G. 2019. Is AI going to be a jobs killer? Forbes, July 15, 2019. Retrieved from https://www.forbes.com/sites/gilpress/2019/07/15/is-ai-going-to-be-a-jobs-killernew-reports-about-the-future-of-work/ [Accessed January 18, 2021]. Reith Lectures. 2020. The Reith Lectures with Mark Carney. BBC. Retrieved from https://www.bbc.co.uk/programmes/b00729d9 [Accessed January 18, 2021]. Sweney, M. 2020. UK and Europe renew calls for global digital tax as US quits talks. The Guardian, June 18. Retrieved from https://www.theguardian.com/ media/2020/jun/18/uk-europe-global-digital-tax-us-quits-talks-tech [Accessed January 18, 2021]. Tabrizi, B., Lam, E., Girard, K. and Irvin, V. 2019. Digital transformation is not about technology. Harvard Business Review. Retrieved from https://hbr. org/2019/03/digital-transformation-is-not-about-technology [Accessed January 18, 2021]. UK Government. 2017. UK. Government, Digital Economy Bill Overview. January 2017. Retrieved from https://www.gov.uk/government/publications/digitaleconomy-bill-overview [Accessed January 18, 2021]. Vial, G. 2019. Understanding digital transformation: A review and a research agenda. Journal of Strategic Information Systems 28(2): 118–144. World Economic Forum. 2020. COVID-19: How Digital Investments Can Help the Recovery. Retrieved from https://www.weforum.org/agenda/2020/04/covid19-digital-foreign-direct-investment-economic-recovery/ [Accessed January 18, 2021].

Part 1

The transformation of society and markets

3

Managing digital servitization A service ecosystem perspective David Sörhammar, Bård Tronvoll and Christian Kowalkowski

A decade ago, the strategic focus of many incumbent industrial firms was a transition towards servitization; a change from a product-centric to a service-based business model. However, instead, it is digitalisation that is driving current business development and business transformations, which has resulted in many incumbents making major strategic investments in artificial intelligence and cloud-based platforms, for example. A frequent problem is that, despite all this investment, these digital solutions often do not meet management’s expectations. This is exemplified by General Electric’s (GE) problems with Predix, its digital platform. The initiative was touted as a revolutionary driving force for Industry 4.0. According to GE’s previous CEO, the initiative would make them one of the top ten software companies by 2020. Instead, the multibillion investment failed due to various factors, such as technical complexity and organisational resistance, which forced GE to spin it off. This highlights the difficulties that can be experienced by an incumbent industrial firm when implementing digital technology. Nevertheless, in most industries across the world interest in “going digital” has intensified. The expectation is often of a single supplier that will be the central systems integrator and integrate products and services into a single unifying digital interface and link it to multiple actors through weak and strong relationships. Whether this depends on whether the company is an established manufacturer or a software company that is new to the industry is often unclear. Many incumbent firms fear that one of the digital giants, such as Amazon, will enter their market, become central and reshape the market. However, one of the consequences of incorporating increasingly advanced digital technologies is convergence among previously distinct industries. Traditional industrial boundaries become blurred, and new value configurations emerge, which changes market positions. For example, the leading international maritime industry standardisation organisation responsible for annual inspections, with which all vessels either at sea or in dry-dock are required to comply, recently launched its own predictive maintenance digital service solution. DOI: 10.4324/9781003111245-3

24  David Sörhammar et al. What is clear is that many firms have no clear roadmap or goals related to their digital journey. In their efforts to go digital, many companies place too big a focus on new digital initiatives without understanding what their benefits will be for their customers. Instead of creating compelling offerings, based on improved customer performance, companies are providing services free of charge, hoping that the customer will recognise the value of these digital services and be willing to pay for them. Such a technologycentric approach creates problems. As the installed base grows, so does the cost of collecting, storing and managing the incoming data. It becomes increasingly difficult to defend this business model if it is not compensated by increases in sales of services. Providing the service free of charge reduces the perceived value of the service, which makes it difficult to persuade the customer to pay for it when, previously, it was free. Also, most customers lack the time and ability to interpret and act on the information, which results in many free services going unused. An important aspect of digitalisation is that it produces data, which many argue is “the new oil.” Like oil, data are a resource that can be utilised, for example, for automation, artificial intelligence and predictive analysis. In order to master this new “natural resource,” we argue that incumbent firms must manage digitalisation and servitization. Thus, digitalisation and servitization should be considered two sides of the same coin of digital servitization. In this chapter, we argue that, in the absence of a clear management focus on how data will create value for customers, an incumbent firm’s digital servitization journey will fail. We also argue that this journey goes beyond the individual firm and encompasses integrating resources among actors embedded within larger structures that form part of the service ecosystem (Vargo and Lusch 2016). Here, we stress the managerial need to enable established “analogue” business relationships to migrate to digital solutions and not to focus only on establishing new business relationships. This chapter shows how incumbent firms’ digital servitization journeys are enabled and hindered by the service ecosystem in which they are embedded, through a network of established and new or somewhat weak business relationships. We build especially on three published papers (Sklyar et al. 2019a, 2019b; Tronvoll et al. 2020) and argue that digital servitization requires the firm to adjust its resource integration pattern, consisting of a combination of strong and weak business relationships. Too strong a focus on creating new links to digital actors, such as platform providers, and cutting links to previously important suppliers, can be disastrous. Finally, we argue that digitisation requires firms to become more, not less, customer-centric than previously. A better understanding of these aspects would both benefit individual firms and increase the competitiveness of a network consisting of strong and weak relationships more generally.

Managing digital servitization  25

3.1 What is digital servitization? In the business world and business studies, there is a growing emphasis on digitisation, which, essentially, means transforming analogue into digital, for example, when the music industry changed from selling long-playing records to selling CDs. Currently, it would be difficult to find any firm that had no digital presence. This is resulting in digitisation rapidly becoming commoditised. To succeed in the market, firms must master digitalisation, which is significantly broader than the activities that convert analogue to digital and includes the sociotechnical structures and processes that accompany digitisation (Lusch and Nambisan 2015). Digital servitization, as in utilisation of digital technologies for the transformational processes involved in changing a product-centric to a service-centric business model, provides new digital opportunities (Sklyar et al. 2019b). Acquisition of data, such as customer insights, is a necessary but not sufficient condition for digital servitization. Data are an enabler allowing firms to make major business improvements by finding new ways to provide value-creating and revenue-generating opportunities by co-creating new (digitalised) service offerings to their customers; from back-office efficiency to reconfigured production, distribution and service operations (Sklyar et al. 2019b). Data also allow firms to compete in increasingly complex markets.

3.2 Towards digital servitization Our research shows (Sklyar et al. 2019a, 2019b; Tronvoll et al. 2020) that, to enable a transition towards digital servitization, an incumbent firm must address and overcome internal and external resistance. Internal resistance may be related to fears about a competency trap. To harness the potential of digital servitization, the firm requires new competencies, which, in turn, may require the recruitment of new data-savvy employees. This can lead to a distinction between traditional service employees with contextual skills and competencies and new employees with technical competencies. There is a danger that management will come to rely too heavily on technical skills and downplay contextual skills. This can create fears about unemployment among employees with contextual skills, which can feed resistance within the organisation. For example, if an engineering/mechanical-driven company with long-standing industry skills begins to recruit data analysts with statistical skills, the loss of contextual knowledge can reduce the firm’s ability to deliver services. The transition towards digital servitization requires a combination of technical and contextual skills; neither type, on its own, is enough. Another source of internal resistance is the different sales focus. Traditionally, incumbent firms formulate budgets and annual sales targets based on sales of physical goods such as a paper mill or aircraft engines. For example, they sell services as additions to these physical goods in the form of

26  David Sörhammar et al. maintenance or spare parts. A digital servitization focus reverses the roles of goods and services. The objective becomes to sell service contracts, related to predictive maintenance or uptime. These contracts may include relevant machines. This changes the revenue stream from a majority of upfront payments from the sale of machines, to a steady revenue stream spread over a number of years. The change from products to services can produce internal resistance from sales representatives who can foresee their changing annual reward structures. Another source of resistance comes from the change of focus from hardware to software in R&D departments. In Tronvoll et al.’s (2020) study, the firm had to rewrite job descriptions and change the job locations of numerous employees in order to manage the internal resistance. This might be considered an extreme example, but the firm’s management believed that the adjustment towards digital servitization required such a radical change.

3.3 Service ecosystem perspective on digital servitization Data on customers’ use (e.g., actual usage of an engine) are essential for creating new digital servitized offerings. To create and deliver digital servitization offerings, such as remote monitoring and software customisation, means that machines, technologies and other resources, previously considered operand resources (traditionally considered physical resources such as natural resources, which cannot act on their own but are perceived as facilitators or enablers), are increasingly capable of adjusting to their environment as operant resources (traditionally considered to be human resources able to take the initiative and act on their own) in value creation (Akaka and Vargo 2014). From this perspective, data become a resource when they are exchanged, integrated and used by any number of actors within a remote service offering. At the same time, digital technologies have become smarter, incorporate more human-like capabilities and, increasingly, are able to act without human intervention (Maglio and Lim 2018). Considering technology as an operant resource allows the incumbent firm to extend its ability to reconfigure its resources to integrate into their service offerings, for example, information technology’s capacity to enable and facilitate knowledge sharing and coordination (Nambisan 2013). Traditionally, many incumbent firms are organised in silos, with each department responsible for its own budget. Here, we argue that data, which are harvested and stored in a cloud and not used, are a cost rather than a resource, because their value emerges only in their use. Compared to other types of resources, data can be reused and spread without losing their value; in fact, paradoxically, they gain in value from being used by many. To reap the benefits of digital servitization involves recognising that the marginal cost of making already-collected data available to other internal and external actors is close to zero. Gaining value out of data, thereby enabling the transition to digital servitization, requires breaking the silo mentality

Managing digital servitization  27 within an organisation and enabling other departments to use already collected data. It shows, also, that this transition process must permeate the whole firm and beyond. Digital servitization entails boundary-spanning activities, such as collaboration with internal and external actors (customers, data cloud suppliers etc.), in order to create digital service offerings. A fruitful context and unit of analysis for digital servitization become the service ecosystem, which offers a multi-actor, systems view of value co-creation, emphasising the integration of resources. A service ecosystem can be defined as a “relatively self-contained, self-adjusting system of resource integrating actors connected by shared institutional arrangements and mutual value creation through service exchange” (Lusch and Vargo 2016: 161). This perspective adopts a systemic, dynamic and contextual understanding of resources and their use, in which the value of a resource depends on how it is integrated with other resources and on how that integration is perceived by the beneficiary (Tronvoll 2017). To sustain an ecosystem over time requires the actors to give permission for the integration of resources through exchanges. Each time an actor integrates resources, it is likely to learn, which makes each iteration slightly different. Thus, resource integration involves incremental changes to the involved actors and their perception of operand and operant resources (Kowalkowski et al. 2012); these changes can be understood as structural adjustments (Evans 1989), which render the ecosystem self-adjusting. However, radical changes are a more direct concern for incumbent firms seeking to adjust resource integration patterns in the service ecosystem towards digital servitization. Resource integration is not accidental; rather, institutions coordinate how resources are integrated (Edvardsson et al. 2014) by specifying “the rules of the game” (North 1990: 4). An institution is “any structure or mechanism of social order and cooperation governing the behavior of a set of individuals within a given human community” (Miller 2014: 514). The role of institutions, then, is to provide guidelines for action and to prohibit or constrain certain activities and interactions among the engaged actors. Institutions rarely act in isolation but tend to operate as nested and interrelated sets of institutions (institutional arrangements) that govern the actors (Lawrence and Suddaby 2006), by, for instance, constraining and enabling resource integration. Institutional arrangements are manifested through both formal constraints, such as rules and laws, and informal constraints, such as norms and conventions. An understanding of the institutional rules provides a holistic understanding of how resource integration is coordinated in a service ecosystem. For an incumbent firm’s ability to adjust the needed resource integrations towards digital servitization, the service ecosystem’s institutionalised rules may prohibit change or blind the actors to potential new ways to co-create value from the new or altered resources. To enable this requires adjustments to the institutional arrangements for exchange. However,

28  David Sörhammar et al. a shift in the underlying rules of the system can be problematic for any firm and almost impossible for the individual firm. It requires alterations to long-standing business relationships and might also necessitate new relationships. Understanding these aspects is critical for understanding the complexity of the transition towards digital servitization in service ecosystems, since the structure drives the behaviours within the system, and any shift in the system’s underlying rules can provide significant leverage for change. All business activities in a service ecosystem are linked through a process of resource integration between some long-standing business relationships and some newer or weaker business relationships. The long-standing business relationships are based on a continuous exchange between the same actors relevant to both parties. Over time, the actors learn to utilise the heterogeneous resources of the other more effectively and more efficiently. On the positive side, these repeated activities foster trust, enabling the firms to adapt their internal processes and routines to better match the other’s resources. The more they are required to adapt, the stronger the ties between the actors (Granovetter 1973). Here incumbent firms are likely to encounter a paradox in their pursuit of digital servitization; resource integrations that resulted in success in the traditional domain may become “core rigidities” (Leonard-Barton 1992) that work to constrain this transformation. This is the negative side to strong ties. They become institutionalised rules that determine which resources it would be valuable to integrate and how best to integrate them, which can obstruct or create resistance, leading to “incumbent inertia” (Lieberman and Montgomery 1988) related to technology-driven change. This incumbent inertia inevitably constrains structural opportunities such as the transformation towards digital servitization. Newer business relationships and relationships involving a low level of activity are seen as having only a minor influence on the firm’s business activities. These relationships take the form of weak ties between the actors (Granovetter 1973). It is by integrating potential resources, in the absence of predefined institutionalised arrangements regarding how they should be integrated and their value, that firms can learn new ways to combine or unbundle and re-bundle (Normann 2001) these potential resources into new resource integration patterns. Thus, weak ties are important for enabling more radical change related to establishing a new exchange relationship with internal or external suppliers, customers or other stakeholders. All resource integrations within a service ecosystem occur between strongly or weakly connected actors, within a network where all the actors are linked to a number of strong and weak resource-integrating actors. This means that all the actors in the ecosystem are dependent on the resources controlled by other actors – both for their own strategic benefit and for the viability of the ecosystem as a whole. Taken together, these strong and weak ties form resource-integrating patterns in the service ecosystem,

Managing digital servitization  29 and, in turn, these patterns enable the formation of the institutional arrangements, which facilitate and coordinate resource access and create behaviours. The firm can adjust the institutional arrangements towards digital servitization by changing the strength of its resource integration relationships.

3.4 Managing a transition towards digital servitization An important aspect of digital servitization is that its execution requires more actors than the individual firm. For example, remote monitoring of internal and external product conditions requires user data to be fed into the firm’s service operation. This, in turn, often requires the firm forging relationships with actors new to the industry. Research shows several new forms of collaboration, including partnerships with data cloud and digital platform suppliers (Sklyar et al. 2019a). An incumbent firm also has numerous well-established relationships with suppliers and customers. Suppliers that previously had a low impact on service delivery might now become more important, and vice versa. This might be due to data analysis of customers’ machine usage that reveals that a tiny and standardised part decreases its life significantly. Then, modification to that specific part would be beneficial for all suppliers. However, asking a strongly or weakly linked supplier to undertake product development that will lead to lower sales of its product is likely to be met with some resistance. The solution might be that the firm and the supplier embark on a joint R&D project to resolve the issue. It can be seen that every change to the strength of a specific relationship has an overarching effect on all of the firm’s relationships. Digitalisation of the service operation also creates a situation where some established relationships may be less relevant or not relevant at all. This could apply to a firm with a customer who loses huge amounts of money every time the machine is down, such as a drill on an offshore oil platform. In this case, service speed is crucial and includes transportation to the facility. In these situations, strong relationships with transportation companies, car rental firms, airlines, helicopter owners and so on are vital for rapid service delivery. However, if most services can be managed at a distance, this will affect the relationships with transportation companies, which are likely to weaken. According to this logic, to enable digital servitization, an incumbent firm must reconfigure its structure of strong and weak ties. It might be tempting to reduce stronger relationships and interact only with weakly connected or new, previously unrelated, actors since strong ties are embedded in the old, institutionalised contextual knowledge of how to integrate resources efficiently and effectively. In the case of weak ties, where institutionalised rules of exchange are less well established, they allow for more radical ways to integrate resources. Weakly linked actors can see the operant properties

30  David Sörhammar et al. of new technologies – that is, as resources that produce effects – whereas strongly linked incumbent firms tend to perceive these technologies as operand resources to be acted on (Lusch and Nambisan 2015). We agree that technologies and its value are socially constructed (Orlikowski 1992) by the institutional rules within the ecosystem. However, creating a new digital solution with the help of weakly linked actors and offering it only to new customers is a high-risk venture and means that the firm has no established ways of integrating resources and no customer insights. Inability to overcome these hurdles might be one reason why many incumbent firms retain their established relationships. For example, although Kodak invented the digital camera in 1975, it did not exploit its innovation. Instead, it continued to work on perfecting the process of developing physical film. Actors, such as Apple, with weak links to the photographic industry, but who gained contextual insights from digital technologies, exploited this development, which disrupted and reshaped the industry. Our research suggests that for a firm to transform towards digital servitization it requires adjustment to the firm’s institutional arrangements in the service ecosystem, which is not an easy task. We use an example from Sklyar et al. (2019b) to show how digital servitization transformation can be managed. The firm started by formulating a strategic intent, which was formalised within the organisation in a white paper co-authored by several managers at different hierarchical levels. This white paper set out how the future would look for the industry, but worked, also, as a game plan for the firm transformation needed to achieve that future. The next step was developing a holistic understanding of the adjustments needed to its resource integration patterns in order to implement the plan. This included finding ways to adjust the structure of their weak and strong links. It required a clear intent (the white paper) for the firm to understand the service ecosystem’s underlying institutional arrangements and allow it to overcome core rigidities and enable digital servitization. This strategic intent also allowed the firm to forge some new relationships with digital platform providers and data analytics actors, which, previously, were external to the service ecosystem. Insights and positive examples from these previously perceived weak or absent relationships provided an understanding of the concrete ways in which the firm could provide value to customers better than through its long-established relationships. In turn, this allowed the firm to overcome core rigidities and alter the content of these relationships. It was crucial for the transformation that these strong ties could be altered; without this possibility, the digital service transformation would have been unsuccessful. Hence, a strategy based on changing the institutional arrangement of the ecosystem is needed for the firm to achieve a transition towards digital servitization. However, this rarely requires abandoning all strong relationships. Rather, a greater focus should be on adjusting the meanings of certain resources and resource practices within established relationships.

Managing digital servitization 31

3.5 Takeaway We argue that the transition towards digital servitization requires a purposeful and coordinated effort to manage the firm’s strong and weak ties in the service ecosystem. There may be a need to create new relationships or strengthen existing weak relationships, especially with technical firms, such as cloud suppliers or digital platform developers. However, it is imperative that incumbent firms recognise that going digital does not mean that they can cut all of their strong links; they need to investigate which will continue to be important for creating value to their customers. Otherwise, the firm risks becoming data-driven but lacking any contextual competence, knowledge or skills critically needed to solve customers’ problems. Therefore, a digital servitization transformation requires maintaining a balance between weak and strong relationships linked to value creation for customers and other key stakeholders in the ecosystem.

References Akaka, M. and Vargo S. (2014). Technology as an operant resource in service (eco) systems. Information Systems and e-Business Management 12(3): 367–384. Edvardsson, B., Kleinaltenkamp, M., Tronvoll, B., McHugh, P. and Windahl, C. (2014). Institutional logics matter when coordinating resource integration. Marketing Theory 14(3): 291–309. Evans, P. (1989). The state as problem and solution: Predation, embedded autonomy, and structural change. In The State: Concepts in the Social Sciences, Hall, J.A. and Ikenberry G.J. (eds). Milton Keynes: Open University Press: 386–423. Granovetter, M. (1973). The strength of weak ties. The American Journal of Sociology 78(6): 1360–1380. Kleinaltenkamp, M., Brodie, R.J., Frow, P., Hughes, T., Peters, L.D. and Woratschek, H. (2012). Resource integration. Marketing Theory 12(2): 201–205. Kowalkowski, C., Persson Ridell, O., Röndell, J.G. and Sörhammar, D. (2012). The co-creative practice of forming a value proposition. Journal of Marketing Management 28(13–14): 1553–1570. Lawrence, T.B. and Suddaby, R. (2006). Institutions and institutional work. In Handbook of Organization Studies (2nd ed.), Clegg, S.R., Hardy, C., Lawrence, T.B. and Nord, W.R. (eds). London: Sage: 215–254. Leonard-Barton, D. (1992). Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal 13(1): 111–125. Lieberman, M.B. and Montgomery, D.B. (1988). First-mover advantages. Strategic Management Journal 9(1): 41–58. Lusch, R.F. and Nambisan, S. (2015). Service innovation: A service-dominant logic perspective. Management Information Systems Quarterly 39(1): 155–175. Maglio, P.P. and Lim, C. (2018). Innovation and smart service systems. In A Research Agenda for Service Innovation, Gallouj F. and Djellal F. (eds). Northampton, MA: Edward Elgar Publishing: 103–115. Miller, S. (2014). Social institutions. In The Stanford Encyclopedia of Philosophy, Zalta, E. (ed.). Stanford, CA: Stanford University Press: 514–518.

32

David Sörhammar et al.

Nambisan, S. (2013). Information technology and product/service innovation: A brief assessment and some suggestions for future research. Journal of the Association for Information Systems 14(4): 215–226. Normann, R. (2001). Reframing Business: When the Map Changes the Landscape. New York, NY: John Wiley and Sons. North, D.C. (1990). Institutions, Institutional Change and Economic Performance. New York, NY: Cambridge University Press. Orlikowski, W.J. (1992). The duality of technology: Rethinking of the concept of technology in organizations. Organization Science 3(3): 398–427. Scott, W.R. (2008). Institutions and Organizations: Ideas and Interests (3rd ed.). Thousand Oaks, CA: Sage. Sklyar, A., Kowalkowski, C., Sörhammar, D. and Tronvoll, B. (2019a). Resource integration through digitalisation: A service ecosystem perspective. Journal of Marketing Management 35(11–12): 974–991. Sklyar, A., Kowalkowski, C., Tronvoll, B. and Sörhammar, D. (2019b). Organizing for digital servitization: A service ecosystem perspective. Journal of Business Research 104: 450–460. Tronvoll, B. (2017). The actor: The key determinator in service ecosystems. Systems 5(2): 38. Tronvoll, B., Sklyar, A., Sörhammar, D. and Kowalkowski, C. (2020). Transformational shifts through digital servitization. Industrial Marketing Management 89: 293–305. Vargo, S.L. and Lusch, R.F. (2016). Institutions and axioms: An extension and update of service-dominant logic. Journal of the Academy of Marketing Science 44(1): 5–23.

4

Caught on the platform or jumping onto the digital train Challenges for industries lagging behind in digitalisation Peter Ekman, Magnus Berglind and Steven Thompson

Digitalisation has reshaped the business landscape such that many industries are now characterised by high degrees of connectivity, automation and interactivity. While some sectors, such as the media, music and gaming industries, are almost fully digitalised, others, such as construction and real estate, are lagging behind. This chapter aims to identify the factors that cause digitalisation lags in some industries. The discussion focuses primarily on the commercial real estate sector and includes firms that own, develop, maintain and lease commercial property. The commercial real estate industry is financially strong but, historically, conservative with respect to adopting new technologies and systems to support operations (Ekman et al. 2021) and is a good case to study the phenomenon of digitalisation inertia. In this chapter, we discuss the features of this industry that are observable in other less digitalised industries and discuss their impact on technology adoption. We offer some suggestions for future research to better understand the phenomenon of industry-wide delayed digitalisation.

4.1 Waves of digitalisation The effect on the business landscape of implementation of Information Technology (IT) and its transformative effects on many industries have been the subject of research for several decades. Some industries were early adopters of IT; in others, its effects have been less profound. In fact, it is possible to identify “waves” of digitally driven market changes which have had impacts on various industries over time. For example, the organisational effects of business process reengineering (Hammer 1990) and justin-time and lean production supported by Enterprise Resource Planning (ERP) systems (Davenport 2000) began to be felt in the manufacturing and production industries in the late 1970s while the transformative effects of e-commerce emerged in the retail sector in the late 1990s and the early 21st century (Srinivasan et al. 2002). Over the past decade, search engines such as Google and social media platforms such as Facebook and Instagram have transformed the advertising and communications functions in a number of DOI: 10.4324/9781003111245-4

34  Peter Ekman et al. different industries (Buzeta et al. 2020). These consecutive waves of technology disruption and rapid emergence of the Internet of Things (IoT) and artificial intelligence (Jeyaraj and Zadeh 2020) are forcing business leaders to continuously evaluate their IT strategies and address the far-from-simple question of “What should we do?” In his famous and hotly debated Harvard Business Review article, entitled “IT doesn’t matter,” which was written shortly after the burst of the dot.com bubble, Nicholas Carr (2003) recommended firms to “follow, don’t lead” in the context of investment in and utilisation of IT. His basic argument was that IT had become a commodity and firms should wait for the emergence of standardised solutions rather than searching for digital innovations. The logic was that IT innovation was expensive and, since technology can be copied easily, IT offered no long-term competitive advantage. This resulted in a widespread belief that IT was a necessary cost but one that did not add value to the business. IT expenditure was considered overhead expenditure, and some organisations set limits on its extent; even large industrial firms limited IT costs at the expense of market adaptivity (Ekman et al. 2020). The increased availability of commercial off-the-shelf solutions that followed predefined standards led to the diffusion of information systems that handled both internal and external processes. These systems were initially designed to support office administration; later, large-scale ERP systems digitised operational business processes across entire organisations. Over time, other business functions such as customer relationship management and customer self-service were digitised. More recently, organisations have acquired the skills needed to exploit software as a service, platform as a service and infrastructure as a service solution (Mohamed and Pillutla 2014). These so-called cloud solutions help organisations to minimise the costs associated with buying, maintaining and protecting the IT and systems needed to conduct business. In many industries, today’s business firms bear no resemblance to their 1980s’ counterparts. However, not all industries have been able to benefit fully from these transformations, and, in this chapter, we elaborate the factors that have caused the commercial real estate industry to lag behind many other industries with respect to digitalisation. While many industries have been fundamentally transformed and are benefiting from connected and integrated information systems, spanning both the supplier and customer sides and supporting most major business processes, some industries have been left behind. They have been left on the platform, watching the digitalisation train leaving the station. So why did some of these industries not jump aboard the train? Our research shows that there are at least four reasons for their being left behind: (1) the persistence of siloed IT systems (i.e., data are not shared), (2) lack of de facto data standards, (3) paucity of large dedicated software suppliers and (4) widespread use of firm-specific IT solutions. There tend to be three steps involved in the journey to adoption of digitalisation, which, as they become more technologically intensive, most industries

Industries lagging in digitalisation  35 follow sequentially. The first step entails digitising of all vital activities, which makes it possible to save, extract and analyse data related to all core business processes. The second step is to integrate and manage the data gathered as a result of completing the first step. Data integration enables firms to assess the impact of the performance of one business function on other areas of the business, for example, the ability to answer questions such as “how does poor supply chain management influence customer retention?” The third step involves the firm’s ability to utilise IT to make strategic and operational transformations to the business. To a large extent, the commercial real estate industry has achieved the first step; most new buildings are equipped with technology that generates large amounts of operational data. However, there are few instances of data integration and even fewer of IT use to transform operations, support managerial decision-making and make strategic changes.

4.2 What delays industry digitalisation? The above discussion provides some background information on the evolution of IT and digitalisation of the firms in many industries. However, some industries are less technologically sophisticated; diffusion of digital innovation in these sectors is slower and is being hampered by both internal organisational factors and market factors. The barriers to their digitalisation fall into two broad categories: (1) an ill-fitting business logic and (2) market complexity. Table 4.1 summarises these aspects which are discussed in more detail in the succeeding sections. Table 4.1 Industrial digitalisation barriers Barrier

Aspect

Poor business logic fit

Non-generic company structure

Complex market

Example

Real estate companies tend to have small numbers of employees but substantial financial assets; that is, in terms of employee numbers they are similar to medium-sized enterprises, but in terms of market value they resemble large enterprises. Discontinuous Design, construction and maintenance phases of value chain buildings (i.e., facilities) are separate activities performed by completely different organisations. Structural Modern buildings conform to current regulatory efficiency standards. Infrastructural Many buildings are old and conform to earlier, not legacy current regulatory standards. Immature Lagging IT developments means there is a lack suppliers of software options and mature technology suppliers. End-user The landlord (facilities owner) is the knowledge characteristics holder; individual tenants may be unaware of the opportunities for improvement or the benefits that process digitalisation might provide.

36  Peter Ekman et al. 4.2.1 Poor business logic fit Business logic fit depends on the industry’s organisational and industry characteristics. In the case of the commercial real estate sector, each firm is distinct from its competitors because it is defined by its specific real estate assets. This results in a non-generic company structure. The real estate industry is based on the principle of an asset manager (landlord) who manages the asset (the facility and its surroundings) and other actors (tenants) who lease the rights to use the facility. Thus, it involves the management of a physical building and its use, in return for a payment, by others for their own business purposes. As a result, the commercial real estate is more rigidly controlled and contract-based compared to other industries that involve dynamic practices such as upselling and cross-selling. Also, buildings are immobile, fixed assets, and concepts such as product lifecycle are irrelevant (Poleg 2020). Traditionally, investing in facilities has been considered a safe investment, and insurance companies, pension funds and alternative investment funds deposit large portions of their financial holdings in direct ownership of real estate. Commercial real estate companies’ annual reports show that their business is capital-intensive and show, also, that investment properties are often highly leveraged, although the investors benefit from reduced risks related to certain other aspects. For example, commercial real estate companies do not have high inventory costs, require minimal administrative staff and have little need for investment in R&D. The small number of staff members include technicians and engineers, who focus on maintaining the property, and customer support and marketing/sales personnel who deal directly with current and prospective tenants. For example, in 2018, one of Sweden’s largest commercial real estate companies had turnover of more than €600 million and a property portfolio valued at approximately €15 billion, but had only around 300 employees. In contrast, the Swedish subsidiary of the pharmaceutical company, AstraZeneca, had only a slightly higher turnover but had almost 6,000 employees. Thus, real estate companies tend to be capital-resource-intensive but require minimal human resources. This factor, along with minimal inventory, little or no R&D costs and assets with extremely long product lifecycles, makes the commercial real estate industry atypical compared to most other industries. These differences likely explain why commercial real estate companies cannot exploit standardised solutions and why large IT suppliers have not prioritised the commercial real estate industry. Also, as Kytömäki (2020) highlights, property companies often have limited business development resources and find digitalisation projects and change management problematic, which discourages digitalisation efforts. The second characteristic of an ill-fitting business logic is what we call a broken value-chain, which characterises the commercial real estate industry and results from differences between the construction and facilities management processes. The first break occurs in the building planning phase; the

Industries lagging in digitalisation  37 building construction process is completely separate from how the building ultimately is used. Most real estate companies have only a sketchy idea about what the building will be used for, and, over the building’s lifetime, this use will almost certainly change. Buildings are designed by architects, who are given guidelines about the eventual use of the property, which they try to match to a location. The construction of the building is in the hands of a construction company that subcontracts to various suppliers to complete the building. Therefore, the construction process is a relatively short episode in the building’s lifecycle. The completed building is handed over to the property owner. Use of IT and data during building construction is focused, primarily, on ensuring the building meets statutory and national regulation and satisfies voluntary sustainability certifications. For example, many real estate companies strive to exceed current environmental requirements to ensure that ongoing operations are cost-efficient and environmentally friendly by obtaining both national and international voluntary environmental certification. The main international buildings certifications are the UK BREEAM (Building Research Establishment Environmental Assessment Method) and the US LEED (Leadership in Energy and Environmental Design). Both BREEAM and LEED are related to energy efficiency related to the building’s expected use and energy use and involve an energy rating (e.g., platinum, gold or silver). Subsequent recertification is based on consideration of changes in annual average temperatures compared to historical averages, actual use of the building compared to expected use and actual number of tenants compared to expected numbers of tenants. Essentially, simulations, conducted using building information modelling software, provide a set of expectations, and, after a certain number of years, accreditation bodies compare these expectations with real data and, in a somewhat ad hoc manner, determine whether the structure meets energy efficiency guidelines based on tenants’ usage. The process used to evaluate the performance of a building might seem rudimentary compared to more technologically advanced industries where evaluations are based on operational data, gathered and analysed in real time, and where the results affect organisational operations as soon as they become available. However, it is difficult to predict how the property will be used by its tenants or the impact on energy use of the temperature set by the tenant, the weather and other external factors such as availability of different sources of energy. Given all these uncertainties, commercial real estate firms opt for low-tech, retrospective analysis of building performance, which provides little incentive to invest in sophisticated technology and software to enable real-time monitoring and intervention. In other industries, the product supplier will continue to assist the customer with offers of complementary services. For example, car dealerships offer extended warranties and automobile service deals. However, those complementary services are not offered by the construction companies that serve the real estate industry. In this case, the interaction between the

38  Peter Ekman et al. construction company and the real estate firm is minimal once the building has been completed and handed over. Renovations to the building are not likely to be needed for several decades and may not be conducted by the original construction company. Thus, there are few incentives for construction companies to keep track of the building’s performance beyond what is required by the statutory guidelines in place at the time of construction. The third characteristic of a poor business logic fit is the presence of structural efficiency. Manufacturing firms strive for operational efficiency by optimising their production processes. This involves extensive use of IT to monitor output and quality and to minimise waste and underutilisation of resources. However, once constructed, buildings require minimal monitoring and assessment. While manufacturing firms must focus on producing a certain output of a specific quality, buildings are designed to accommodate a certain number of people and to meet specific indoor quality measurements. Therefore, provided the building’s tenants do not diverge from the agreed use and occupancy of the building, it is likely to meet their efficiency requirements in perpetuity. Given the static nature of buildings and their ability to meet tenant expectations over long periods of time without renovations or other interventions, collection, storage and analysis of large amounts of data are not a priority. As a result, facilities management research related to digitalisation makes little reference to analysis of big data (Bröchner et al. 2019). The inherent structural efficiency of buildings and their persistence over time are disincentives for investment in IT. 4.2.2 Complex market The second barrier to industry transformation through digitalisation is market complexity. The first dimension to this is the legacy infrastructure. Buildings are expected to persist for several decades. Over the lifetime of the structure it may house different types and numbers of tenants, who use it for different purposes, for example, as professional office space, warehouse or storage space, as a manufacturing facility or as a server farm. The use and market value of a building are also affected by developments that occur in its location. As a result, large commercial real estate companies engage in what they describe as “urban development.” Attracting other high-end landlords and tenants to a location can increase the value (or yield) of an asset (building), whereas relocation of other business to other areas can reduce the asset’s value. The decision to change the building’s technological infrastructure or carry out renovations will depend on developments in the building’s location. Real estate companies that manage several buildings with different infrastructure legacies will be unable to implement a common information system. For example, buildings in large cities such as Stockholm, Sweden’s capital city, are updated frequently with new technologies or retrofitted to enable technology and data integration. The second dimension of market complexity is the number of IT suppliers offering standardised software. Software standards are important because

Industries lagging in digitalisation  39 they allow digitalisation of business processes and subsequent integration of data to support operational and analytical initiatives. In the case of commercial real estate, most software is offered by what can be best described as immature suppliers, that is, young, entrepreneurial companies without a large customer base. These suppliers of software and IT solutions for the real estate sector are known in the industry as PropTechs or property technology companies (Kirk 2019). However, the property IT supplier landscape is fragmented and includes a patchwork of small firms and no de facto standards to enable system integration similar to that achieved in other industries. The third dimension of market complexity is end-user characteristics. Industry-wide change can result from both push and pull effects; that is, the change might be due to new supplier offerings or might be the result of customer demand. In the case of commercial real estate, customer management resembles the type of customer exchanges typical of the utilities industries such as electricity and Internet services. The building is considered by its owner and tenants to be a value in itself, resulting in the real estate company focusing, primarily, on facilities management and much less on added value and customer care (Anker and van der Voordt 2017). Also, compared to users in other industries, building end-users’ expectations are low. A building’s indoor climate is dictated by national regulation; the interior design and structural features of the building tend to be related to the location and cost of leasing the facility. Building services tend to be related, mainly, to correcting building faults, for example, replacing broken windows. The characteristics of the commercial real estate industry’s end-users have been studied in relation to their energy use and interest in energy management systems. Strengers (2014: 24) article refers to “Resource Man” who is interested in his own energy data, understands it, and wants to use it to change the way he uses energy. He responds rationally to price signals and makes informed decisions based on up-to-date and detailed data…. He is both in control of his energy consumption and assigns this control to technologies to manage on his behalf. Much of the research estimating tenants’ engagement in monitoring and controlling their energy use suggests that only a few are interested in investing time in this activity. Any digitalisation related to commercial property is the responsibility of the landlord who must decide whether adoption of new technology and its related transformative effects will pre-empt the future needs and expectations of tenants (Ekman et al. 2016).

4.3 Learning from laggards This chapter discussed the case of the real estate industry and the possibility of obtaining value from digitalisation to improve maintenance efficiency, advance sustainability efforts and offer new services to tenants. While many of these technological developments can be expected to follow the same

40  Peter Ekman et al. trajectories observed in other industries (e.g., Shapiro and Varian 1999), the commoditisation of IT, the rapid incorporation of technologies developed in other industries and the lowered cost of data communication may result in technological “leapfrogs” who develop transformative services that were unthinkable in the real estate industry ten years ago. Tracing the process behind such transformations and the affected stakeholders can reveal new diffusion patterns and offer managerial insights on how to enable industries with limited digitalisation benefits reach a more mature state. In the real estate industry, digitalisation and sustainability are inseparable (Bröchner et al. 2019). The construction and operation of buildings account for a large part of developed countries’ energy and resources use, which makes any large-scale improvements critical. The early adoption by a Swedish real estate firm of real-time digital solutions allowed a 40% reduction in energy utilisation and costs. Tenants who downloaded an app allowing them to see their energy usage in real time achieved an additional 10% cost reduction. Solar Photovoltaic (PV) energy systems are an example of a technology-driven sustainable business practice. Landlords describe the suppliers of solar PV systems as diffusing new knowledge in the market and providing tenants with information about energy generation. Some landlords are introducing “green leases” and involving use of technology to increase sustainability (Ekman et al. 2016; Hinnells et al. 2008). Also, real estate companies are facing increasing pressure from governments, the financial market and their own tenants to reduce carbon emissions, which is requiring landlords to collect the necessary information. Some smart solutions, related to building security and car parking facilities, are increasing both environmental sustainability and social well-being (Atkin and Brooks 2015; Al-Turjman and Malekloo 2019). However, it is important that the hype surrounding digitalisation should not deter real estate industry firms from pursuing lower-cost changes, such as upgrading of physical infrastructure or changed practices, which also provide value. For example, while a smart indoor climate control system can maintain a comfortable inside temperature at low-cost, the low-carbon alternative might be a less strictly controlled indoor and a more relaxed dress code, for example, allowing office workers to wear shorts during heat-waves or encouraging them to wear warm clothes in the winter. Understanding the benefits, challenges and risks related to sustainability and digitalisation needs more investigation in the context of industries that are lagging in their digitalisation efforts. Finally, industry digitalisation should be examined from a holistic perspective. Different industries will require different solutions. Real estate customers who digitalise their business are likely to require smaller or temporary premises. Commercial real estate firms are not likely to offer digital places for tenant work and sales. Instead, they may focus on the features that emphasise the real-world experience over digital enhancements. In some industries, digitalisation may provide less value or be counterproductive, socially irresponsible or environmentally undesirable. Digitalisation

Industries lagging in digitalisation

41

raises questions about integrity, security, energy use and deskilling. In the real estate industry, increased use of sensors, cameras and digital services is providing landlords with increasingly varied tenant user data, highlighting issues related to tenants’ privacy and data security. The infrastructure required to collect data increases energy use and carbon footprint. While technological advances seem inevitable, it will be difficult to digitise some functional areas in some industries. Further research into these aspects will require use of different theoretical lenses and analytical methods. Study designs could range from a focus on trailblazer organisations and technological opinion leaders (i.e., micro level), to interest groups and communities (meso level), to larger business networks and the ecosystems that are forming in society (macro level). Potential theoretical frameworks include institutional theory (Ekman et al. 2021), multilevel perspective (Geels 2011), business network theory (Ritter et al. 2004) and service ecosystem (Sklyar et al. 2019). The plethora of unexplored research questions could be addressed via analytical or empirical modelling or qualitative methods.

4.4 Takeaway While highly digitalised industries are the most frequent focus of academic research, studying industries that lag in terms of digitalisation could provide a more nuanced view of digital transformation. Exploring the tipping point of digitalisation in these industries – emerging from the dominant business logic or current market structure – could offer managerial and theoretical insights into how companies would prosper in a digitalised world.

Acknowledgement The work in this chapter was financed, in part, by the Swedish Energy Agency project 44749-1 and, in part, by Eskilstuna municipality though the project Sörmlandskontraktet.

References Al-Turjman, F. and Malekloo, A. 2019. Smart parking in IoT-enabled cities: A survey. Sustainable Cities and Society 49. doi.org/10.1016/j.scs.2019.101608. Anker, J.P. and van der Voordt, T. 2017. Facilities Management and Corporate Real Estate Management as Value Drivers. London: Routledge. Atkin, B. and Brooks, A. 2015. Total Facility Management, 4th Edition. Chichester: Wiley. Bröchner, J., Haugen, T. and Lindkvist, C. 2019. Shaping tomorrow’s facilities management. Facilities 37(7/8): 366–380. Buzeta, C., De Pelsmacker, P. and Dens, N. 2020. Motivations to use different social media types and their impact on consumers’ online brand-related activities (COBRAs). Journal of Interactive Marketing 52: 79–98.

42

Peter Ekman et al.

Carr, N. 2003. IT doesn’t matter. Harvard Business Review 81(5): 41–49. Davenport, T.H. 2000. Mission Critical: Realizing the Promise of Enterprise Systems. Boston, MA: Harvard Business Press. Ekman, P., Raggio, R.D. and Thompson, S.M. 2016. Service network value cocreation: Defining the roles of the generic actor. Industrial Marketing Management 56: 51–62. Ekman, P., Thilenius, P., Thompson, S. and Whitaker, J. 2020. Digital transformation of global business processes: The role of dual embeddedness. Business Process Management Journal 26(2): 570–592. Ekman, P., Röndell, J., Kowalkowski, C., Raggio, R.D. and Thompson, S.M. 2021. Emergent market innovation: A longitudinal study of technology-driven capability development and institutional work. Journal of Business Research 124: 469–482. Geels, F.W. (2011). The multi-level perspective on sustainability transitions: Responses to seven criticisms. Environmental Innovation and Societal Transitions 1(1): 24–40. Hammer, M. 1990. Reengineering work: Don’t automate, obliterate. Harvard Business Review 68(4): 104–112. Hinnells, M., Bright, S., Langley, A., Woodford, L., Schiellerup, P. and Bosteels, T. 2008. The greening of commercial leases. Journal of Property Investment and Finance 26(6): 541–551. Jeyaraj, A. and Zadeh, A.H. 2020. Evolution of information systems research: Insights from topic modeling. Information and Management 57(4): 103207. Kirk, N.J. 2019. Embracing PropTech. Journal of Property Management 84(1): 32–35. Kytömäki, O. 2020. Digitalization and Innovation in the Real Estate and Facility Management Sectors – An Ecosystem Perspective. Licenciate thesis. Stockholm: KTH Royal Institute of Technology. Mohamed, M.A. and Pillutla, S. 2014. Cloud computing: A collaborative green platform for the knowledge society. VINE – Journal of Information and Knowledge Management 44: 357. Poleg, D. 2020. Rethinking Real Estate: A Roadmap to Technology’s Impact on the World’s Largest Asset Class. Brooklyn, NY: Palgrave Macmillan. Ritter, T., Wilkinson, I.F. and Johnston, W.J. 2004. Managing in complex business networks. Industrial Marketing Management 33(3): 175–183. Shapiro, C. and Varian, H.R. 1999. The art of standards wars. California Management Review 41(2): 8–32. Sklyar, A., Kowalkowski, C., Tronvoll, B. and Sörhammar, D. 2019. Organizing for digital servitization: A service ecosystem perspective. Journal of Business Research 104: 450–460. Srinivasan, S.S., Anderson, R. and Ponnavolu, K. 2002. Customer loyalty in e-commerce: An exploration of its antecedents and consequences. Journal of Retailing 78(1): 41–50. Strengers, Y. 2014. Smart energy in everyday life: Are you designing for resource man? Interactions 21(4): 24–31.

5

Digitalisation for sustainability conceptualisation, implications and future research directions Elena Anastasiadou, Linda Alkire and Jimmie Röndell

In recent years, academics and business managers alike have acknowledged that digitalisation is not a future issue but is present and ongoing and is transforming everyday practices. Specifically, digitalisation is causing the most significant changes to organisations around the world, since the industrial revolution (Yüksel and Sener 2017). These transformations are creating both challenges and opportunities – for individuals, businesses and society. Digitalisation is the use of digital technology to create value in new ways (Gobble 2018). In this chapter, value is understood as a positive or negative change in the well-being or viability of a particular actor/system (Vargo and Lusch 2004) and can be manifested in various forms, for instance, in the form of sustainability. Sustainability refers to the ability to balance social equity, environmental protection and economic growth, which have been described as the “triple-bottom line” (Elkington 1997). Recent major societal problems, such as climate change (Mende and Misra 2020) and service exclusion (Fisk et al. 2018) among many others, are requiring companies to be more efficient, to be smarter and transformative in order to have an uplifting sustainable impact on people, society and our planet. We argue that digitalisation can facilitate this. Although sustainability is attracting more attention than in the past, as a field, it is developing more slowly than the field of digitalisation. At the same time, the world is becoming more interconnected and technologically controlled, but despite extant research on the use of Artificial Intelligence (AI) and robots (e.g., Wirtz et al. 2018), we know little about their impact on people and the planet. We also need to know more about how digitalisation could increase sustainability. We believe that these knowledge gaps arise, in part, because most business research in relation to value creation (e.g., sustainability) based on digitalisation considers that the firm, single-handedly, creates and delivers value to its customers. We argue that this view provides only a limited picture of both sustainability and digitalisation as well as their benefits because it excludes other actors and resources that participate actively in the value creation process. In turn, this view reduces the potential sustainable value generated by firms’ activities and resource integration (Vargo and Lusch 2011). Finally, most previous work on digitalisation DOI: 10.4324/9781003111245-5

44  Elena Anastasiadou et al. focuses on the technology – social media, robots, the Internet of Things (IoT) – resulting in a gap of a more abstract view of digitalisation and its relation to sustainability. In this chapter, we address the need to consider sustainability in relation to the digitalisation process by introducing the concept of digitalisation for sustainability. To define this concept, we first provide an overview of digitalisation, including its possibilities and problems, and then address sustainability. Section 5.3 links digitalisation and sustainability and provides a practical example. Finally, in the last section, future research opportunities, managerial implications and conclusions are presented.

5.1 Digitalisation Although the so-called digital revolution began at the turn of the century, technological innovation and the trend towards greater digitalisation have increased exponentially only in the most recent few years. This increase has been fuelled by demands for more time-effective and cost-effective processes that have resulted in more digitalisation and automation (Dotoli et al. 2017). Digitalisation has become a buzzword and, often, is used interchangeably with digitisation. The two letters separating “digitalisation” from “digitisation” however make a great difference. Digitisation describes the process of shifting from analogue to digital forms; in other words, digitisation takes an analogue process and changes it to a digital form without making modifications to the process. Many companies claim they engage in digitalisation, but they are actually digitising instead. Thus, they are conducting the same activities but converted to digital form, for example, the “paperless office.” Some organisations consider the switch from fax machines to emails and digital signatures as digitalising their business. These companies would seem to subscribe to the old adage that you can’t teach an old dog new tricks; in other words, they believe that people will not abandon longestablished habits and practices. However, digitalisation offers much more than the ability to transforming paper documents into PDFs, for example. Digitalisation transforms business models and market practices, changes the ways people work and combines new resources leading to innovation in ways which earlier would have been impossible. To achieve these transformations appropriate tools and digital technology such as the IoT, big data, robotics, automation, social media and digital platforms are required (Foerster-Metz et al. 2018). Digitalisation can enhance the ability to create value (e.g., sustainability) and enable new ways to address the needs of other actors (Lenka et al. 2017). These opportunities, enabled by digitalisation, facilitate integration of (formerly nonrelated) resources as well as engagement and interaction between these “new” resources and the relevant actors. Hence, when resources are viewed and combined in new ways, new digitally facilitated solutions emerge, resulting in the development of enhanced service provision and experienced value (Skålén et al. 2015). Digitalisation,

Digitalisation for sustainability  45 which is able to offer new solutions and contribute to innovation, is now being called on to enhance sustainability as part of a sustainable business logic, where sustainability transcends from being an add-on to becoming part of the core business.

5.2 Sustainability The “going green” phenomenon has driven companies, worldwide, to continuously consider their environmental and social capabilities and to innovate to protect society and the environment while, also, increasing business performance. The World Commission on Environment and Development (1987), also known as the Brundtland Report, defines sustainable development as the ability to meet present needs, without diminishing the ability of future generations to meet their needs. This implies that sustainability is related to resource efficiency, people’s well-being along with fair and equitable service provision. In 2015, the United Nations (UN) proposed a new global agenda, which promoted triple bottom line-thinking as enabling a more sustainable path (i.e., delivering social, environmental and economic sustainability) for governments, companies and other actors to collaborate to achieve sustainable development (Howard-Grenville et al. 2017). Sustainability refers, also, to the preservation of well-being over long, even infinite, periods of time (Kuhlman and Farrington 2010). Although sustainability efforts are growing, it is becoming more complex and more difficult to assess levels of sustainability: A farmer, who plants tomatoes and potatoes, can estimate the consequences of his work pretty easily – on the soil, on people, on the environment. But a trader, who uses millions of data from around the globe and acts based on algorithms, cannot. (Osburg 2017: 3) As our world becomes ever more interconnected and service ecosystems become more open and collaborative, digitalisation as a means of enhancing sustainability is ever more crucial. Digitalisation has both positive and negative potential in relation to facilitating sustainability practices to benefit both people and our planet in general and to contribute to reducing negative impacts of human activities (Gijzen 2013). Digitalisation can increase the sustainability of social, environmental and economic aspects (Helbing 2012). The transformative character of sustainability will allow adaptations to the opportunities and risks introduced by digitalisation. Thus, digitalisation works to both change and shape sustainability (Seele and Lock 2017). Digitalisation has consequences, also, for transparency and accountability by providing new ways to organise, observe and regulate sustainability (Heemsbergen 2016). As the world becomes more digitalised, more services, such as media, commerce, banking, education and healthcare, will

46  Elena Anastasiadou et al. be delivered online. Sustainability and digitalisation will thus have major impacts on our world and how we conceive it. However, digitalisation is not a panacea that will automatically improve life; one of the results of digitalisation is that it enforces the use of electronic devices which produce electronic waste (e-waste). In addition, the design of new digital services rarely considers sustainability perspectives. Although we do not know whether it is more sustainable to store data using cloud software, the growth of these digital service continues to rise. However, cloud services involve huge use of electricity. Therefore, moving computing capacity and local storage to a cloud service may not be sustainable; it may merely mean that the environmental burden has switched location. Companies need to critically assess their digitalisation choices from the perspective of their sustainability. For instance, a particular digital technology might seem the most sustainable choice at a particular time, but, over the long run, some other digital technology might be more sustainable. Also, a digital technology that would appear to be sustainable could entail unobservable impacts and produce large amounts of waste. In some cases, a new digital technology might be more hazardous, from a sustainability perspective, than a non-digital solution. Take the example of books; many are available in digital format using new digital services. An e-book, which saves on use of physical materials, might be considered a more sustainable solution, but this ignores, for example, the devices for reading the e-book and the energy used to provide the service. Thus, a holistic view is required to assess the sustainability of one solution compared to another and to identify the threats and possible negative impacts of that solution. Overall, a more nuanced understanding of digitalisation and sustainability is needed if we are to achieve the sustainability benefits and avoid the pitfalls of digitalisation.

5.3 Digitalisation for sustainability In line with the above, we define digitalisation for sustainability as creation of sustainable value aided by digitalisation. Adoption of digitalisation for sustainability allows the firm better control over its processes, maintaining corporate costs low and enabling a more sustainable business logic (Newlands 2017). For firms that provided sustainable digital technologies and systems to their customers, co-development of solutions without digitalisation was impossible. For instance, digitalisation for sustainability of the energy industry could lead to less or no use of fossil fuels and result in increased environmental sustainability. Such a change requires collaboration, innovation and experimentation in the areas of energy storage, distribution and consumption, and transformation of the business model. Newly empowered actors (e.g., employees, customers and suppliers) and digital tools (e.g., software and digital platforms) make such changes possible and allow orchestration of the activities required for their implementation.

Digitalisation for sustainability  47 A practical example of digitalisation for sustainability involves a real estate company based in Stockholm, Sweden. The company, whose tenants are commercial companies, developed a platform which we describe here as a climate portal. The purpose of the climate portal was to engage the company’s tenants in a joint effort to increase the sustainability of their firms and the buildings. Access to this digital service required the signing of a green lease which is a form of a sustainability proposition in current use in the real estate sector. The green lease takes the form of a commercial landlord–tenant contract and states that the partners shall jointly strive to achieve more sustainable use of the buildings and its facilities. The climate portal had a positive impact on landlord–tenant collaboration, and most of the tenants signed a green lease agreement. This illustrative case indicates that the digitalisation of a company’s processes – with the integration of new tools and resources such as the climate portal that embeds sustainability – becomes a new value proposition. Sustainable value propositions, enabled by digitalisation, make it possible for both firms and their customers to engage and integrate resources in ways not previously possible, in order to increase sustainability outcomes such as reduced energy use, a healthier indoor environment and increased well-being. Thus, digitalisation for sustainability can become the means to offer new resources and engage actors in new ways, resulting in increased value outcomes. Digitalisation for sustainability allows firms to map their service ecosystem and identify likeminded actors to engage and collaborate with, in order to develop new, sustainable value propositions. Digitalisation for sustainability enables new ways of working and the creation of new business models. In the case of problem-solving, digitalisation for sustainability can facilitate new ways of including “new” actors and resources and, thus, enable the development of novel value propositions that provide new means to address important societal challenges. However, digitalisation for sustainability also entails a number of challenges. A major issue related to digitalisation for sustainability is lack of knowledge, expertise and skills of actors. Many customers lack the technical knowledge to allow them to benefit fully from digitalisation for sustainability. In addition, many providers have neither the resources nor the expertise required to fully develop sustainable digital technologies and transform their business models. New sustainable digital technologies and the process of business model transformation entail some costs and investment risks. Engaging in digitalisation for sustainability is resource-demanding and time-consuming with no guarantee of success and provides more long-term than immediate benefits. In many companies, employees and other actors often resist change due to lack of knowledge and understanding of the value proposition. Similar to the introduction of any new process, digitalisation for sustainability is accompanied by challenges. However, it is important to focus on the advantages, the value potential and long-term benefits of digitalisation for sustainability. Some managerial implications and suggestions

48  Elena Anastasiadou et al. for coping with the challenges related to digitalisation for sustainability are provided in Section 5.5.

5.4 Future research opportunities In linking digitalisation to sustainability, with the exception of work on social innovation and sustainability innovation, most research tends to focus on environmental sustainability. Although an environmental focus is undeniably important and responds to calls to save the planet, it is equally important to consider all three dimensions of sustainability (i.e., social equity, environmental protection and economic growth). Acting in a more environmentally friendly way does not automatically yield more sustainable economic and social outcomes. Thus, future research should study digitalisation for sustainability from a triple-bottom-line perspective. There is also a lack of research that connects technological development to a sustainable business logic and services. Interdisciplinary research (Gustafsson and Bowen 2017) and service research collaborations (Fisk et al. 2020) are required to address these complex phenomena, drawing on lessons from service design, transformative service research, transformative consumer research, social innovation, social entrepreneurship and information systems fields. This complexity cannot easily be tackled by one research stream. In addition, insights from midrange theory are necessary to understand the everyday practices and challenges involved in service inclusion and actor engagement within digitalisation and sustainability. Thus, we would suggest more collaborations between research and practice. Previous research links digitalisation to co-creation of value, understood as the perceived value that the firm can provide to consumers (or other beneficiaries; Howell et al. 2018). This would seem problematic since the established view on the possibilities of digitalisation in relation to sustainability does not consider new ways of involving customers and other actors in the firm’s activities. Future research should approach digitalisation for sustainability, as well as digitalization and sustainability separately, from a more explicit value co-creation perspective and explore actor engagement and resource integration within this context. Also important is the inclusion of other actors, such as beneficiaries, in the development of new sustainable digital services (Ekman et  al. 2016). Future research should explore actor engagement using digital tools (e.g., engagement platforms and value propositions). Including more actors in the value co-creation processes enhances value alignment among them, which results in better chances for increased value experiences and a faster diffusion of digital services. This also affects the impact of digitalisation for sustainability on institutions (in the form of cognitive, cultural, normative and regulatory frames) and our understanding of actor behaviours in the service ecosystem following the introduction of digitalisation for sustainability.

Digitalisation for sustainability  49

5.5 A step-by-step guide for managers Companies should not simply replace existing activities with digital technologies to achieve, for example, the paperless office, considered a fundamental of digitisation. To improve competitiveness and sustainability, companies need to make gradual changes towards digitalisation for sustainability, taking into consideration the wider service ecosystem. Therefore, we suggest the following steps related to the challenges and opportunities that digitalisation for sustainability could provide for the firm. •

•

•

•

•

It is important to establish what digitalisation for sustainability means for the firm in relation to the wider service ecosystem. Different companies have different goals and ideas related to business model transformation, which highlights the importance of a clear vision and understanding extending throughout the organisation, to set the basis for a successful digitalisation for sustainability process. Companies should assess the need for sustainability in relation to their internal capabilities and their business models and explore how digitalisation could help them. When addressing sustainability issues, companies should balance their profits with identification of new business opportunities. Less is more might be a helpful maxim; full utilisation of new digital capabilities is required in order to achieve more using less, that is, using fewer “new” tools and involving lower levels of investment. Digitalisation would allow the firm to map its service ecosystem to identify actors and external resources that could potentially be included in their sustainability processes and facilitate exchanges and development of new or existing resource combinations with new or existing actors. An understanding of current and potential roles in the network would allow the sharing of beneficial resources. Companies should communicate their new sustainable digital value propositions and highlight their sustainability value potential to other ecosystem actors such as employees, customers, suppliers and partners. This communication must be balanced; it must demonstrate that digitalisation for sustainability is not just an idea – it must also be practised (do the “talk” and do the “walk”). Providing information on new initiatives encourages the engagement of other actors. Although it is good to take initiatives in regard to sustainability efforts, it is not necessary to drive such changes single-handedly. The firm must ensure that all the actors involved are kept informed and have the necessary knowledge to understand the new digital service. Failure to do this will result in employee resistance, lack of actor (e.g., customer) engagement and poor sustainability outcomes.

To sum up, the key to successful digitalisation for sustainability depends on close collaboration among a variety of actors with the same objective.

50  Elena Anastasiadou et al. This has been highlighted in many studies (see Pagani and Pardo 2017), and digitalisation would seem to offer a lot in the context of enhancing sustainability. Identifying external resources and gaining access to them is crucial. It seems that competitiveness will rely on greater digitalisation for sustainability. In partnerships that include more actors in the firm’s core business, knowledge sharing and open innovation activities will increase sustainability outcomes substantially. Integrating the resources from multiple actors enabled by digitalisation would seem to improve activities related to addressing complex phenomena such as climate change and service inclusion. It is important, also, to note that companies’ integration of digital technologies has a long-term perspective and is part of a bigger sustainability strategy rather than ad hoc adoption. A clear digitalisation for sustainability strategy, embedded in the firm’s core activities, such as sustainability and new service development, will allow adoption of new digital technologies to achieve firm goals. Digitalisation for sustainability will involve major changes in the firm’s efforts to provide social well-being, reduce environmental impact and improve economic performance and will change the business logic (e.g., actors and resource constellation). Companies must consider the longevity and adaptability of the digital technologies they intend to adopt and choose sustainable digital technologies that can be adapted and connected to other systems. Sustainability must be viewed from a system and network perspective, taking account of the firm’s position in the wider service ecosystem. Finally, the firm’s ongoing value creation strategy must be oriented to collaborative/engagement thinking, embracing a mind-set where the company sees other ecosystem actors as part of the ongoing value creation and not merely as entities at the receiving end. This will allow the firm to embrace the possibilities offered by digitalisation for sustainability.

5.6 Takeaway This chapter has shown that digitalisation is not just about being faster and cheaper; it is also about enhancing other types of value. We have tried to link digitalisation and sustainability, by introducing the concept of digitalisation for sustainability and proposing a more open and collaborative view of digitalisation for sustainability as an alternative to the myopic focus on the implementation of technology. We also discussed some research opportunities and implications for practice.

Acknowledgement The work in this chapter was financed, in parts, by the Swedish Energy Agency project 44749-1, Eskilstuna Municipality though the project Sörmlandskontraktet, and by the Swedish Research School of Management and IT.

Digitalisation for sustainability

51

References Dotoli, M., Fay, A., Miskowicz, M. and Seatzu, C. 2017. Advanced control in factory automation: A survey. International Journal of Production Research 55(5): 1243–1259. Ekman, P., Raggio, R.D. and Thompson, S.M. 2016. Service network value cocreation: Defining the roles of the generic actor. Industrial Marketing Management 56: 51–62. Elkington, J. 1997. Cannibals with Forks: The Triple Bottom Line of 21st Century Business. Oxford: Capstone Publishing Limited. Fisk, R.P., Alkire, L., Anderson, L., Bowen, D., Gruber, T., Ostrom, A.L. and Patrício, L. 2020. Elevating the human experience (HX) through service research collaborations: Introducing ServCollab. Journal of Service Management 31(4): 615–635. Fisk, R.P., Dean, A.M., Alkire, L., Joubert, A., Previte, J., Robertson, N. and Rosenbaum, M.S. 2018. Design for service inclusion: Creating inclusive service systems by 2050. Journal of Service Management 29(5): 834–858. Foerster-Metz, U.S., Marquardt, K., Golowko, N., Kompalla, A. and Hell, C. 2018. Digital transformation and its implications on organizational behavior. Journal of EU Research in Business 30: 1–14. Gijzen, H. 2013. Development: Big data for a sustainable future. Nature 502(7469): 38. Gobble, M. 2018. Digitalization, digitization, and innovation. Research-Technology Management 61(4): 56–59. Gustafsson, A. and Bowen, E.D. 2017. The curious case of interdisciplinary research deficiency: Cause or symptom of what truly ails us? Journal of Business Research 79: 212–218. Heemsbergen, L. 2016. Digital age: From radical transparency to radical disclosure: Reconfiguring (in) voluntary transparency through the management of visibilities. International Journal of Communication 10(1): 138–151. Helbing, D. 2012. The future of ICT knowledge accelerator towards a more resilient and sustainable future. In Why Society Is a Complex Matter, Ball, P. (Ed.). Berlin: Springer: 55–60. Howard-Grenville, J., Davis, J., Dyllick, T., Joshi, A., Miller, C., Thau, S. and Tsui, A.S. 2017. Sustainable development for a better world: Contributions of leadership, management and organizations. Academy of Management Discoveries 3(1): 107–110. Howell, R., Van Beers, C. and Doorn, N. 2018. Value capture and value creation: The role of information technology in business models for frugal innovations in Africa. Technological Forecasting and Social Change 131(6): 227–239. Kuhlman, T. and Farrington, J. 2010. What is sustainability? Sustainability 2(11): 3436–3448. Lenka, S., Parida, V. and Wincent, J. 2017. Digitalization capabilities as enablers of value co-creation in servitizing firms. Psychology and Marketing 34(1): 92–100. Mende, M. and Misra, V. 2020. Time to flatten the curves on COVID-19 and climate change. Marketing can help. Journal of Public Policy and Marketing 40(1): 1–3. Newlands, N. 2017. Future Sustainable Ecosystems. Boca Raton, FL: Taylor and Francis Group. Osburg, T. 2017. Sustainability in a digital world needs Trust. In Sustainability in a Digital World: New Opportunities through New Technologies (CSR, Sustainability,

52

Elena Anastasiadou et al.

Ethics and Governance), Idowu, S.O. and Schmidpeter, R. (eds). Berlin: Springer: 3–19. Pagani, M. and Pardo, C. 2017. The impact of digital technology on relationships in a business network. Industrial Marketing Management 67: 185–192. Seele, P. and Lock, I. 2017. The game-changing potential of digitalisation for sustainability: possibilities, perils, and pathways. Sustainability Science 12(183): 183–185. Skålén, P., Gummerus, J., von Koskull, C., & Magnusson, P. (2015). Exploring value propositions and service innovation: a service-dominant logic study. Journal of the Academy of Marketing Science 43(2), 137–158. Vargo, S.L. and Lusch, R.F. 2011. It’s all B2B … and beyond: Toward a systems perspective of the market. Industrial Marketing Management 40(2): 181–187. Vargo, S. L., and Lusch, R.F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing 68(1), 1–17. Wirtz, J., Patterson, P.G., Kunz, W.H., Gruber, T., Lu, V.N., Paluch, S. and Martins, A. 2018. Brave new world: Service robots in the frontline. Journal of Service Management 29(5): 907–931. World Commission on Environment and Development (1987). Our Common Future. Oxford: Oxford University Press. Yüksel, A.N. and Sener, E. 2017. The reflections of digitalization at organizational level: Industry 4.0 in Turkey. Journal of Business, Economics and Finance 6(3): 291–300.

6

Reaching new heights in the cloud The digital transformation of the video games industry Kevin Walther and David Sörhammar

Digitalisation has enabled business model innovations in many industries. Netflix has changed the way we consume series and movies, Spotify has changed the way we consume music, and podcasts and Instagram have redefined how we share pictures and stories with our friends. All of these digitised services have transformed traditional haptic experiences into digital user experiences, based on the business model innovations in their respective industries. As numerous companies undergo digital transformation, it is important to draw attention to the business model innovations that precede this transition, since “a better business model will beat a better idea or technology” (Chesbrough 2007: 12). In this chapter, we study business model innovation by tracing the digital transformation of the video games industry. US market data show that, in 2009, 80% of all video games were sold in physical format. In 2018, 83% of video game sales are constituted of digital units (Statista 2018). Digitalisation is leading to new business models, such as micro-transactions, sales of digital goods and subscription services. In this chapter, we discuss the digital transformation of the video games industry, with a focus on the business model innovations and technological advancements involved. We especially build our arguments on the business model innovation concept, considered as driving digital transformation. We then identify the main business model innovations in three distinct time periods – the predigital, digital transformation and post-digital periods – and identify what we consider to be the significant business model innovations and technological advancements that disrupted the video games industry. The pre-digital era focuses, mostly, on physical arcade games. In the digital transformation era, games shifted from physical cartridges and discs to virtual goods. The post-digital era is characterised by digital giants battling for supremacy over cloud gaming services. Finally, we argue which business model innovation is required to facilitate digital transformation. It underlines that digital transformation does not stop with the online distribution of a product or service. DOI: 10.4324/9781003111245-6

54  Kevin Walther and David Sörhammar

6.1 Business model innovation The literature on business model innovation has increased hugely since the early 2000s but is often criticised for its lack of a unifying theoretical foundation (Foss and Saebi 2017). Numerous definitions of different business model innovation types have been proposed (see Foss and Saebi 2017, for an overview). However, we would argue that a business model innovation comprises two dimensions. A business model can be considered the set of the firm’s decision-making variables, related to the creation, delivery and capture of value (Wirtz et al. 2016). Business model innovation can consist of adaptations to a previous business model (Geissdoerfer et  al. 2018), in order to create, maintain or reinforce competitive advantage, based on new ways of satisfying customer demand (Chesbrough 2007). What level of adaptation or change to the business model is needed for it to be considered a business model innovation (see Foss and Saebi 2017, for an overview)? We subscribe to Zott and Amit’s (2017) argument that adjustments to the business model should focus on four interlinked aspects: novelty, lock-in, complementarity and efficiency. Novelty refers to the degree of newness of the idea; lock-in refers to those elements of the system that increase customer loyalty; complementarity refers to value-enhancing effects among the different business model elements (e.g., payment systems that enhance the purchase experience); and efficiency refers to processes that provide users with more seamless or faster access to the service or product. From the perspective of the drivers of digital transformation model, Zott and Amit’s (2017) four aspects need to be considered in the context of technological advancements. We argue that technology is an enabler but also forces the firms in an industry to innovate in order to survive. Thus, despite the many impressive technological advancements that have occurred, it is important to bear in mind that technological advancement, on its own, is not at the heart of business model innovation and does not guarantee success. However, technological advancements provide novelty and, thus, are a key element of business model innovation. We would stress, also, the influence on business model innovation of the dynamic nature of the context (Lindgardt et al. 2015). These contextual properties highlight the importance of a particular industry and its unique characteristics; however, a successful business model innovation by a specific firm can affect the entire industry profoundly.

6.2 The three business model innovation eras in the video games industry From an empirical perspective, to study business model innovation requires an in-depth understanding and detailed consideration of the industry contexts. Based on industry reports and research works such as those of McNeil (2019), Harris (2014) and Newman (2017) and our personal interest and

Reaching new heights in the cloud  55 ongoing research projects, we identified three distinct business model periods related to the video games industry: pre-digital, digital transformation and post-digital. We highlight the significant technological and business model innovations in each era to provide insights into how the industry’s digital transformation is driven by continuous business model innovations and technological advances. 6.2.1 Pre-digital period The precursor of the emergence of the video games industry in the early 1970s was the gambling industry and, specifically, Irving and Martin Bromley’s father-and-son business, which sold and installed slot machines in the United States. During the early 1950s, the US government had introduced new laws that restricted gambling. However, Martin Bromley realised that these laws did not apply to the many US military bases that had been established in East Asia after the Second World War. The Bromleys bought old slot machines that had been installed in the United States and installed them in US military bases overseas. Their business became so lucrative that Martin Bromley set up the production company, Service Games Enterprises (later known as SEGA), in Japan, soon after, changing their production from slot machines to skill-based, electromechanical game machines (such as pinball machines). Although these machines were coin-fed, like slot machines, they did not involve payouts and, therefore, were unaffected by the US gambling laws and could be installed in US as well as in the European market (McNeil 2019). In this period, another business model innovation occurred in the games industry. Nolan Bushnell and Ted Dabney had a shared interest in computer science and pinball machines. They developed a machine that used video circuitry to mimic the functions of a computer and combined this with simple game elements. In 1972, Bushnell and Dabney launched their standalone Pong arcade game machine (digital ping-pong). The business model for their newly founded company, Atari Inc., focused on installing their arcade machines in pubs and shopping malls. Their arcade machines were fed by coins, like a pinball machine, but enabled users to play a particular video game. Their arcade machines became hugely successful, and their success was exploited by SEGA, Nintendo and others companies, which released their own arcade machines during the 1970s (Newman 2017; McNeil 2019). The emergence and success of arcade machines, especially in shopping malls, attracted the interest of department stores and led to business models designed to draw the crowd attracted by these arcade machines into their stores. In 1975, Sears, the US department store chain, made a deal with Atari to create and deliver 150,000 Home Pong Console units. This forced Atari to update its business model from being a provider to becoming a supplier. The console, which was called Sears Tele-Games, sold out quickly, triggering Atari to release its own updated version of the console in 1976.

56  Kevin Walther and David Sörhammar These developments led to the whole video games industry adjusting their business models to accommodate home consoles, which brought the mall arcade machine experience to people’s living rooms. However, technical limitations meant that all of these early consoles were “one-game-systems.” One of the firms that had copied Atari’s successful arcade machines business model was the Japanese company, Nintendo, which also began to develop video games consoles. In 1985, there were three major players in the console business, Atari with its Atari 7800, SEGA with its Sega Master System and Nintendo with its Nintendo Entertainment System. All three firms’ business models had built on technical developments, which had allowed them to separate their consoles from the games. This allowed them to reap revenue from selling consoles and selling games on cartridges, designed for their particular consoles. These consoles became so popular that the firms could not keep pace with the demand for new games, which led to the founding of many independent game studios and game publishers. In turn, this led to another business model innovation; game publishers made deals with game developers, and the resulting games were sold to all three console manufacturers. Nintendo, the market leader, adjusted its business model and forced game developers to sign exclusivity contracts if they wanted their games to be played on Nintendo’s consoles. This changed Nintendo’s business model, and the firm became both a hardware producer and a publisher. Nintendo’s exclusive franchises, such as “The Legend of Zelda” and “Super Mario,” left Atari and Sega struggling; neither was able to adjust its business model to become a publisher of a similarly successful game brand (Harris 2014; McNeil 2019). Nintendo, unintentionally, became responsible for the emergence of a new firm in the console business, Sony, which later became one of Nintendo’s biggest competitors. Nintendo wanted to respond to SEGA’s Mega Drive console and games that were stored and played on CD-ROMs. This new technology did not trigger a major adjustment to the business model, but it increased storage capacity and allowed enhanced graphics and sound. To capitalise on this new technology, Nintendo had contracted the Japanese electronics firm, Sony, to develop a CD-ROM console. However, disagreement about how the revenue would be shared caused Nintendo to break the deal. Sony decided to continue developing the prototype and, in September 1995, released its own console under the name PlayStation. Sony undermined SEGA’s business model, by selling its PlayStation for roughly $100 less than SEGA’s new console, Saturn. They exploited the fact that users could play the same games on these two consoles; SEGA had no exclusivity clause, and both firms used the same CD-ROM technology. Users saw no point in paying for Saturn, with the result that Sony’s PlayStation became the winner. Nintendo did not release a CD-ROM extension and continued to use cartridges to store the games for their consoles (Edge Magazine 2009; McNeil 2019).

Reaching new heights in the cloud  57 6.2.2 Digital transformation period Until the mid-1990s, consoles tended to dominate the gaming landscape. However, this changed in 1995 when Microsoft released its Windows 95 operating system, which included a graphical interface and the DirectX technology, which pioneered the new 3D technology. Windows 95 made playing games on a Personal Computer (PC) much smoother and easier. This did not involve a radical change to the gaming business model since PCs used the CD-ROM technology that was incorporated in most consoles, which made it easy for game developers and publishers to launch their games for PCs. However, the emergence of LAN (Local Area Network) parties in the late 1990s had a profound impact on the video game industry business model. This allowed several PCs to be connected via a LAN, which allowed several gamers to play the same game either with or against one another. LANs and LAN parties quickly made shared gaming very popular. Clearly, this sharing of games among consumers was not legal and had a negative effect on the business model for the actors in the industry, since it meant loss of revenue for game publishers and developers. However, the US game developer/publisher, Valve, instead saw an opportunity for a business model innovation. In 2003, it released its own digital marketplace, Steam. Initially, Valve used Steam to digitally distribute its own games, but then allowed distribution of games from other developers onto its platform. After a rather slow start, in 2010, Steam had a huge user base. Traditional publishers (e.g., Origin [EA], Epic Store [Epic Games], Uplay [Ubisoft] etc.) and console manufacturers (e.g., PlayStation Store [Sony] and Windows Store [Microsoft]) all tried to copy Valve’s successful business model with their own online stores. However, the success of Steam meant that Valve’s business model had given it a near monopoly position for virtual distribution on PCs. Conservative estimates give Steam a market share of more than 70% and US$4.3 billion revenue for Valve in 2017 (The Economist 2019b). Over the years, Valve continuously adapted its business model, and its current Steam platform provides additional revenue from commercially distributed add-ons, in-game items and power-ups. This kind of within-game monetisation has resulted in some negative feedback from players and led to legal interventions in some countries. “Pay-to-win” mechanics and “lootboxes,” where players are asked to pay for superb or randomly generated in-game items, are reminiscent of earlier mechanised gambling such as Bromley’s slot machines. The in-game items, especially those used by the popular football simulation, FIFA, were also subject to investigation by the gambling committees in several countries (The Economist 2017). The huge success of digital platforms did not put an end to piracy. In fact, faster broadband speeds and cheaper Internet prices have encouraged piracy. The fight against piracy, increased broadband access around the world and the promise of ever higher revenues have forced many industry actors to adjust their business model and shift to subscription-based models. One

58  Kevin Walther and David Sörhammar of the earliest and probably best-known subscription-based successes was Blizzard Entertainment’s 2004 release of their online role-play game, World of Warcraft. Would-be players were required to pay a monthly subscription fee; at the time of writing, World of Warcraft has millions of monthly paying players. Another common business model innovation was to offer the base game for free and encourage players to buy additional content and virtual content such as clothing or weapons. The most famous example of this “freemium” or “free-to-play” model is Epic’s Fortnite Battle Royale (The Economist 2020b). 6.2.3 Post-digital transformation period The main business model innovation in the current post-digital transformation era of the video games industry is the subscription model and the focus on games as a digital service, often described as the “Netflix-for-gaming” model. However, the comparison with Netflix ignores the sophisticated interaction and streaming technology required for video games. Gaming requires low latency and vast bandwidth as playing requires both incoming and outgoing data, whereas streaming a film requires only one-way data. Streaming games using cloud technology require state-of-the-art infrastructure (e.g., 5G technology) and are technically more difficult to develop and maintain than streaming videos (Forbes 2019). The first such business model innovation was Microsoft’s launch of Game Pass in 2017. This game subscription service currently gives subscribers access to more than 250 games on the Xbox console and Windows PC. It still requires the games to be downloaded, so it is not (yet) the seamless experience of streaming a film on Netflix. In September 2020, Game Pass had 15 million subscribers (The Economist 2019a; Microsoft 2020). Google responded by launching Stadia in November 2019. Stadia allows access to games through streaming technology enabled by cloud technology. It does not require the user to invest in costly hardware, in the form of a gaming PC or console; its games can be streamed on any device (e.g., a PC, a TV monitor, a tablet or a smartphone). At the time of writing, the service was limited to a few Google and Samsung devices and included only a small number of games, which has been the subject of some criticism from early adopters (Grey 2019; The Economist 2019a). However, Microsoft can be considered to be building on Stadia’s business model and adjusting its Game Pass. In September 2020, Microsoft launched a subscription game streaming service called xCloud. This service gives full access to Microsoft’s Game Pass library and enables streaming using Microsoft’s cloud technology. Moreover, (so far) this allows seamless game playing on its Xbox console, android tablets or smartphones (Engadget 2020). Several others of the tech giants are competing to provide players with a seamless cloud gaming service (e.g., Nvidia [GeForce Now]) or a cloud gaming service including access to a game library (e.g., Amazon [Luna] or Tencent and Huawei [START]).

Reaching new heights in the cloud  59 This “battle of the technology giants” indicates that this business model will have a significant impact on the gaming industry. Obviously, innovating the business model towards a subscription-based service that enables seamless streaming of games on any device requires heavy investments in infrastructure, development and content. Only the largest firms, such as Google, Microsoft, Amazon, Tencent and Sony, which can afford these heavy investments in server farms and game content, will be battling for cloud gaming leadership in this post-digital transformation era. The situation is reminiscent of the video game industry in the 1980s, when Nintendo extended its business model to become both a hardware producer and a publisher. The strategy of becoming a game publisher and feeding its services with exclusive content led Microsoft in September 2020 to buy ZeniMax Media and its publisher Bethesda games for $7.5 billion. This major acquisition was a shock to the video games industry and means that Microsoft has extended its business model; it now includes some of the most prominent game franchises and 23 in-house game development studios producing content for its Game Pass and xCloud services (Microsoft 2020). Strengthening its gaming portfolio and, thus cloud gaming services, has allowed Microsoft to benefit, also, from economies of scope since Microsoft is combining its largest revenue driver “server products/services” with its fourth largest revenue driver “gaming” (The Economist 2020a). To conclude, a constant supply of new games that attract new subscribers and retain existing subscribers is crucial to support the game libraries and/ or cloud gaming services of the digital giants. Major acquisitions of large game developers by the digital giants, such as ZeniMax and Microsoft, are likely to become more frequent in the near future. The video streaming market shows a similar trend; the competition between Netflix, HBO, Disney and so on boosted the production of new TV series and movies and acquisition of producing firms (The Economist 2019a).

6.3 Discussion This chapter has addressed a significant question for businesses today – how to innovate business models to achieve firm growth in the digitalisation era. Overall, for nearly 50 years, the video game industry has been at the forefront in terms of capitalising on new technology and innovating its business models. The reason for business model innovation has been described as “when the game gets tough, change the game” (Lindgardt et al. 2015). We focused on what we considered the most significant business model innovations in the video game industry. We would stress that new technology, on its own, is not a game changer; it must be linked to a business model innovation. An example of a technology that lacks a business model innovation is virtual reality headsets. They attracted much media attention but are relatively high-priced and lack game content to attract gamers. The absence of a major business model innovation

60  Kevin Walther and David Sörhammar has left this technology far from reaching expectations (The Economist 2020c). For digitally transformed industries, such as the computer gaming industry, cloud technology holds immense potential. Several firms of this industry have been involved in different business model innovations in the form of different cloud subscription services. In our ongoing research project, we have had the opportunity to talk to many developers and industry experts. The managing director of a large Swedish game publisher told us that his firm is expecting and planning for a huge increase of the gaming population worldwide thanks to cloud gaming subscriptions. Cloud gaming will make ownership of dedicated gaming hardware obsolete and streaming will be enabled through the cloud which will open up entirely new markets. Our linking in this chapter of three video games development periods has traced the business model innovations towards the current business model in the post-digitalisation era. The insights from this chapter should be helpful to firms in other industries undergoing digital transformation. We hope that we have shown that contemporary business model innovations do not occur in a vacuum; rather, they are part of a long history of business model innovation and technical advancements. Table 6.1 summarises what we consider the main business model innovations and technological advancements in each era and offers an overview of the digital transformation of the video games industry and the post-digital transformation era.

Table 6.1 Summary of business model innovations and technological advancements in the three eras The pre-digital The digital transformation era transformation era Business model • “Insert coin” innovation/ slot machines major “Game • Setting Changers” up arcade machines in hotspots (pubs, shopping malls) • Consumers can buy their own Home Entertainment Systems, no longer confined to playing in pubs and shopping malls • Consumers can buy additional games for their game console

The post-digital transformation era

• Selling (physical) • Subscription service to access games for PC and virtual game console/building libraries up strong game • Cloud gaming franchises services • Distributing • Gaming on any games virtually device with a (digital screen platforms) • Generating revenue from virtual goods (Freemium model) • Games as a service rather than a product

Reaching new heights in the cloud 61 The pre-digital The digital transformation era transformation era • Royalties for console manufacturers from game sales on cartridge/disc Technological • Development advancement of arcade machines using a combination of pinball and oscillation technology (1960s/1970s) • “One game systems” (1970s) • Home consoles (1980s onwards) • CD-ROM Drive (1990s)

• PCs with graphical interface (Windows 95) • Multiplayer gaming through LAN network • Internet • New generations of consoles (e.g., PlayStation 2-4)

The post-digital transformation era

• Worldwide increase in Internet access and high broadband coverage • Cloud technology/ server farms

6.4 Takeaways This chapter offers two main takeaways. First, it shows that business model innovations need to be linked to continuous technological innovation. The video games industry is a good example of the intertwining of these aspects over time. We have shown that external technological advancements can force firms to adjust their business models, but that, sometimes, the technology needs to be adapted to fit the current business model innovation. Second, we have highlighted that business model innovation related to a digitally transformed industry mostly involves subscription-based revenue streams linked to cloud-based technologies. The insights in this chapter could help other industries undergoing digital transformation to reformulate their business model innovations in similar ways. The video games industry can be considered a technology and business model innovation forerunner as can be seen in the cases of digitally transformed sectors such as music (Spotify), movies (Netflix) and photography (Instagram).

References Chesbrough, H. 2007. Business model innovation: It’s not just about technology anymore. Strategy and Leadership 35(6): 12–17. Edge Magazine. 2009. The making of: PlayStation. Edge Magazine. April 29, 2009 edition. Engadget. 2020. Microsoft XCloud will offer over 150 Xbox games when it goes live tomorrow. https://www.engadget.com/microsoft-xbox-xcloud-game-streaminggame-pass-ultimate-150917167.html (accessed January 4, 2021).

62

Kevin Walther and David Sörhammar

Forbes. 2019. Why game streaming needs 5G. Forbes Magazine. November 30, 2019 edition. Foss, N.J. and Saebi, T. 2017. Fifteen years of research on business model innovation: How far have we come, and where should we go? Journal of Management 43(1): 200–227. Geissdoerfer, M., Vladimirova, D. and Evans, S. 2018. Sustainable business model innovation: A review. Journal of Cleaner Production 198(October): 401–416. Grey, J. 2019. Stadia might be one of Googles best products – eventually. Wired Magazine. November 2019 edition. Harris, B. 2014. Console Wars: Sega vs Nintendo – and the Battle that Defined a Generation. Camden, London, Atlantic Books Ltd. Lindgardt, Z., Reeves, M., Stalk, G. Jr. and Deimler, M. 2015. Business model innovation: When the game gets tough, change the game. In Own the Future: 50 Ways to Win from the Boston Consulting Group, edited by Deimler, M., Lesser, R., Rhodes, D. and Janmeiaya, S. Hoboken, NJ, John Wiley & Sons Inc: 291–298. McNeil, S. 2019. Hey! Listen!: A Journey through the Golden Era of Video Games. London, Headline Publishing Group. Microsoft. 2020. Microsoft to acquire ZeniMax Media and its game publisher Bethesda Softworks. https://news.microsoft.com/2020/09/21/microsoft-to-acquirezenimax-media-and-its-game-publisher-bethesda-softworks/ (accessed January 4, 2021). Newman, M. 2017. Atari Age: The Emergence of Video Games in America (1st Ed.). Cambridge, MA: MIT Press. Statista. 2018. U.S. computer and video game sales – digital vs. physical 2018. https:// www.statista.com/statistics/190225/digital-and-physical-game-sales-in-the-ussince-2009/ (accessed January 4, 2021). The Economist. 2017. Video games could fall foul of anti-gambling laws. The Economist. December 7, 2019 edition. The Economist. 2019a. Mortal Kombat – Google launches its game-streaming platform. The Economist. November 21, 2019 edition. The Economist. 2019b. Fortnite’s developer is entering the retail business. The Economist. March 14, 2019 edition. The Economist. 2020a. Microsoft and tech competition – is tech getting more competitive? The Economist. October 22, 2020 edition. The Economist. 2020b. Tencent has used stealth to become a gaming superpower. The Economist. June 13, 2020 edition. The Economist. 2020c. Headset technology is cheaper and better than ever. The Economist. October 1, 2020 edition. Wirtz, B., Pistoia, A., Ullrich, S. and Göttel, V. 2016. Business models: Origin, development and future research perspectives. Long Range Planning 49(1): 36–54. Zott, C. and Amit, R. 2017. Business model innovation: How to create value in a digital world. GfK Marketing Intelligence Review 9(1): 18–23.

7

Hyper-Taylorism and third-order technologies Making sense of the transformation of work and management in a post-digital era Christoffer Andersson, Lucia Crevani, Anette Hallin, Caroline Ingvarsson, Chris Ivory, Inti José Lammi, Eva Lindell, Irina Popova and Anna Uhlin

Since the mid-1970s, automation and, latterly, digital technology, have become a focus for investment and innovative effort (Woodcock and Graham 2019), forming the basis for a new industrial revolution (Brynjolfsson and McAfee 2014; Schwab 2017). While digital technologies can serve multiple social and industrial ends, such as creating a “sharing economy” (Sundararajan 2016), the primary focus of development and investment, similar to earlier industrial revolutions, is to increase productivity and efficiency. In other words, the current technical development is closely entwined with dominant ideas about how work should be performed and for whose benefit. The most recent iteration of digital technologies, so-called third-order technologies, includes technologies that communicate directly with each other without human involvement (Floridi 2013) and are designed, specifically, to perform tasks previously performed by human workers. Their effects are being felt in service delivery, production and management. In this chapter, we propose that the search for productivity and efficiency, through the implementation and use of third-order digital technologies, is leading to a shift in how both work and management are understood. We argue that this shift draws on and reinforces a Taylorist logic in the design of work, where the norms of rationality and the division of labour are crucial. In addition, this shift has consequences in allowing for a different construction of work. Building on a sociomaterial framework that foregrounds both the social and material dimensions of work, we treat ideas – such as Taylorism – and materials – such as third-order technologies and other technologies – as constitutively entangled (Orlikowski 2007). Through this lens, we suggest that classical Taylorist ideas about how work ought to be organised and managed are being transformed as new technologies emerge. DOI: 10.4324/9781003111245-7

64  Christoffer Andersson et al. We discuss two types of situations that reflect how third-order digital technologies are re-enforcing a Taylorist logic: when technologies are designed to take the position of workers and when they are designed to take the position of managers. Drawing on empirical examples of these situations, we discuss how hyper-Taylorism can be interpreted as altering how work and management are understood and the consequences of this changed understanding.

7.1 The post-digital era, third-order technologies and algorithms Successive decades have witnessed widespread diffusion of digitising techniques to a wide range of social and institutional contexts, to the extent that, now, digital technologies are largely taken for granted (Tilson et al. 2010). According to Orlikowski and Scott (2016, p. 88), society, work, management and other forms of organising “always entails the digital.” Western societies, in particular, are moving into what has been termed a post-digital era, in which digital technologies have become ubiquitous, intertwined with personal as well as organisational life and, generally, are perceived as normal (Cramer 2015; Pepperell and Punt 2000; Reeves 2019). The technologies themselves have become less visible. What Floridi (2013) describes as “third-order technologies” work within existing processes, collecting data autonomously – without human involvement – and acting on this information. Unlike first-order technologies, which allowed humans to interact directly with the natural world (e.g., the plough, the axe and the saddle), or second-order technologies which allowed humans to interact with technologies using other technologies (e.g., a key that interacts with a lock), third-order technologies, once designed, push humans away from the action (Floridi 2013). To achieve this, these technologies depend heavily on algorithms. Algorithms are abstract representations of computational procedures and constitute the operational logic of third-order technologies (Dourish 2016), which, today, are more autonomous than in the past. Third-order technologies have attracted huge interest and major financial investment, making the developers of these technologies drivers of the post-digital era (Woodcock and Graham 2019). However, it has been pointed out that the use of new technologies is a question not only of technology but also, and perhaps most importantly, of how work is organised, managed and performed (Brynjolfsson and McAfee 2014; Schwab 2017). As will be discussed below, although third-order technologies might push the human out of its operations, third-order technologies exist in relation to work, which means that algorithms extend beyond the technology itself.

7.2 Classic Taylorism Taylorism has been a dominant force in the organisation of work. Introduced in Frederick Winslow Taylor’s (1911) seminal book The Principles of

Hyper-Taylorism in the post-digital era  65 Scientific Management, Taylorism builds on ideals of scientific and rulesbased rationality underpinned by the imperative of efficiency. It involves the optimisation of production through the development of sets of rules for the execution of work. The rules themselves are derived through direct observation and scientific analysis of production processes, the subsequent design and planning of work and the top-down allocation of tasks to workers depending on their individual skill sets (Rylander Eklund and Simpson 2020). The ultimate aim of scientific management was to transfer the craft knowledge and know-how of workers to managers, in the form of clear formal instructions for the performance of work tasks (Zuboff 1988). While managers retain responsibility for planning and controlling work, workers retain only responsibility for robotic execution of tasks (Zuboff 1988). Taylorism gives rise, quite deliberately, to the deskilling of workers, since individual workers need only to master a limited set of skills; those needed for the particular, delimited production or assembly (Braverman 1974; Lysgaard 1961). While Taylor thought that scientific objectivity and fairness would inspire workers to excel and to be better integrated with management and the organisation, the opposite occurred. The work-design approach, which also included efficiency targets pursued relentlessly by managers, merely highlighted the very different interests and positions of workers compared to managers (Lysgaard 1961; Zuboff 1988). A hallmark of Taylorism is its focus on time-and-motion studies, involving careful observation of the performance of work deemed central to the gathering of scientific knowledge (Taylor 1911). Having determined how to perform a task, where, at what time and within what timeframe, Taylorism results in the worker being tied to a specific place, often close to a particular machine. While often presented as a management model or management philosophy, Taylorism can be understood, also, as a way of producing knowledge about work. As described above, Taylorism builds on the idea that work can be conceived as a series of interrelated, but discrete activities, which can be subjected to scientific scrutiny. From its beginnings, Taylorism assumed that, if measured carefully enough, all aspects of work could be fully explicated and grasped by managers. Consequently, putting the ideas of Taylorism to use implied a particular way of imagining and configuring work, workers and managers. From a sociomaterial perspective, which seeks to shed light on the effects of both the social and material dimensions of work and organising (Gherardi 2016a, 2016b; Orlikowski and Scott 2008), it is clear that Taylorism was more than an idea. For it to come together, production technologies, scientific measurement and data collection techniques, an emerging management cadre, new investment possibilities in and around mechanisation and, later, the emergence of markets large enough for mass-produced goods were all important. Put differently, Taylor’s ideas, the technologies involved and the wider conditions were part of a sociomaterial assemblage that allowed the production of different kinds of knowledge about work and, thus, its different organisations.

66  Christoffer Andersson et al. We next examine the post-digital era and the experiences of both workers and managers within the shifting assemblage of Taylorism, promoted by the introduction of third-order technologies. Based on empirical illustrations, we discuss how third-order technologies provide a new materiality, which invigorates Taylor’s ideas, leading to what we call “hyper-Taylorism.”

7.3 When digital technologies are designed to take the position of the worker Robots are commonplace in manufacturing. On the shop-floor of one firm we studied, a large international steel company, producing high-quality steel equipment, robots perform much of the work previously performed by humans. The shop-floor is constructed as a series of cells, each constituting a “mini-factory,” consisting of a robot and two or three machines that perform various operations, such as lathing, routing, welding and threading of the steel. The workers, now called “operators,” feed the cells with data and materials and monitor the progress of the work and the health of the machines. This monitoring activity is not based on watching the machine but on observing computer displays, positioned outside the cell, for example, in the coffee area. The operators are responsible, also, for cleaning the machines and replacing failing parts. The machines are capable of drawing attention to potentially faulty parts before they become problematic. The duties of workers who previously physically operated the machines now include engagement in meetings and discussions about plant-related issues such as efficiency and safety. However, third-order automation technology is not limited to blue-collar work. In a Swedish municipality, we observed white-collar administrative workers, previously engaged in second-order digitised work, such as moving data between systems, structuring data or processing data in order to make decisions, had been replaced by Robot Process Automation (RPA). The RPA does the work of linking together and analysing data from different sources. Consequently, former frontline officers in public authorities, the street-level bureaucrats traditionally at the operational core of government (Bovens and Zouridis 2002), have been substituted by robotic administrative workers, with a narrow focus on discrete work processes they have been programmed for (Lindgren et al. 2019). Similar to our manufacturing study, we noted the emergence of new roles for public administrators. When the RPA technology was implemented in the municipality’s economy unit, the administrator who had previously done the work, was given the task of “robot caretaker.” The human administrator’s role was refocused on cases deemed too difficult for the RPA technology (i.e., unique cases where adaptation to the algorithm would not have been cost-effective) and any errors that occurred. The limits of robot third-order workers is that, while designed to usurp the human worker, they are only able to perform routine tasks according to clear rules (Floridi 2013), that is, tasks that are digitally legible (Woodcock and Graham 2019). Algorithms are able to deal effectively only with

Hyper-Taylorism in the post-digital era  67 predictable worlds (worlds that are legible to the robot); factory shop-floors constitute ideal environments (as long as there are no breakdowns), as do clients with standard and predictable needs. Work that is digitally legible allows the creation of formal, rules-based knowledge that can be expropriated from workers. Similar to what occurred in 1920s’ time studies in manufacturing, we observed professional workers, such as social workers, being filmed, timed and interrogated in order to generate algorithmic representations of their work. The more hard-won tacit skills of keeping the factory process running even if some machines are not working optimally, or dealing with a claimant with an unusual combination of needs, or one who simply struggles to communicate what those needs are, remain the province of the human. Thus, we see that, rather than being simply substituted by third-order technologies, workers are being repositioned as caretakers and tasked with ensuring the technologies work properly. Also, the human workers’ tasks, time and space are no longer tightly controlled by managers; the human worker is required to adjust to the machines. Some workers have expressed a preference for predictable manager algorithms as opposed to less reliable human managers (Woodcock and Graham 2019). The removal of humans from decision-making facilitates more efficient delivery of work. However, in some cases, the technology has changed the nature of the work’s output. While more efficient and expedient, services, in particular, are accompanied by a strikingly different ‘understanding’ of the work itself. Services delivered without human intervention tend, for example, to underemphasise the holistic and interpersonal logic of care work (Laurent 2008). These elements cannot be translated into digital inputs that an automated case system can incorporate into its algorithmic procedure.

7.4 When digital technologies are designed to take the role of the manager If work is digitally legible (Woodcock and Graham 2019), third-order technologies can calculate the optimal sequence of a worker’s tasks, when they should be executed, how long they should take and where each worker needs to be at a particular point in time. In other words, third-order technologies can take on the role of manager. In an environmental services department in a UK municipality we studied, a digital portal which allowed citizens to report environmental issues, such as an abandoned bike or graffiti, was implemented. The portal linked directly to software that then allocated work tasks to employees via their smartphones. Task completion was reported directly to the system. In effect, managers were removed from the process. There are many platforms available to control work minutely, which are replacing not only workers’ but also managers’ jobs. Routing systems that direct drivers to the most efficient route, systems to control the work of repair technicians, platforms enabling outsourcing of work to freelancers,

68  Christoffer Andersson et al. care assistants, taxi drivers and cleaners are all examples that remove even the need for employment contracts (Woodcock and Graham 2019). Some of this software is highly sophisticated and already available to, for example, UK police forces. The software assesses crime incident reports and automatically dispatches suitably qualified police officers to the incident. At the incident site, other software directs the officer to collect information deemed pertinent. Thus, although workers have their decision-making autonomy reduced, the need for managers is reducing increasingly. The efficacy of the technology for routine decision-making suggests that many middle managers will become redundant (Frey and Osborne 2017). However, it could mean a shift in managers’ responsibilities from responsibility for planning and control of work to a ‘softer’ human resources-type role. Identifying the right mix of staff skills to sustain an efficient organisation and support competitive advantage will require strategic and creative thinking. Following the introduction in factories, of scientific management and automation, before the digital age, some factory owners found that workers welcomed machines, at least those that took on some of the physically hard work. However, some workers found the resulting work intensification intolerable (Zuboff 1988). It could be argued that these issues might be salient today. Staff retention, motivation and reward will pose new challenges for management skills under hyper-Taylorism. Even in seemingly humanistic operations, such as social services, managers will need to acquire a new, more systematic understanding of the work performed in their organisation, to ensure the right balance of technology and human oversight, critical for service quality. They will need, also, to build new relations and alliances with software developers and information and communication technology professionals. Workers previously considered support staff may be the owners of the knowledge required to change how the work is performed, by reprogramming third-order technologies. For example, police forces in the UK that adopted sophisticated software for storing and interrogating crime data found that support staff needed familiarity with enquiry languages to overcome the limitations of the data structure.

7.5 Hyper-Taylorism and its consequences The promise of efficiency has ensured wide-spread diffusion of third-order technologies in our post-digital societies. At the same time, it has opened the door to a new form of Taylorism that we call hyper-Taylorism. The analytical capacity unleashed by embedded sensors, and the seemingly limitless data storage and computational capacity, is on a different level from the time-study engineer equipped with a clipboard, stop-watch and mechanical calculator (Brynjolfsson and McAfee 2014). We have proposed that hyper-Taylorism describes a technology-enhanced Taylorism in the post-digital era. Just as Taylorism reconfigured how work,

Hyper-Taylorism in the post-digital era  69 workers and managers should be understood for the sake of efficiency, we see a change in how contemporary work is understood. The concept of hyper-Taylorism shifts the focus to another level compared to the concept of “digital Taylorism,” for example. Digital Taylorism is the term that has been used to describe the codification and digitisation of knowledge in knowledge work through the use of second-order digital technologies, such as the industrialisation and standardisation of services (Brown et al. 2010). However, in a post-digital era, third-order technologies have become an integral part of how work is performed and managed. These new technologies are providing a specific way of enhancing an analytical understanding of work that supersedes Taylorism – both pre-digitalisation and in digital form. More specifically, the assumption that knowledge about work is something that can be made explicit, quantified, expropriated and used to plan work can now be materialised in the form of third-order technology algorithms. Thus, algorithms provide a materiality for both the representation and performance of work based on these representations. We have shown that when algorithms in third-order technologies perform work, they can replace both workers and managers. In both cases, the tenets of Taylorism are altered, but they are also enhanced and expanded. As workers, these technologies perform what has been planned in a specific way; as managers, these technologies are able to find an analytical optimisation of what needs to be done, how, where and when. In contrast to Taylorism, under hyper-Taylorism, managers are no longer in a privileged position as the coders, storers and transferers of knowledge about work. Instead, the new technologies do all of these tasks. Although Frederick Taylor, when he developed his idea, may not have considered this possibility, in the post-digital era, entities that are actually more efficient at computing do exist. The scientific knowledge of work, previously possessed by human managers, is now possessed by digital technologies, making the presence of the humans with knowledge about work redundant. Having characterised what we have seen taking place in the post-digital era, we next examine the consequences of hyper-Taylorism. First, workers’ tasks, time and space are either very closely surveilled by or are dependent on algorithms. This applies particularly to the case of workers taking care of the technology. In other words, the workers’ room for action is heavily constrained by the technology. Second, once the ‘best way’ of performing the work has materialised, parts of organising become ‘rigid’ as work or management is performed in a particular, often sequential, way. This requires other parts of the organisation to adjust, by performing a different type of work, that is, caring for and repairing (either workers or machines). Third, humans lose the possibility to negotiate work. As Floridi (2013) discusses, after the third-order technology has been designed and developed, humans have become the caretakers of the technology, responsible for monitoring the loop and enabling smooth performance. While this might be considered as organisational members having to use higher-level skills,

70

Christoffer Andersson et al.

which some regard as an improvement, the use of these skills is demanded by technological needs and there is no possibility for discussing or negotiating the distribution of the work. Fourth, a crucial consequence of hyper-Taylorism concerns the meaningfulness of work. Taylorism always primarily valued efficiency of work, which has been detrimental to both workers and their experience of work (Lysgaard 1961; Zuboff 1988), and there are few indications that this will change under hyper-Taylorism. After all, the algorithms of these technologies do not necessarily reflect on or support what humans consider to be meaningful. In addition, as their traditional role changes, managers’ perceptions of their well-being may be discussed.

7.6 Takeaways In this chapter, we suggested that the new, so-called third-order technologies have transformed Taylorism, and we outlined the potential consequences of this transformation. There are two main takeaways from this chapter. First, when technologies are implemented, the work that humans do changes; that is, implementation of technology does not lead, necessarily, to job losses. Second, this change affects not only how the work is performed but also how ‘work’ is understood. This change is subtle and can be difficult to identify, but we would argue that it needs to be taken into account when planning and proceeding with implementation of new technologies. It might involve new job descriptions or purposeful and continuous consideration of the evolving nature of work practices. To summarise, there is more to post-digital work than what can be measured or translated into algorithmic form.

Acknowledgement This research was carried out within the Digitized management – what can we learn from England and Sweden? programme, financed by FORTE (grant no: 2016-07210).

References Bovens, M., and Zouridis, S. 2002. From street-level to system-level bureaucracies: How information and communication technology is transforming administrative discretion and constitutional control. Public Administration Review 62(2): 174–184. Braverman, H. 1974. Labor and Monopoly Capital – The Degradation of Work in the Twentieth Century. New York, NY: Monthly Review Press. Brown, P., Ashton, D., and Lauder, H. 2010. Skills are not enough: The globalisation of knowledge and the future UK economy, UKCES Praxis Paper No. 4, UK Commission for Employment and Skills, Wath-upon-Dearne. Brynjolfsson, E., and McAfee, A. 2014. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York, NY: W.W. Norton & Company.

Hyper-Taylorism in the post-digital era

71

Cramer, F. 2015. What is ‘Post-Digital’? In Postdigital Aesthetics, edited by David M. Berry and Michael Dieter, 12–26. London: Palgrave Macmillan. Dourish, P. 2016. Algorithms and their others: Algorithmic culture in context. Big Data and Society 3(2): 1–11. Floridi, L. 2013. Technology’s in-betweeness. Philosophy and Technology 26(2): 111–115. Frey, C.B., and Osborne, M.A. 2017. The future of employment: How susceptible are jobs to computerisation? Technological Forecasting and Social Change 114: 254–280. Gherardi, S. 2016a. Sociomateriality in posthuman practice theory. In The Nexus of Practices, edited by Allison Hui, Theodore Schatzki and Elizabeth Shove, 38–52. Abingdon: Routledge. Gherardi, S. 2016b. To start practice theorizing anew: The contribution of the concepts of agencement and formativeness. Organization 23(5): 680–698. Laurent, V. 2008. ICT and social work: A question of identities? In The Future of Identity in the Information Society, edited by Simone Fischer-Hübner, Penny Duquenoy, Albin Zuccato, and Leonardo Martucci, 375–386. Boston, MA: Springer. Lindgren, I., Madsen, C.Ø., Hofmann, S., and Melin, U. 2019. Close encounters of the digital kind: A research agenda for the digitalization of public services. Government Information Quarterly 36(3): 427–436. Lysgaard, S. 1961. Arbeiderkollektivet: en studie i de underordnedes sosiologi. Oslo: Universitetsforlaget. Orlikowski, W.J. 2007. Sociomaterial practices: Exploring technology at work. Organization Studies 28(9): 1435–1448. Orlikowski, W.J., and Scott, S.V. 2008. Sociomateriality: Challenging the separation of technology, work and organization. Academy of Management Annals 2(1): 433–474. Orlikowski, W.J., and Scott, S.V. 2016. Digital work: A research agenda. In A Research Agenda for Management and Organization Studies, edited by Barbara Czarniawska, 88–96. Cheltenham: Edward Elgar Publishing. Pepperell, R., and Punt, M. 2000. The Postdigital Membrane: Imagination, Technology and Desire. Bristol: Intellect Books. Reeves, T. 2019. A postdigital perspective on organisations. Postdigital Science and Education 1(1): 146–162. Rylander Eklund, A., and Simpson, B. 2020. The duality of design(ing) successful projects. Project Management Journal 51(1): 11–23. Schwab, K. 2017. The Fourth Industrial Revolution. New York, NY: Crown Publishing Group. Sundararajan, A. 2016. The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism. Cambridge, MA: The MIT Press. Taylor, F.W. 1911. The Principles of Scientific Management. New York, NY: Harper & Bros. Tilson, D., Lyytinen, K., and Sørensen, C. 2010. Research commentary – Digital infrastructures: The missing IS research agenda. Information Systems Research 21(4): 748–759. Woodcock, J., and Graham, M. 2019. The Gig Economy: A Critical Introduction. Cambridge: Polity. Zuboff, S. 1988. In the Age of the Smart Machine. New York, NY: Basic Books.

8

Why space is not enough Service innovation and service delivery in senior housing Petter Ahlström, Göran Lindahl, Markus Fellesson, Börje Bjelke and Fredrik Nilsson

The housing environment is our everyday space and place. It is in this space that we create memories and manifest ourselves through design, furnishing and location. The housing environment affects who we are and what we can do. It provides a means to achieve personal well-being and what we consider to be a good life. Therefore, we need to pay attention to the space available to us and our ability to make use of it. In this chapter, we discuss how the value of space (manifested in the building and its related services) can be increased for seniors. We show that digital services are important in this value creation process. We focus on the context of Sweden. Good living conditions and working environments, combined with regular exercise, have contributed to creating a relatively healthy elder generation in Sweden, where 93% of seniors are aged 75 years (or older) and are in good health; only 7% are multi-diseased (Eklund-Grönberg et al. 2009, with reference to policy document). Hence, this group of seniors have the ability to affect their quality of life and living conditions – both individually and in society at large. This is the starting point of our discussion on the development of senior housing solutions (i.e., the building and its services). It can be difficult for the housing industry to develop a good understanding of the needs of the growing population of relatively healthy seniors and to use that knowledge to develop buildings and services that create value for them (Abramsson 2015; Ahlström 2008). Cooperation among traditional sectoral borders (e.g., real estate developers, service providers and information technology firms) is required to identify novel ways to integrate buildings and physical resources with services. This type of collaboration can be problematic (Pirinen 2016); however, digital services and the associated technologies can be a catalyst of such developments (Akaka and Vargo 2014; Ekman et al. 2016). Below we elaborate on some of the challenges related to this endeavour by discussing service innovation and service delivery in senior housing. We provide several examples of the possibilities offered and the problems raised by digital services in the development we envisage. Our approach spans different and overlapping scientific disciplines which each contribute a unique perspective. We also cite some practical experiences from the DOI: 10.4324/9781003111245-8

Why space is not enough  73 senior housing industry. We believe strongly that a holistic and integrative approach is needed to explain why space is not enough in this context. The chapter is structured as follows. Section 8.1 describes the “new” seniors and their characteristics. Section 8.2 discusses the role of housing for well-being. Section 8.3 focuses on digital services in senior housing. Section 8.4 discusses service innovations and service delivery. We conclude in Section 8.5 with a discussion of why space is not enough and provide some takeaways from our investigation.

8.1 The “New Seniors” We use the term “new seniors” to highlight that this group is both increasing in size and is different from earlier elder groups. Medical science claims that, according to our genetic profile, we can expect to achieve 85 years of age. Our lifestyles are a crucial determinant for achieving an older age. In theory, our lifespan is estimated to be around 125 to 135 years; thereafter, according to the medical scientists, 100% mortality prevails. By the year 2060, the proportion of elderly people (i.e., those aged over 60 years) in the Swedish population is expected to reach approximately 25%. From an international perspective, average life expectancy in Sweden is high. At the time of writing, it is 81 years for men and 84 years for women. In 2014, Statistics Sweden (SCB) estimated that 500,000 Swedes were aged 80 years or older and forecast that, by 2040, this number would have increased to 1,000,000. The data show, also, that the elderly are a relatively well-off group (Kelfve and Abramsson, 2017; SOU 2015:85). Although individual variations are significant, it is reasonable to assume that there is a relatively large group of people – the “new seniors” – who are better-off financially and healthier than previous generations of elderly people in Sweden (see Jonsson 2018; Rizzuto et al. 2012). Therefore, we can assume that good health and the accumulation of wealth are drivers of senior housing development (Gudmundsson 2017; Salo 2019). For most people, ageing with dignity, good health and with an independent lifestyle is desirable. Unfortunately, many seniors face involuntary loneliness that causes depression, malnutrition and so on. Fortunately, these effects can be avoided through adaptations to care processes, buildings and services (Luanaigh and Lawlor 2008), including digital services (Hasan and Linger 2016; Pekkarinen et al. 2019). These solutions related to senior housing have the potential to support quality of life and well-being.

8.2 Senior housing and well-being Housing environment plays a fundamental role in our lives. As already noted, spaces and places are where our lives are manifested. Housing research has adopted a range of perspectives from design, including viewing

74  Petter Ahlström et al. housing as a right as well as a market commodity. This body of work suggests that physical space affects the housing experience (i.e., our living conditions and our feelings) and, ultimately, our quality of life. Research shows that the housing experience is influenced not only by physical space but also by social interaction with others, access to various services and so on (Aubert-Gamet and Cova 1999; Rosenbaum and Massiah 2011). Notably, digital services have propelled the rapid development towards an extended understanding of what constitutes space (e.g., a building). This is because digital services have worked to reduce the spatial constraints traditionally associated with access services, resources and social interactions and, at the same time, being embedded in new spatial configurations. Digital services have turned our homes into workplaces, cinemas, libraries and shops and enabled remote control of heating, kitchen utilities, lights and so on. Reciprocally, if there were no spaces in which to apply these functions, these digital services would not have been developed. For the new seniors, well-being seems to be related to the ability to experience and act and, especially, to how elderly people experience the usefulness of housing solutions (Lindenfalk and Imre 2019; Verma 2019). Of prime importance are how they experience safety and the ability of suppliers to adapt functions to suit seniors’ needs. Currently, this experience is related largely to digital services, from functions such as management of lighting to managing to book a visit from a maintenance technician. The experience is also related to more traditional technical, functional and aesthetic qualities of the senior housing solution. All of the technical functions discussed above are related to how the built environment is structured, technically organised and serviced. In other words, the building’s technical status affects facilities management and, ultimately, running costs. The technical aspects of the building and its maintenance also directly affect how seniors experience the building. For example, it is relatively easy to design and deliver an effective and – construction-wise – sophisticated entrance to a building employing all available digital services (e.g., entrance communication and security solutions). However, if there are no benches in the entrance to allow seniors to sit before entering or leaving the building, this can be a cause of dissatisfaction. Similarly, when and how snow is cleared in the winter has multiple consequences for seniors (e.g., lack of access, risk of slipping, reduced possibilities to go outside).

8.3 Digital services in senior housing In contemporary service and marketing research, value is considered to be created by resources being combined, integrated and applied by endusers (Grönroos and Voima 2013) within complex systems of actors and resources (Lusch and Vargo 2014). Therefore, in the context of senior housing, a service perspective is in line with the notion of space as multifaceted and

Why space is not enough  75 unfolding. The service perspective complements this view by emphasising the centrality and capacity of the housing user, and the importance of viewing resources, such as buildings and services, as a means to create value in daily life processes and not as ends in themselves. This is particularly important when considering the introduction of digital services (see Pekkarinen et al. 2019) which have the potential to alter the way seniors interact with other resources and other people. For example, a digitalised booking and surveillance system that regulates the density of people in hallways and common areas would reduce exposure of seniors to viruses. This example shows, also, that space is a place where digital and other types of services are enacted. Inevitably, we are “somewhere” when we use or co-create a service. If we transfer this reasoning to a senior housing context, the co-creation of services would contribute to an experience of service excellence. Thus, service delivery is co-created, and this co-creation is what creates value for the senior. This argumentation is reflected in the model proposed by Lindenfalk and Imre (2019) which considers value creation to be down to choice. The authors claim that, if the senior chooses not to use a digital service or chooses to use it in a way that was not intended, this will be harmful to the co-creation. They conclude that the senior’s understanding of a digital service is reflected in their experience of its value (see also Pekkarinen et al. 2019). This implies that digital services can be viewed and appreciated differently. Furthermore, co-creation is related to the space and place in which it is delivered. Hence, a digital service will be experienced differently depending on whether it is delivered in your home or in a hospital, for instance. Digital services can also be viewed as either directly targeting physical resources or assisting the use and experience of these resources. For example, a digital service to control the lights in a building might be designed from a supporting or a monitoring perspective. The ability to manage one’s own lights remotely differs fundamentally from their management by a facilities support centre and has different implications for the well-being and quality of life. Successful service innovation requires integrating digital services in senior housing in such a way that services are experienced as a supporting function that doesn’t violate privacy or individual control or perceived as out of reach (Gudmundsson 2017; Salo 2019) or inaccessible. In addition, a senior who is capable and active might consider digital services used to help people with special needs as something that is not value-creating. This applies, also, to the design of physical facilities in senior housing. In line with the model in Lindenfalk and Imre (2019), a spatial solution can be experienced as a possibility or as a hindrance. A children’s playground can be experienced as enjoyable when you are able to choose whether to enjoy it; in contrast, it can be a nuisance for someone confined to their apartment and unable to choose the extent of their exposure to the sound of happily playing kids.

76  Petter Ahlström et al.

8.4 Service innovation and service delivery in senior housing From the discussion so far, it follows that the value of senior housing solutions come from how well they fit with and support the individual/personal needs of seniors. Commercially, this requires a shift away from welldelineated traditional housing products towards a holistic experience of the entire customer process. This shift in perspective has two consequences: First, service innovation and value creation become multidimensional, transcending organisational borders and involving a multitude of actors. The value creation experience related to senior housing derives from a network of resources and services, ranging from the building’s architectural and functional qualities – via maintenance, domestic and home care services – to the availability of additional resources and services (e.g., restaurants, shops, transportation and cultural activities). Less tangible resources, such as friends and neighbours, are also important for the outcome of the value-creating process. All of these resources can be derived from private sources (self, family, friends), from the market in the form of goods and services (which in themselves are combinations of resources) and from various public sources. Together, these resources form dynamic and continuously evolving configurations that enable the daily life of the seniors and determine its quality. Importantly, these configurations (or service systems, see Vargo et al. 2008), and the value they give rise to, ultimately are defined from the seniors’ point of view. However, innovative actors can enhance the value-creating capacity of the system by reconfiguring it and adding new resources. Senior housing that caters for the complex needs of age optimisation is an example of such innovative reconfigurations. Second, value is created in use, when resources are integrated and deployed by users in their consumption activities (Grönroos and Voima 2013). Seniors create value by using the senior housing resources in their daily lives in combination with other resources such as digital services. Thus, it is within the context of their daily lives that senior housing solutions become valuable to users. In line with the view on age and ageing discussed previously, the service perspective positions senior users not as a passive recipient of predefined values delivered by some other but as competent and active subjects, capable of developing their own unique value-creating processes with the help of the resources available to them. Thus, what is provided is the opportunity for quality of life, not actual quality of life, and the opportunity for capable seniors to realise this quality. However, this is not to imply that the benefits depend on the senior user or that there is no room for service-oriented entrepreneurship and business development within the sector. On the contrary, we see an urgent need for business actors who are able to envision and implement innovative service concepts at the systems level across functional and organisational borders and with the senior customer as an active partner and not as a passive recipient. Co-creation based on new service concepts and business models will be

Why space is not enough  77 an important facilitator of such development. These new concepts are often driven by novel digital services, that is, innovations that reconfigure both the service system in terms of resources and the actors’ roles, including the role of a senior housing customer. A service perspective helps to structure these novel concepts and points to various ways that companies can become more involved in and contribute better to customers’ value creation processes, rather than being mere providers of resources. As already pointed out, digital services can be a significant driver of these developments and in several ways. Of particular importance are digital services that directly support and strengthen the capacity of seniors to engage actively in value creation, that is, to actually use the resources available (Pekkarinen et al. 2019; Yang et al. 2015). Well-designed digital services that integrate seamlessly into the daily lives of seniors might work to offset some of the physical and mental impairments that accompany old age and which otherwise would make a particular housing solution unsuitable. Furthermore, several of the resources known to contribute to quality of life for seniors are dispersed in personal and societal networks and may not be commercially available, but must be provided by the seniors themselves. Therefore, digital services that actively stimulate customer value creation activities and integration of the resources are crucial from a strategic company perspective and for enhanced quality of life. This can include securityenhancing technologies (e.g., physical surveillance and health-monitoring technologies) and platforms to manage the complexities of the resource network and tools enabling internal and external communication and socialisation (e.g., Hasan and Linger 2016; Karlsen et al. 2019; Pekkarinen et al. 2019). Such digital services have the potential not only to provide value-inuse but also to increase and capture the overall value- creating capacity of the senior customer.

8.5 Why space is not enough A basic function of our spaces is to enable and support quality of life for seniors. This does not occur serendipitously; rather, it has been given consideration when planning the built environment. The spaces used and how they are managed will affect the extent to which they enable or support the intended outcomes. Based on the biological and lifestyle-based conditions prevailing in the environment, different behaviours and uses will develop (Saarloos et al. 2009). Access to social meeting places provides opportunities for social activity, an important factor in a dynamic living environment for supporting quality of life for seniors. To accommodate this broad impact of the physical environment, we have drawn on insights and experiences from different fields of research and practice. We highlighted the dynamics of ageing which set biological age against the theoretical optimal age. We described this as “age optimisation,” a concept that links knowledge between different fields such as geriatrics and health, service design, architecture and

78  Petter Ahlström et al. real estate economics in order to lay the foundations for innovative service development and delivery in senior housing. Even the most basic functional aspects of housing have relevance for use of senior housing for age optimisation. The width of door frames, size of bathrooms, number of stairs, lighting and ease of orientation are a few such functional aspects. We would stress the usability concept to describe senior housing and that, ultimately, the value of a specific functional aspect is related to how well it satisfies the user. Along these lines, digital services can add to the usability of a housing solution, as a feature in its own right and as a supportive and enabling tool that increases seniors’ capacity to use other resources. As housing-related digital services become integrated in our everyday living, their usability becomes crucial, not only for how a particular housing configuration is functioning but also for well-being more generally (Carlsson and Walden 2015). This highlights that for a digital service to contribute to value creation it is required that it be adapted to the needs of seniors, which should be achieved through their participation in a co-creation process that encompasses not only the use of service but also its design and planning phases (Gudmundsson 2017; Pirinien 2016; Salo 2019). It is important, also, to recognise that many digital service solutions focus on supporting social interaction through message and picture managing techniques, an approach that might be seen as reducing the need for physical social interaction. However, it should rather be considered as one among several ways of “meeting,” where the place and space are a part of the digital service that supports social interaction. In other words, even digitally mediated social interactions require a physical setting that is at the same time defined and redefined by digital services attached to it. Similar to digital services in general, availability of digitally mediated social interactions adds value to spaces rather than diluting it. Were this not so, there would be no value to be gained from the use of social media platforms and applications, and simple text messaging would be sufficient. This brings us back to research on facilities management – one of today’s big challenges, that is, how to facilitate co-creation and value in use for new seniors and, in so doing, contribute to service innovation and delivery. In this chapter, we have argued that the complex processes of optimised ageing and seniors’ well-being require system-thinking and holistic solutions that put the seniors centre stage and make them responsible for their own value creation. We identified digital services as a key enabling factor for service innovation and delivery within this field that offers opportunities for both traditional housing service providers and new entrants to the market.

8.6 Takeaway Senior housing supports the well-being of seniors by making physical and social resources available. We have shown how digital services contribute to these developments. First, they increase the resources available. Second,

Why space is not enough 79 they increase the capacity of seniors to integrate resources and take advantage of the value-creating opportunities offered by senior housing solutions. Thus, seniors have a crucial role to play as active co-creators of their own well-being and contributors to both service innovation and service delivery. Although digital services have provided seniors with the means to interact and meet, this does not mean that the physical space has lost its importance. On the contrary, as digital services become essential in seniors’ lives, they need to be integrated in physical spaces. This is where the actions and memories that shape the lives of seniors take place, and digital services have the potential to both create and deliver new services that will enhance their experience. The integration of digital services with physical space is an important and inseparable component of service innovation and delivery in senior housing.

References Abramsson, M. 2015. Äldres bostadsval och preferenser – en sammanställning av aktuell forskning (ʻElderly housing choices and preferences – a compilation of current researchʼ). Nationella institutet för forskning om äldre och åldrande (NISAL), Institutionen för samhälls- och välfärdsstudier, Linköping University. Ahlström, P. 2008. Strategier och styrsystem för seniorboendemarknaden (ʻStrategies and control systems for the senior housing marketʼ). Linköping: Institutionen för ekonomisk och industriell utveckling, the Institute of Technology at Linköping University. Akaka, M.A. and Vargo, S.L. 2014. Technology as an operant resource in service (eco)systems. Information Systems and e-Business Management 12(3): 367–384. Aubert-Gamet, V. and Cova, B. 1999. Servicescapes: From modern non-places to postmodern common places. Journal of Business Research 44(1): 37–45. Carlsson, C. and Walden, P. 2015. Digital wellness for young elderly: Research methodology and technology adaptation. In Proceedings of the 28th Bled eConference #eWellBeing, June 7–10, 2015, Bled, Slovenia. Eklund-Grönberg, A., Köhler, M., Ekdahl, A., Modin, S. and Sjöberg, A. 2009. Bättre vård för multisjuka äldre. Läkartidningen 106(40): 2512–2513. Ekman, P.C., Raggio, R.D. and Thompson, S.M. 2016. Service network value co-creation: Defining the roles of the generic actor. Industrial Marketing Management, 56(July): 51–62. Grönroos, C. and Voima, P. 2013. Critical service logic: Making sense of value creation and co-creation. Journal of the Academy of Marketing Science 41(2): 133–150. Gudmundsson, M. 2017. Aging-in-place with ICT: A qualitative study of senior citizen users’ perception and acceptance towards smart home technology. Unpublished Master’s Thesis, Linnaeus University, Växjö. Hasan, H. and Linger, H. 2016. Enhancing the wellbeing of the elderly: Social use of digital technologies in aged care. Educational Gerontology 42(11): 749–757. Jonsson, H. 2018. Äldres boendeekonomi (‘Elderly’s housing economics’), Boverket, Rapportnummer 2018:19, Karlskrona. Karlsen, C., Moe, C.E., Haraldstad, K. and Thygesen, E. 2019. Caring by telecare? A hermeneutic study of experiences among older adults and their family caregivers. Journal of Clinical Nursing 28(7–8): 1300–1313.

80

Petter Ahlström et al.

Kelfve, S. and Abramsson, M. 2017. Äldres materiella förhållanden (ʻThe material conditions of the elderly’). In Abramsson, M., Hydén L.-C. and Motel-Klingebiel, A. (eds), Vem är den äldre – Äldrebilder i ett åldrande Sverige (‘Who is the elderly? Pictures of the elderly in an aging Sweden’). Nationella institutet för forskning om äldre och åldrande (NISAL), Institutionen för samhälls- och välfärdsstudier, Linköping University, pp. 15–24. Lindenfalk, B. and Imre, Ö. 2019. Narratives of value co-creation: Elderly´s understanding of their own role in the value creation process. In Proceedings of the 27th European Conference on Information Systems (ECIS), June 8–14, 2019, Stockholm and Uppsala, Sweden. Luanaigh, C.Ó. and Lawlor, B.A. 2008. Loneliness and the health of older people. International Journal of Geriatric Psychiatry 23(12): 1213–1221. Lusch, R.F. and Vargo, S.L. 2014. The Service-Dominant Logic of Marketing: Dialog, Debate, and Directions. London: Routledge. Pekkarinen, S., Melkas, H. and Hyypiä, M. 2019. Elderly care and digital services: Toward a sustainable sociotechnical transition. In Toivonen, M. and Saari, E. (eds), Human-Centered Digitalization and Services (Vol. 19). Singapore: Springer, pp. 259–284. Pirinen, A. 2016. The barriers and enablers of co-design for services. International Journal of Design 10(3): 27–42. Rizzuto, D., Orsini, N., Qiu, C., Wang, H.-X. and Fratiglioni, L. 2012. Lifestyle, social factors, and survival after age 75: Population based study. British Medical Journal, doi.org/10.1136/bmj.e5568. Rosenbaum, M.S. and Massiah, C. 2011. An expanded servicescape perspective. Journal of Service Management 22(4): 471–490. Saarloos, D., Kim, J.-E. and Timmermans, H. 2009. The built environment and health: Introducing individual space-time behavior. International Journal of Environmental Research and Public Health 6(6): 1724–1743. Salo, S. 2019. Technological solutions for an ageing population: New perspectives and opportunities for business development. Unpublished Master’s Thesis, Hämeenlinna University Centre. SOU 2015:85. 2015. Bostäder att bo kvar i. Bygg för gemenskap i tillgänglighetssmarta boendemiljöer (ʻHousing to stay in. Build for togetherness in accessibility-smart living environments’), Stockholm. Vargo, S.L., Maglio, P.P. and Akaka, M.A. 2008. On value and value co-creation: A service systems and service logic perspective. European Management Journal 26(3): 145–152. Verma, I. 2019. Housing design for all? The challenges of ageing in urban planning and housing design – The case of Helsinki. Diss. 123/2019. Helsinki: Aalto University School of Arts, Design and Architecture, Department of Architecture. Yang, Q.Z., Miao, C.Y. and Shen, Z.Q. 2015. Digital services innovation for agingin-place. In Proceedings of 2015 IEEE International Conference on Industrial Engineering and Engineering Management (IEEM), (pp. 659–573), December 6–9, 2015, Singapore.

9

Challenges in implementing digital assistive technology in municipal healthcare Ann Svensson, Linda Bergkvist, Charlotte Bäccman and Susanne Durst

9.1 Digital assistive technology and healthcare Globally, we face challenges related to finding the means to meet the needs of an increasing number of persons in need of healthcare. An ageing population and the number of people living with chronic disease and/or disabilities have led to higher healthcare costs, which will continue to increase in future decades. Also, many older people are wanting to continue to live independently at home for as long as possible. The use of digital assistive technology (DAT) is considered a solution to these challenges (Johansen and Van den Bosch 2017; WHO 2018). DAT provides the healthcare sector with a range of digital solutions, such as safety alarms, camera surveillance and medication reminders, to facilitate the everyday lives of both older people and people in need of care (Gücin and Berk 2015; Svensson 2020). Several studies show that DAT contributes to longer life and greater ability to live independently (e.g., Flandorfer 2012; Öberg and Rolfer 2017). According to Glomsås et al. (2020), DAT contributes to several healthcare aspects, which create value for its users, such as safety, security, wellness, mobility, social and cultural contact and participation, and contribute to their treatment and care. As research on DAT implementation is in its infancy, the implications of DAT have yet to emerge. For example, little is known about how to incorporate DAT in work processes to create value. A recent study by Bäccman et  al. (2020) shows that the user value of DAT differs across user groups, which highlights the importance of investigating DAT and its usefulness from different user perspectives in order to fully understand its value. However, any implementation is accompanied by challenges. In the healthcare context, healthcare personnel may fear being replaced, which could cause resistance to DAT and its implementation (Tiwari et  al. 2010). Healthcare organisations’ lack of facilitation of learning and development may also impede different actors’ perception of the value created by DAT (e.g., Shubber et al. 2018; Gjellebæk et al. 2020a, 2020b). To address the multiple challenges involved, the technology implementation literature (e.g., Ross et al. 2016) stresses the necessity of early involvement of key actor groups DOI: 10.4324/9781003111245-9

82  Ann Svensson et al. (e.g., patients, personnel and managers) in the implementation process. Hence, a multi-actor perspective would allow a better understanding of how different actor groups perceive DAT and the issues that arise in the different phases of the implementation process and especially in the early phases of implementation. The aim of this chapter is to enhance the current understanding of the early (preparation) phase of DAT implementation and to investigate the challenges experienced by different actor groups in municipal healthcare.

9.2 The cases – the Nordic context for digital assistive technology implementation The chapter is based on two independent case studies. Both were part of a longitudinal project on DAT implementation in Swedish and Norwegian municipalities. The Swedish and Norwegian healthcare systems are similar in their organisation and structure. The healthcare services are publicly owned and operated and financed through taxes; this approach to public healthcare is described as the Scandinavian or Nordic Model (Kemp and Hvid 2012). In both countries, municipalities are responsible for the provision of care services, including homecare, regardless of the resident’s age, gender or socioeconomic status. Thus, the main responsibility for elderly care is at the municipal level. Both case studies have a multi-actor perspective and include: older people who need regular care by a person and/or DAT, either in their homes or in assisted living facilities; healthcare personnel, that is, individuals working on the frontline with older people, with skills and competences for using DAT (henceforth personnel); healthcare managers, that is, individuals responsible for the planning of personnel and/or DAT implementation and use (henceforth managers); and information technology (IT) staff, responsible for the technological platform enabling the DAT. The IT staff are responsible, also, for supporting the implementation and use of DAT. One of the cases focuses more on the general preparedness phase, in which some of the actors had experience of DAT and some did not. This case was aimed at exploring the challenges related to change management, as well as challenges experienced by different actor groups and their attitudes to implementation of DAT, for example, surveillance cameras and e-commerce solutions. The other case involved the introduction and testing of a specific new DAT, a robotic shower, and was aimed at understanding users’ expectations and experience of DAT and identifying challenges related to its implementation. Despite their slightly different focus, both cases involved the early preparatory implementation phase where the prevailing conditions were exploratory.

Digital assistive technology  83

9.3 Implementation of digital assistive technology The introduction of DAT in elderly care is aimed at improving and sustaining quality of life for older people, but its introduction provides opportunities as well as challenges at both the individual and the organisational levels (Glomsås et al. 2020). For example, the introduction of DAT may affect work practices. Indeed, the influence on existing work practices is the single most important factor in DAT implementation success. Personnel may lack the knowledge and skills needed to fully utilise the DAT (Dugstad et al. 2019). At the organisational level, DAT may change the structures and processes related to the provision of services. Many studies within the healthcare area employ the Technology Acceptance Model (TAM; Davis 1989) or some version of it to understand how technology is adopted within healthcare (e.g., Yarbrough and Smith 2007; Aggelidis and Chatzoglou 2009; Shubber et al. 2018). However, these studies focus mostly on the implementation and adoption of IT. Bäccman and Bergkvist (2019) argue that the TAM may not be appropriate for all types of DAT since the technology may change the service provision work and daily routines. In their paper, the authors not only show the transformative impact of DAT on healthcare for older people but also show how this transformation increases the difficulty among personnel to anticipate and understand needs. A study by Gjellebæk et al. (2020a) emphasises professionals’ attitudes to digitalisation and considers DAT to be a barrier to successful implementation. Another aspect is fear that the technology will replace human contact. Several studies show that both personnel and older users prefer personal contact to DAT (Hofmann 2013). Older people are susceptible to social isolation, and many fear that technology will increase their feeling of loneliness and social isolation. However, Bäccman and colleagues (2019, 2020) found that interpersonal contact did not disappear – it just changed. It seems that DAT can involve a transformation to the work situation and the service provision that goes beyond mere adoption of a technological solution. Hence, we argue that a new mind-set, new work practices and new roles and professions are needed for successful digital transformation of healthcare. Implementation of DAT is about transformation and can be disruptive (Bäccman and Bergkvist 2019; Dugstad et al. 2019; Bäccman et al. 2020; Svensson 2020). It is important to know how the disruptive nature of the DAT affects its adoption and implementation. One of the most popular frameworks used to study implementation of healthcare solutions is the Consolidated Framework for Implementation Research (CFIR) (Damschroder et al. 2009). CFIR has been shown to be useful to guide the implementation process of various interventions in healthcare settings (Ross et al. 2016). It includes five main categories. Innovation characteristics refers to the adaptability of the technology to the local context and its complexity in use situations; inner settings refers to the general fit between the technology and the organisation;

84  Ann Svensson et al. contextual settings refers to legislation and standards; and individual characteristics refers to attitudes, beliefs, skills and abilities. The fifth category includes the phases of the implementation process. These five categories have persisted over time in relation to explaining the difficulties involved in implementing e-health applications (Ross et al. 2016). However, we know little about their role in the case of implementation of DAT more broadly. DAT implementation is a complex process in which many aspects play vital roles. DAT has been perceived as novel and hard to adopt since it disturbs and changes prevailing work practices and daily routines. Also, DAT transforms care and nursing work to a profession that requires technological skills. In addition, the implementation of healthcare interventions often lacks a strategic plan related to the diffusion of the DAT, which complicates its adoption in work practices and daily routines (Desveaux et  al. 2019). Therefore, we argue that research on technology implementation in healthcare needs to be more nuanced to suit the context of DAT implementation. We argue, also, that due to the disruptive nature of DAT, in the early phase of the implementation process, the role of actor groups will be particularly important. By investigating how different actor groups perceive DAT and their experience of implementing DAT, this chapter contributes to filling these knowledge gaps. In addition to confirming previous research (e.g., Ross et al. 2016; Hamblin 2020), this chapter provides new insights into the early phase DAT implementation challenges, at both the organisational and individual levels, and as a complex innovation. It shows how the absence of standards and policies can hamper the collaboration across actor groups required to implement a disruptive technology such as DAT.

9.4 Challenges to the implementation of digital assistive technology The two cases provide insights into the preparatory phase, that is, the phase immediately preceding actual implementation. The presentation and discussion are inspired by the CFIR categories (Damschroder et al. 2009) of complex innovation characteristics, external policy and incentives, organisational characteristics and individual characteristics. 9.4.1 Complex innovation characteristics End-user input in the design and development of DAT facilitates adoption of the technology (Ross et  al. 2016). Thus, users should be provided with opportunities for involvement in the context, to promote empowerment, democratisation and job satisfaction among personnel (Glomsås et al. 2020). However, we found that DAT often is implemented without user involvement, which can result in the users experiencing difficulties related to its operation and interfaces which are difficult to learn or are not intuitive. In the worst case, this leaves the user unable to master the technology. It is

Digital assistive technology  85 important to consider the user’s technological readiness since this has implications for adoption. In our study, some of the older people did not own a smartphone of any kind. Also, the instructions for using the DAT were not adapted to the local context, as demonstrated by the implementation studies of a surveillance camera (see Section 9.4.3). One of the main factors for technology adoption failure is that users find the technology difficult to use (e.g., Dugstad et al. 2019), and this was evident in our study. The user interfaces need to be simple and intuitive. The IT staff stresses that DAT has to be easy to learn and to use and reliable. Now there are too many pitfalls in trying to implement a new DAT, and the IT staff has to support both the older people and the personnel working with the DAT. Ease of use can be a barrier to user acceptance and promote a negative attitude towards the DAT (Gjellebæk et al. 2020a). 9.4.2 External policy and incentives The reason for introducing DAT in municipal healthcare is obvious and is related to both economic and social gains in terms of quality of life (Glomsås et al. 2020). Managers expressed the desire to implement more of DAT features to increase safety and independence for older people. However, successful implementation depends on the conditions in the wider environment, beyond the municipality, for example, the digital infrastructure. Not all older people have access to broadband or the digital identification applications required by some Internet-based services. Thus, provision of DATs to all older people is impossible due to unequal societal differences (cf. Hamblin 2020). Conditions can vary across municipalities, and managers are not always aware of the situation in their municipality. Since DAT is a new technology, responsibility for decisions about its implementation and the type of DAT to use are somewhat unclear. This is another barrier to DAT implementation. Absence of a DAT strategy results in confusion related to who can prescribe a DAT (managers, occupational therapists or some government department) and how it will be financed. The municipalities do not have access to the full range of DATs available, and some are provided by the regional healthcare organisations, for example, many cognitive aid technologies. In line with the review by Ross and colleagues (2016), our cases confirm that the absence of standards, legislation and policies hamper the implementation of DAT. Standards provide personnel with information about how to manage patient data and to ensure integrity and safety and information on professional liability and how data can be transferred between organisations and systems. Confidentiality and privacy issues were mentioned by IT staff as posing problems. In particular, system-driven access to information and communication and sharing of information have been found to be difficult in a wide range of healthcare organisations, from hospitals to primary healthcare, municipality healthcare and pharmacies. Our cases

86  Ann Svensson et al. show that lack of standards and policies on aspects such as confidentiality, information sharing and storage hamper not only the implementation of DAT but also the collaboration across different actors and between organisations and systems. 9.4.3 Organisational characteristics DAT seems to have a transforming effect on work practices, a finding that contrasts with research on the implementation of e-health applications (Ross et al. 2016), which stresses the importance of a fit between the technology and existing work practices. However, this transformation requires support from managers and a well-constructed work practice strategy (Gjellebæk et al. 2020b). We observed the implementation of surveillance equipment to replace some face-to-face visits and save on long car journeys. The surveillance equipment promised increased efficiency and greater safety and security for older users. However, there was a lack of clarity about the response to an alarm and lack of consideration that some might be false alarms. The increasing number of alarm signals and how to deal with them with the current workforce caused a major worry for managers. It would seem that DAT cannot completely replace personnel visits and that, in the absence of a new work organisation, the introduction of new technology can add to the current workload rather than reducing it. Thus, municipalities face major issues in the implementation and adoption of DAT (Gjellebæk et al. 2020a). At the very least, it requires a detailed implementation plan, and it may also involve a total reorganisation to create a structure that allows for the learning and collaboration necessary to implement the DAT successfully. Also, since the use context of the DAT will vary (e.g., an assisted living facility, a specific area of care, a specific population), the actors involved may face different challenges depending on the context and the provisions, which may require implementation plans designed around, or adapted to, specific user needs based on the types of services an organisation may provide. Another challenge related to the organisation implementing the DAT can be a competence gap. Working in the healthcare sector increasingly involves use of technology, but personnel’s technological skills vary. Managers are aware that some may perceive DAT as a threat and fail to see the opportunities it provides (Svensson 2020). Lack of competence to use DAT creates a precarious situation, since the personnel are responsible for making sure that the DAT has a positive effect on older users. However, when older people and their kin request for DAT-oriented services, it forces managers to design and implement DAT-driven work practices even when they are fully aware of the lack of technological competence of the personnel in the healthcare organisation. The IT staff responsible for supporting the personnel may again lack knowledge about the care context; this knowledge gap highlights the importance of teaching the care personnel about

Digital assistive technology  87 how to use the technology to its optimum potential in service provision. It is possible that the introduction of DAT may require municipal healthcare organisations to learn or acquire a new set of technology skills to achieve complete transformation of service provision. Despite their different competences and technological skills, all the actor groups in our cases stressed the importance of access to knowledge and information for the implementation of DAT (cf. Ross et al. 2016). Successful implementation of DAT and improving the efficiency with which it is used call for creating and sustaining a tech-oriented work environment that helps personnel learn to use technology to the optimum level and provide services efficiently; this is something new to the healthcare sector (Gjellebæk et al. 2020b). The competence gap and fast technological development create a situation where it is difficult to rearrange work practices and create opportunities for personnel to learn about the DAT (Gjellebæk et al. 2020b). It is possible that the existing boundaries between different professional competencies, technology and healthcare may need to be integrated to form a new healthcare profession. Municipal healthcare organisations will need to develop new skills and competences or upskill (or unlearn) extant skills and competences to increase the likelihood of successful implementation of DAT (Wilbert et al. 2018). The lead staff at the municipality level and human resources department staff should identify the conditions required for a learning and knowledge-sharing work culture, which brings together different actor groups to produce a shared vision. Different skills will be required to enable an overall implementation strategy combined with a top management mandate related to strategy. 9.4.4 Individual characteristics As already mentioned, the different users in municipal healthcare have different technological skills and competences and very few personnel have deep knowledge about types of DAT and how it could increase and support quality of life for older people. Many older users in our case studies had no experience of DAT and were not comfortable with using digital devices. However, both the older people and the personnel were generally positive about technology and the implementation of DAT in particular. The most positive attitudes were among younger personnel and those with previous experience of working with DAT (Gjellebæk et al. 2020a). Personnel with the opportunity to co-create their work practice with the DAT were especially positive and engaged (Dugstad et al. 2019). The organisational-level competence gap was emphasised by the personnel themselves; they recognised the need for education and training in how to use and manage the DAT. This relies, currently, on a peer-to-peer system; a few personnel receive specific training and are responsible for training colleagues. Since attitudes to DAT can vary, the success of this method also varies since negative attitudes can get passed on (Gjellebæk et  al. 2020a).

88  Ann Svensson et al. However, in most cases, personnel had to work out for themselves how to use the DAT and rely on information obtained from the Internet. Continuous information reduces worry and misconceptions about DAT and its uses and emphasises that individual involvement is important for successful implementation (Gjellebæk et  al. 2020a). It is important that actor groups are able to continuously communicate and collaborate, that information flows are open and transparent and that users can monitor implementation of each specific DAT (Gjellebæk et  al. 2020b). Thus, in line with knowledge management theory, continuous creation, sharing and updating of knowledge and information, should be a natural part of the learning process (Svensson and Durst 2020). To reap the intended value of DAT requires the resolution of various individual-level challenges. They include information flow, and provision of education and training in different DAT, to allay fear and compensate for inexperience, both of which can have a negative effect on the adoption of DAT (Gjellebæk et al. 2020a). The likelihood of success will increase if all actor groups are involved in implementation from the beginning since this seems to increase rates of actor acceptance and engagement (Bäccman et al. 2020).

9.5 Takeaway By studying DAT implementation from a multi-actor perspective, this chapter adds to the understanding of technology implementation and research in healthcare. By focusing on the people involved in the implementation process, the cases discussed in this chapter provide new insights that could help overcome some of the challenges associated with technology implementation. By investigating different actor groups and their specific challenges and roles, this chapter adds to the understanding of the prerequisites for the successful implementation of DAT. DAT transforms not only work practices and daily routines but also the entire healthcare profession, from being primarily concerned with caring and nursing, to a profession involving technological skills. Successful digitalisation of healthcare requires a new mind-set, new work practices and new roles and professions. The challenges identified could serve as enablers and/or inhibitors in this transformation and provide insights into how DAT implementation can be managed.

Acknowledgements The authors thank the Karlstad Health and Care Administration in Sweden and the personnel and residents in an assisted living facility for their cooperation and participation. The authors also thank the managers and professionals in the municipalities of Fyrbodal, Sweden and Viken, Norway. The project was supported by the European Regional Development

Digital assistive technology 89 Fund through Interreg Sweden – Norway. We are grateful to Catharina Bjørkquist, Nina Fladeby, Camilla Gjellebæk, Kerstin Grundén, Lena G Larsson and Helena Vallo Hult for their help with collecting the data.

References Aggelidis, V.P. and Chatzoglou, P.D. 2009. Using a modified technology acceptance model in hospitals. International Journal of Medical Informatics 78(2): 115–126. Bäccman, C. and Bergkvist, L. 2019. Welfare technology and user experience: A study of seniors’ expectations on and first impressions of a robotic shower. Proceedings of the 52nd Hawaii International Conference on System Sciences, Honolulu: University of Hawaii at Manoa: 4297–4306. Bäccman, C., Bergkvist, L. and Kristensson, P. 2020. Elderly and care personnel’s user experiences of a robotic shower. Journal of Enabling Technologies 14(1): 1–13. Damschroder, L.J., Aron, D.C., Keith, R.E., Kirsh, S.R., Alexander, J.A. and Lowery, J.C. 2009. Fostering implementation of health services research findings into practice: A consolidated framework for advancing implementation science. Implementation Science 4(1): 1–15. Davis, F.D. 1989. Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly 13(3): 319–340. Desveaux, L., Soobiah, C., Bhatia, R.S. and Shaw, J. 2019. Identifying and overcoming policy-level barriers to the implementation of digital health innovation: Qualitative study. Journal of Medical Internet Research 21(12): e14994. Dugstad, J., Eide, T., Nilsen, E.R. and Eide, H. 2019. Towards successful digital transformation through co-creation: A longitudinal study of a four-year implementation of digital monitoring technology in residential care for persons with dementia. BMC Health Services Research 19(1), 366: 1–17. Flandorfer, P. 2012. Population ageing and socially assistive robots for elderly: The importance of sociodemographic factors for user acceptance. International Journal of Population Research, 829835: 1–13. Gjellebæk, C., Svensson, A. and Bjørkquist, C. 2020a. The dark sides of technology – barriers to work-integrated learning. In Augmented Cognition. Human Cognition and Behavior, edited by Schmorrow, D.D. and Fidopiastis, C.M., 69–85, Switzerland: Springer Nature. Gjellebæk, C., Svensson, A., Fladeby, N., Bjørkquist, C. and Grundén, K. 2020b. Management challenges for the future digitalisation of healthcare services. Futures 124(102636): 1–10. Glomsås, H.S., Knutsen, I.R., Fossum, M. and Halvorsen, K. 2020. User involvement in the implementation of welfare technology in home care services: The experience of health professionals – A qualitative study. Journal of Clinical Nursing 29(21–22): 1–13. Gücin, N.Ö. and Berk, Ö.S. 2015. Technology acceptance in health care: An integrative review of predictive factors and intervention programs. Procedia − Social and Behavioral Sciences 195: 1698−1704. Hamblin, K. 2020. Technology and social care in a digital world: Challenges and opportunities in the UK. Journal of Enabling Technologies 14(2): 115–125. Hofmann, B. 2013. Ethical challenges with welfare technology: A review of the literature. Science and Engineering Ethics 19: 389–406.

90

Ann Svensson et al.

Johansen, F. and van den Bosch, S. 2017. The scaling-up of neighbourhood care: From experiment towards a transformative movement in healthcare. Futures 89: 60–73. Kemp, A. and Hvid, H.S. (Eds.) 2012. Elderly care in transition: Management, meaning and identity in work – A Scandinavian perspective. Copenhagen: Copenhagen Business School Press. Öberg, A.D. and Rolfer, B. 2017. Välfärdsteknologi handlar inte om teknik utan om människor – tekniksprång i nordisk demensvård. Nordens välfärdscenter [Digital assistive technology is not about technology but about people – disruptive technology in Nordic Dementia Care], http://nordicwelfare.org/PageFiles/41831/ Demens-inspirationsha%cc%88fte- webb.pdf (accessed December 10, 2019). Ross, J., Stevenson, R.L. and Murray, E. 2016. Factors that influence the implementation of e-health: A systematic review of systematic reviews (an update). Implementation Science 11(1), 146: 1–12. Shubber, M., Östlind, T., Svensson, A. and Larsson, L.G. 2018. Acceptance of video conferencing in healthcare planning in hospitals. Proceedings of 24th Americas Conference on Information Systems, New Orleans, LA. Svensson, A. 2020. Identifying motives for implementing eHealth by using activity theory. Sustainability 12(4), 1298: 1–11. Svensson, A. and Durst, S. 2020. Implementing digital assistive technology in healthcare: Which work-related knowledge matters? In Digital Ecosystem and Business Transformation: Individual, Organizational and Societal Challenges, edited by Za, S., Braccini, A.M., Lazazzara, A. and Virili, F., 1–14, Switzerland: Springer Nature. Tiwari, P., Warren, J. and Day, K.J. 2010. Some non-technology implications for wider application of robots assisting older people. Health Care and Informatics Review Online 14(1): 2−11. WHO (World Health Organization). 2018. Ageing and health, Retrieved from https://www.who.int/news-room/fact-sheets/detail/ageing-and-health (accessed October 12, 2020). Wilbert, J., Durst, S., Ferenhof, H. and Selig, P. 2018. Unlearning at the individual level: An exploratory case study in a high power distance country. Journal of Innovation Management 6(2): 17–39. Yarbrough, A.K. and Smith, T.B. 2007. Technology acceptance among physicians: A new take on TAM. Medical Care Research and Review, 64(6): 650–672.

Part 2

Managerial and organisational challenges

10 Modern project management Challenges for the future Klas Sundberg, Birger Rapp and Christina Keller

Digitalisation can be regarded as “a sociotechnical process of applying digitizing techniques to broader social and institutional contexts that render digital technologies infrastructural” (Tilson et al. 2010: 749). As digitalisation and digital transformation have become a common, often ubiquitous, part of our society, we argue the need for new approaches to project management to adapt to a situation of rapid technological development and flexibility. This flexibility is evident in agile project methods, such as eXtreme Programming (Beck and Andres 2005) and Scrum (Schwaber and Beedle 2002), although project management methods developed during the 1960s and are still in use. In 1969, the U.S. Project Management Institute published A Guide to the Project Management Body of Knowledge (PMBOK Guide) which has served as the standard for project management since that time (Tonnquist 2018). However, the “agile manifesto” changed how Information Technology (IT) projects (Gustavsson 2019) were viewed, and agile became the dominant way to manage such projects. The success of agile methods has led to researchers and practitioners applying them in other project contexts. These attempts have shown varying results. It seems that agile methods have some limitations when applied to non-software sectors because of the different requirements related to control system tightness (Merchant and Van der Stede 2007) in organisations. Large and complex organisations tend to demand more stringent control procedures which are not coherent with agile methods (Boehm and Turner 2005). This chapter examines how traditional project management can learn from agile methods and identifies the factors that are critical for successful use of project management methods. It discusses the alternative hybrid project management as an opportunity for industries where agile methods are not appropriate. The chapter concludes by highlighting the most favourable contexts for traditional, agile and hybrid project management, based on literature.

10.1 Traditional project management Traditional project management is based on the project management model proposed in the PMBOK Guide (Tonnquist 2018). This is a plan-and- controldriven model, which includes five project phases and ten knowledge areas (see Table 10.1). DOI: 10.4324/9781003111245-10

4. Project cost management

3. Project time management

2. Project scope management

1. Project integration management

Knowledge area processes

Develop project charter

1. Initiation process groups

Phases

Plan scope management Collect Requirements Define scope Create a work breakdown structure (WBS) Plan schedule management Define activities Sequence activities Estimate activity resources Estimate activity duration Develop schedule Plan cost management Estimate costs Determine budget

Develop project management plan

2. Planning process groups

Control costs

Control schedule

Close project or phase

4. Monitoring and 5. Closing process controlling process groups groups

Direct and Monitor and manage project control project work work Perform integrated change control Validate scope Control scope

3. Executing process groups

Table 10.1 The PMBOK guide: a guide to the project management body of knowledge

94  Klas Sundberg et al.

Plan risk management Identify risks Perform qualitative risk analysis Perform quantitative risk analysis Plan risk response Plan procurement Conduct management procurement Manage stakeholder Manage engagement stakeholder engagement

8. Project risk management

Identify stakeholders

Plan communication management

7. Project communications management

9. Project procurement management 10. Project stakeholder management

Plan human resource management

6. Project human resource management

Perform quality control Control quality

Control procurement Control stakeholder engagement

Acquire project team Develop project team Manage project team Manage Report communication performance Control communication Control risks

Plan quality management Perform quality assurance

5. Project quality management

Close procurement

Modern project management  95

96  Klas Sundberg et al. The five project phases are executed sequentially with no iteration. In traditional project management, planning, monitoring and control are significant project manager and project team responsibilities and tasks. Traditional project management focuses on two main project phases –a. planning and b. monitoring and control – which encompass the main project activities. Planning includes 25 activities, and monitoring and control include 13 activities. Execution, which refers to actual project performance, includes only eight activities. In traditional project management, there is a basic assumption that the project has a project owner who can take decisions about the project based on regularly reported information.

10.2 Agile project management Agile project management developed in 2001 as a reaction to the rigidity of the traditional plan-and-control-driven methods. Agile methods focus on the project team’s ability to enhance value and customer delivery (Beck et al. 2001). Agile methods are more flexible and more adaptable during the project and focus more on real outcomes than on pre-planned outcomes (Rigby et al. 2016). “Making detailed plans only for the next events” is an agile principle (Gustavsson 2019: 97). The agile manifesto includes the following priorities: • • • •

Individuals and interaction rather than processes and tools; Working project results rather than comprehensive documentation; Customer collaboration rather than contract negotiation; Responding to change rather than following a plan.

Agile project management is an incremental process that can be readily adapted to changes to the project and the project environment. The agile approach to projects is characterised by short cycles and adaptations to respond to changes and capture the ongoing learning from the project. It also involves a different time horizon. Whereas traditional project management includes relatively extended phases, agile project management focuses on sprints or shorter stages of a predefined length. In situations where there is considerable uncertainty about what to produce and how to produce it, an agile approach allows for experimentation and production of smaller prototypes to allow updates to the final product. The agile project management organisation differs from the traditional project management organisation; it includes the product owner, the scrum master and the development teams. The traditional project manager role is taken by the scrum master, whose job it is to coach the development team and ensure adherence to the agile methodology. The scrum master’s role is more limited and involves less responsibility than the traditional project manager role. In agile projects, the entire development team is responsible for planning and results. Figure 10.1 compares the phases related to traditional

Modern project management  97

Build

iew

Build

n sig

Sprint 3 Pla n

Launch

Closing

De

Sprint 2 Pla n

Pla n

Launch

t Tes

n sig

Sprint 1

Build

De

n sig

Rev

t Tes

De

Agile project management

Monitoring and controlling

Execution

iew

t Tes

Planning

Rev

Initiating

Rev iew

Traditional project management

Launch

Figure 10.1 A comparison between the stages in traditional and agile project management (adapted from Keller et al. 2017).

project management and agile project management (see, for example, Gustavsson 2019; Keller et al. 2017). Boehm and Turner (2005: 34) distinguish between agile and traditional project management, as follows: An often-overlooked difference between agile and traditional engineering processes is the way everyday business is conducted. Estimation, resource loading, and slack calculations can vary significantly. The level of uncertainty and ambiguity that exists in any evolutionary or iterative process, particularly in long-term estimates, is most likely higher with agile approaches. We’re still caught in the certainty/ambiguity conundrum; our business processes and infrastructure require near-perfect predictions of difficult-to-estimate tasks rather than encouraging experimentation and evolution with knowable short-term results but accepting of long-term haziness.

10.3 Hybrid project management Different project management methods involve different problems and limitations. Successful and sustainable development requires a combination of disciplined plan-and-control-driven and agile methods. Cooper and Sommer (2018) consider that the major problems related to the transformation to flexible methods are management scepticism and dedicated resources to enable the new model. However, the increasing popularity of agile methods for general project management is resulting in the integration and combination of methods and what have been called hybrid methods. A hybrid method refers to a combination of more than one method to exploit the respective method’s strengths (Riesener et  al. 2018). Empirical studies show that an agile methodology is not always appropriate, and, in

98  Klas Sundberg et al. the manufacturing sector – especially the product development process – a combination of an agile and a plan-driven approach might be optimum. According to Riesener et al. (2018), research on the combined use of agile and traditional approaches is increasing exponentially. The success of small agile project management methods is allowing more ways to integrate agile approaches with more traditional project planning. One such notion is scaling up. Fitzgerald et al. (2013) present a case study to show how agile methods can be scaled up to fit with a regulated environment. They focus on three particular aspects: first, continuous quality assurance to ensure regulatory compliance; second, a focus on procedures related to safety, security and protection regulation. Strict authentication and password routines, restricted to authorised personnel, allow visibility in all project phases, which simultaneously provides transparency and reduces regulatory risks; and third, to achieve end-to-end traceability in the regulated environment, the development process must be subject to traceable ongoing product checks and monthly external audits (Fitzgerald et al. 2013). Sommer et al. (2015) discuss how to achieve improved product development performance using hybrid methods. Many contemporary enterprises are adopting agile forms of organisational design to increase their agility more generally. Sommer et al. (2015) argue that manufacturing companies’ product development processes are complex and involve iteration and external collaboration and resources, which inflexible plan-and-control-driven models cannot handle. Their comparative study of a sample of technologyintensive companies shows that a hybrid process that combines elements of agile management (at the execution level) with the traditional plan-andcontrol-driven model (ay the strategic level) offers a more flexible alternative than conventional product development. They suggest that industrial companies can improve their performance by implementing hybrid product development processes. Sommer et al.’s (2015) study shows that use of agile tools, visualisation techniques related to communication and knowledge sharing and incentivising employees are the most important sources of productivity improvements. Lensges et al. (2018) argue that there is a trade-off involved in choosing traditional or agile or hybrid methods. They propose a 2 × 2 matrix based on the dimensions of high and low complexity and low and high uncertainty. They argue that an agile methodology is preferred in situations of high complexity and high uncertainty. However, in the case of low complexity and low uncertainty, traditional methods perform better. For all other combinations of complexity and uncertainty, a hybrid method works best (see Figure 10.2). Lensges et al. (2018: 29) consider that “There is still great benefit from detailed early planning, but parts of the project may be too complex to fully understand at the outset or the client may simply not know enough to make all needed decisions early.”

Modern project management  99

Hybrid project methods

Agile project methods

Traditional project methods

Hybrid project methods

High

Complexity

Low

Low

High Uncertainty

Figure 10.2 How uncertainty and complexity favour different approaches for project management (adapted from Lensges et al. 2018: 29).

10.4 Project characteristics Project contexts differ and include software engineering, product development and service management. In this section, we discuss the level of project complexity and project size and scope in the context of traditional and agile project management. To measure the level of complexity, we follow the definition provided by Baccarini (1996), which states that project complexity depends on the difficulty of the project being undertaken. Complexity can derive from whether the project uses a new technology, whether the project task is complicated or whether it involves a high level of integration or links to existing structures. In highly complex projects, static tools (charts, plans, documentation and specification) become burdensome (Sommer et al. 2015). The introduction of agile methods, being based on the notion of flexibility, can not only reduce but also handle high complexity. Also, agile methods involve knowledge workers in solving complex problems, making them more involved in the project creation process (Lensges et al. 2018). Finally, agile methods support direct communication among people, which enables regular feedback and evaluations to deal with problems (Diel et al. 2015). There are several barriers to the implementation of agile processes (Boehm and Turner 2005). One of these is project size in terms of the number of personnel involved. Although large and complex organisations can adopt agile principles and methods, they use them only in small-scale projects that need smaller teams and smaller project resources and investments.

100  Klas Sundberg et al. Agile project teams tend to be smaller than traditional project teams. However, in large organisations, agile teams may be integrated with other teams, entailing them to work with other experts who are responsible for project coordination (Hobbs and Petit 2017). Project scope refers to all the work required to complete the project successfully (Tonnquist 2018). The scope for plan-and-control-driven projects and the scope for agile projects are defined differently. The former’s scope is predefined in detail in terms of expected outcomes. As for the latter – agile projects – their scope can change based on changes in customer demand (Rigby et al. 2016). This represents a potential clash in the adoption of agile principles by large corporations. For example, a large manufacturing project often involves a contract signed by the company and the customer, which specifies project scope (i.e., outcome) and deviations from the terms of this contract could have legal consequences: “The question as how to use the flexibility of agile to deliver … by contract remains largely unanswered” (Hobbs and Petit 2017: 12).

10.5 Obstacles to agility Jovanovic and Beric’s (2018) meta-analysis shows that the general characteristics of traditional plan-and-control-driven methodologies make them more appropriate for large and more complex projects, such as military and manufacturing, and that agile methodologies are more appropriate for IT projects and small, less complex projects. Hobbs and Petit (2017) analysed large organisations’ efforts to apply agile methods and found that they faced difficulties at three levels: with the development team, at the project level and in the interaction between the project and the organisation. The main issue for big organisations is how the project interacts with other parts of the organisation (Sommer et al. 2015). In a special issue on agile development in IEEE Computer, Williams and Cockburn (2003: 40) state that agile methods “best suit collocated teams of about 50 people or fewer who have easy access to user and business experts and are developing projects that are not life-critical.” Based on an empirical study conducted at Microsoft, Begel and Nagappan (2007) found that agile methodologies are preferred because they enhance communication among team members and allow quick releases and increased design flexibility. The developers were concerned most about scaling up the agile methodology to projects with more than 20 members, which can involve too many meetings to coordinate agile and non-agile teams.

10.6 Skills and leadership A turbulent environment requires organisation members and managers to have specific capabilities. Appelbaum et al. (2017) highlight the challenges

Modern project management  101 related to achieving organisational agility. In their literature review, they investigate the possible ways to combine internal stability with external agility in order to contribute to general organisational agility, operational performance and survival. They suggest that commitment to continuous transformation and agile strategies implies changes at all organisational levels, from structure to leadership and decision-making to individual skills and interpersonal relationships. In the context of the performance of innovation projects, de Oliveira et al. (2012) suggest that a transformational leadership style is preferable to the traditional top-down transactional leadership style. A transformational leader focuses on the group, on long-term progress and on development. This leadership style rests on four components (de Oliveira et al. 2012): • • • •

Charisma or idealised influence, which generates trust and vision; Inspirational motivation, which poses challenge and encourages engagement towards a shared goal; Intellectual stimulation, which enables visionary development and critical analysis to set standards and generate creative solutions; Individualised consideration, which treats followers as individuals and guides their search for self-development.

Transformational leaders tend to be risk-takers and are comfortable with experimentation. They may use decentralised principles and focus on the overall goal for the whole team. Appelbaum et  al. (2017) underline that leadership programmes need to focus on transformational capabilities that allow the members of the organisation or team to better align to agile principles. Agile leadership behaviours need to trickle down to lower organisational levels. Appelbaum et al. (2017) emphasise employee satisfaction as crucial for organisation performance and customer satisfaction. Leaders need to promote organisational customer-focused capabilities, such as: coordination to harmonise information; cooperation to encourage people to work together in the interests of the customer; and connection to develop relationships with external actors. Recent empirical research on the IT sector (Hidayati et al. 2020) highlights the ability to communicate, to commit and to collaborate as competences required by agile team members. Thus, we can assume that leadership and employee skills are crucial for creating changes in agile methods. Management needs to understand and support and facilitate use of agile methods (Rigby et  al. 2016). The right competences required for the transformation of agile principles should not be underestimated; this transformation can question the fundamental base of the traditional organisation. However, the opening up of rigid structures can introduce freedom and promote training which favour creativity and long-term survival.

102  Klas Sundberg et al.

10.7 Stakeholders and customers Stakeholders are individuals or groups who are affected by or who affect a project (Tonnquist 2018). Examples of stakeholders include customers, contractors, owners, employees and pressure groups. To be successful requires the project manager to identify stakeholders able to provide input or resolve questions that arise during the project (Hobbs and Petit 2017). Agile project management requires attention to actors affected by the project (Gustavsson 2019). The agile manifesto highlights ongoing customer interaction throughout the project (Beck et al. 2001). While in traditional, sequential project methods the customer is involved only at certain decision points, agile methods allow for customer involvement throughout the project (Kärrbom Gustavsson and Hallin 2014), which enhances customer engagement and satisfaction. This can be especially useful in an unpredictable environment in terms of customer preferences and in a situation where the solution options might change during the project (Rigby et al. 2016). Agile projects tend to proceed in small steps with continuous delivery to the customer. This allows for constant evaluation of outcomes and reformulation of goals and milestones (Gustavsson 2019). However, it can have some drawbacks. First, it requires a very active customer who is fully engaged in the project. It requires the customer to interact with the project team regularly and throughout the course of the project. If the customer is unable or unwilling to commit to full involvement, the agile method becomes pointless (Boehm and Turner 2005). Second, if the project produces high-value assets, it may be too costly to change direction completely to a new product. There will be reduced opportunities for adjustments in projects where most of the project’s resources have been invested in a particular asset. Finally, if the end-product and its characteristics have been defined in a formal contract with the customer, this leaves little room for changes during the project (Gustavsson 2019). Figure 10.3 summarises our discussion of the different dimensions that influence the choice of planning method. We argue that project dimensions can range from small and flexible to large and predefined and that organisations can opt for either agile project management or traditional project management depending on the project dimensions. If all of the dimensions shown in Figure 10.3 favour only one type of project management, that is, either agile project management or traditional project management, then the choice is clear. However, if some dimensions suggest agile methods and some suggest traditional management, then perhaps hybrid project management is the choice.

10.8 Takeaway Traditional project management is rigid and does not allow for changes or adaptations while the project is running. This can be problematic especially

Modern project management 103 AGILE is favoured if... SCOPE is

HYBRID is favoured if...

SMALL, FLEXIBLE

TRADITIONAL is favoured if... LARGE, PRE-DEFINED

SMALL

...project characteristics take on

LARGE

COMPLEXITY is

HIGH

values in the middle of the

LOW

UNCERTAINTY is

HIGH

continum or if they are

LOW

DELIVERY TO CUSTOMER

a combination of agile

QUALITY, COST, CONTROL

HIGH

and traditional traits

SIZE is

PROJECT FOCUS is CUSTOMER INVOLVMENT is PROJECT MEMBER INTERACTION is LEADERSHIP SKILLS NEEDED is DEGREE OF LEGAL REGULATION is PORTFOLIO MANAGEMENT is

LOW

INFORMAL, WHEN IN NEED

FORMAL, PLANNED

INTERACTION-ORIENTED

TASK-ORIENTED

LOW

HIGH

SIMPLE

COMPLEX

Figure 10.3 Factors favouring different approaches to project management.

in IT projects. Agile thinking and agile project management allow for short cycles and a focus on real outcomes and not pre-planned outcomes. In IT projects it is important to use methods that allow for changes since information is diffusing rapidly and is more detailed and more pervasive. However, some settings will be better suited to traditional methods. Successful and sustainable development will require both disciplinary plan-and-controldriven methods and agile methods or a hybrid project management method, and we are seeing an increase in the use of hybrid methods in line with increased digitalisation.

References Appelbaum, S.H., Calla, R, Desautels, D. and Hasan, L.N. 2017. The challenges of organizational agility: Part 2. Industrial and Commercial Training 49(2): 69–74. Baccarini, D. 1996. The concept of project complexity – A review. International Journal of Project Management 14(4): 201–204. Beck, K., Beedle, M., Van Bennekum, A. et al. 2001. Manifesto for Agile Software Development. Retrieved from http://www.agilemanifesto.org. Beck, K. and Andres, C. 2005. Extreme Programming Explained: Embrace Change. Boston, MA: Addison-Wesley. Begel, A. and Nagappan, N. 2007. Usage and perceptions of agile software development in an industrial context: An exploratory study. In First International Symposium on Empirical Software Engineering and Measurement (ESEM 2007). Madrid, Spain: IEEE, 255–264. Boehm, B. and Turner, R. 2005. Management challenges to implementing agile processes in traditional development organizations. IEEE Software 22(5): 30–39. Cooper, R.G. and Sommer, A.F. 2018. Agile–stage-gate for manufacturers: Changing the way new products are developed integrating agile project management methods into a stage-gate system offers both opportunities and challenges. Research-Technology Management 61(2): 17–26. de Oliveira, M.A., Dalla Valentina, L.V.O. and Possamai, O. 2012. Forecasting project performance considering the influence of leadership style on organizational

104 Klas Sundberg et al. agility. International Journal of Productivity and Performance Management 61(6): 653–671. Diel, E., Bergmann, M., Marczak, S. and Luciano, E. (2015, October). What is agile, which practices are used, and which skills are necessary according to Brazilian professionals: Findings of an initial survey. In 2015 6th Brazilian workshop on agile methods (WBMA). Pernambuco: IEEE, 18–24. Fitzgerald, B., Stol, K.J., O’Sullivan, R. and O’Brien, D. 2013. Scaling agile methods to regulated environments: An industry case study. In 2013 35th International Conference on Software Engineering (ICSE). San Francisco, CA: IEEE, 863–872. Gustavsson, T. 2019. Agile Project Management. 1st ed. Stockholm: Sanoma. Hidayati, A., Budiardjo, E.K. and Purwandari, B. 2020. Hard and soft skills for scrum global software development teams. In Proceedings of the 3rd International Conference on Software Engineering and Information Management. Sydney: IEEE, 110–114. Hobbs, B. and Petit, Y. 2017. Agile methods on large projects in large organizations. Project Management Journal 48(3): 3–19. Jovanovic, P. and Beric, I. 2018. Analysis of the available project management methodologies. Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 23(3): 1–13. Kärrbom Gustavsson, T. and Hallin, A. 2014. Rethinking dichotomization: A critical perspective on the use of hard and soft in project management research. International Journal of Project Management 32(4): 568–577. Keller, C., Haftor, D., Rapp, B. and Sundberg, K. 2017. Agil projektledning: Något för alla eller bara för några? MGMT: Management of Information and Technology 4: 5–6. Lensges, M.L., Kloppenborg, T.J. and Forte, F. 2018. Identifying key agile behaviors that enhance traditional project management methodology. Journal of Strategic Innovation and Sustainability 13(2): 22–36. Merchant, K.A. and Van der Stede, W. 2007. Management Control Systems: Performance Measurement, Evaluation, and Incentives. Harlow: Prentice Hall. Riesener, M., Dölle, C., Ays, J. and Ays. J. L. 2018. Hybridization of development projects through process-related combination of agile and plan-driven approaches. In 2018 IEEE International Conference on Industrial Engineering and Engineering Management (IEEM). Bangkok, Thailand: IEEE, 602–606. Rigby, D.K., Sutherland, J. and Takeuchi, H. 2016. Embracing agile. Harvard Business Review 94(5): 40–50. Rother, E. and Baboli, A. 2019. Lean manager in the factory of the future: Case study in automotive industry. In 2019 IEEE 6th International Conference on Industrial Engineering and Applications (ICIEA). Tokyo, Japan: IEEE, 218–224. Schwaber, K. and Beedle. M. 2002. Agile Software Development with Scrum. Upper Saddle River, NJ: Prentice Hall. Sommer, A.F., Hedegaard, C., Dukovska-Popovska, I. and Steger-Jensen, K. 2015. Improved product development performance through agile/stage-gate hybrids: The next-generation stage-gate process? Research-Technology Management 58(1): 34–45. Tilson, D., Lyytinen, K. and Sørensen, C. 2010. Research commentary – Digital infrastructures: The missing IS research agenda. Information Systems Research 21(4): 748–759. Tonnquist, B. 2018. Project Management. 4th ed. Stockholm: Sanoma. Williams, L. and Cockburn, A. 2003. Agile software development: It’s about feedback and change. IEEE Computer 36(6): 39–43.

11 Managing the paradoxes of digital product innovation Fredrik Svahn and Bendik Bygstad

Digitalisation holds great promise for new product development. New material properties, such as programmability and reproducibility, are promoting novel functions and services (Yoo 2012) and making heat pumps intelligent, cars connected and lawn mowers automatic. Digital design tools are transforming prototyping practices (Boland et al. 2007), which, in combination with technologies such as 3D printing and the Internet of Things, promise almost indefinite product variation and an opportunity to capitalise on the ‘long tail’ (Brynjolfsson et al. 2010). Digital platforms are engaging new stakeholders in innovation (Parker et al. 2016) and allowing firms to capture value from a range of transactions, rather than relying on a single revenue stream (Eisenmann et al. 2006). Ongoing digitalisation motivates product-developing firms to reconsider how to design, organise, work and make money in a digital economy, where marginal costs disappear. At the same time, since heat pumps, cars and lawn mowers are highly physical artefacts, in which scale economies and commoditisation still matter, existing innovation practices cannot be abandoned. This leaves incumbent firms in limbo, between existing product innovation practices and a new, often poorly understood digital innovation logic (Svahn et al. 2017). Existing research emphasises that a shift from product innovation to digital innovation does not resolve this challenge. Rather, digital product innovation – the use of digital technology for creation and subsequent market introduction of new, redesigned or substantially improved physical products – is requiring firms to find working product innovation and digital innovation combinations. This chapter examines the logics underlying product innovation and digital innovation and compares these innovation regimes. Section 11.2 discusses the inherent tensions between these regimes by proposing three paradoxes. Section 11.3 highlights some specific organisational capabilities required to tackle these tensions between product innovation and digital innovation.

DOI: 10.4324/9781003111245-11

106  Fredrik Svahn and Bendik Bygstad

11.1 The dual face of digital product innovation Research on product innovation is mature and relatively stable. It includes many seminal papers and widely acknowledged concepts. However, research on digital innovation is quite recent, its contours are somewhat blurred and its key concepts are being negotiated. In what follows, we review these two bodies of research in order to compare and identify some inherent tensions between them. 11.1.1 Product innovation In product innovation, as we know it from the industrial era, the firm is at the epicentre of innovation activity. To study technological innovation and change, the research community has focused, mostly, on incumbent firms that manufacture complex, but generally homogenous and uniform physical products. End-users are able to choose among alternative solutions, but these products are fairly similar. This results in low levels of price differentiation in the market. The existence of a few dominant designs indicates a strong focus on incremental improvement. In manufacturing settings, where material supplies are unreliable, production is costly and knowledge is scarce, such incremental innovation is managed through hierarchical organisational structure, modular products (Baldwin and Clark 2000) and linear development processes (Godin 2006). It has been argued that this results in vertically integrated industries (Chandler 1977) where competitive advantages derive from organisational capability to enforce formal control over the entire value chain. Another theoretical argument is that vertical structuring offers competitive advantage by reducing transaction costs (Williamson 1979). It is simply cheaper to conduct incremental innovation internally than to outsource it. The concept of dominant design is central to product innovation (Suarez and Utterback 1995). At some point in the evolution of every physical technology, the industry moves away from a system of ‘made-to-order’ products to standardised, mass-market manufacturing of complex assembled products (Abernathy and Utterback 1978). Among the several mechanisms suggested as driving this process (technological compromise, first-mover advantages, network effects), one explanation stands out: a dominant design enables economies of scale in supply that can be realised through direct sales of standardised products, where market competition shifts from functional performance to price (Teece 1986). To leverage these economic benefits requires the firm to reconsider its organisational structure and processes. In particular, scale economies require production systems that are nearly algorithmic, with well-synchronised product assembly stages, which allow high-speed throughput (Chandler 1977). This leaves little room for ambiguity about the overall structure of the product. Therefore, a dominant design emerges from a set of core design concepts, corresponding to

Digital product innovation  107 the product’s main functions (Henderson and Clark 1990). It also embeds a general idea of how physical components embody these core design concepts and how they, eventually, are integrated in a product (Baldwin and Clark 2000). Then, “once any dominant design is established, the initial set of components is refined and elaborated, and progress takes the shape of improvements in the components within the framework of a stable architecture” (Henderson and Clark 1990: 14). Product-developing organisations frequently use modular architectures to create such stability. By structuring the parts of a system according to the principles of modularity, they can pay particular attention to the internal properties of components. They may use this component-level flexibility to create product families (Sanderson and Uzumeri 1995). On the one hand, mixing and matching of components feed variety to markets. On the other hand, a stable, overall system affords supply-side scale advantages as variants share the burden of development and production. In markets characterised by a dominant design, competitive advantage follows from the capability to fine-tune the fitness of a relatively stable overall system solution by adapting its different parts (Abernathy and Utterback 1978; Henderson and Clark 1990). While a modular product strategy offers the flexibility required for recurrent changes to the interior of components, it effectively prevents changes to the overall system structure (Baldwin and Clark 2000). Assumptions about how the components in a product are related need to be cautious, since they define how the product could change over time. Design and development tend to follow strictly linear processes and apply modes of formal control, which reduces ambiguity about product structure (Godin 2006). That requires an early-stage shift in attention, from functional design to physical design. When released for production, functional designs are frozen (Baldwin and Clark 2000). Therefore, product definition is a critical decision, defining change patterns both within the lifecycle of a product and across generations (Ulrich 1995). Although preventing change in overall system structure, modularity has proven a successful approach to handling the complexity of physical artefacts. Loosely coupled, hierarchically ordered components are easier to reuse and to reconfigure for new purposes. In fact, modularity exponentially increases the number of possible configurations achievable from a given set of inputs, which greatly increases the flexibility of a system (Baldwin and Clark 2000). 11.1.2 Digital innovation There is a general consensus that digital innovation refers to “the carrying out of new combinations of digital and physical components to produce novel products” (Yoo, Henfridsson and Lyytinen 2010: 725). This unique capability of digital technology fosters boundary-spanning practices, involving increasing varieties of, largely, uncoordinated innovation sources. As

108  Fredrik Svahn and Bendik Bygstad a result, innovation becomes a distributed activity (Yoo et al. 2010), which takes place in networks (Boland et  al. 2007) or ecosystems (Hannah and Eisenhardt 2018; Selander et al. 2013; Tiwana 2015), rather than in corporate hierarchies. Such distributed value creation “leads to the emergence of dynamic, non-linear patterns of digital innovation” (Yoo et al. 2010: 3). These nonlinear, distributed innovation environments do not provide value by outperforming existing products, but through the establishment of new value paths (Henfridsson et al. 2018). In that sense, digital innovation cultivates multiplicity and substantial functional variety (Brynjolfsson et  al. 2010). Consequently, digital innovation is associated to significant risk, deriving from the unpredictable evolution of technologies and markets. To navigate such volatile environments, where ideas and knowledge derive from external sources at the bottom of a market, incumbent organisations need to organise for agility. Rather than the flexibility to differentiate products over a range of predefined variants, they need to develop the capability to continuously “detect and seize market opportunities with speed and surprise” (Sambamurthy et al. 2003: 238). Digital innovation calls for new forms of governance and requires the firm to rethink the trade-off between incentives and authority (Wareham et al. 2014). It might seem that an incumbent firm could reap the benefits deriving from an open ecosystem, without contributing to it, but such opportunistic behaviour is fallacious. To achieve durable value, which resonates with the firm’s internal innovation process, it is necessary to engage actively with external actors (Selander et al. 2013). The creation of mutual value requires concurrent manoeuvring of cooperation and competition forces. In such coopetitive environments (Hannah and Eisenhardt 2018), explicit contributions provide influence and power. The variation and uncertainty inherent in digital innovation environments relate to the absence of marginal costs (e.g., Parker et al. 2016). Production tools, materials, supply chains, factories and distribution account for the greater part of the costs of a car or a plane. In contrast, software functions can be reproduced for free. The economic burden derives almost exclusively from the fixed costs of development, since software can be realised, shipped and consumed electronically, without consuming scarce, physical resources. Essentially, the abundance of critical resources eliminates price as a dominant force in innovation. Ultimately, this promotes markets with infinite choice, where competitive advantage rests on the capability to attract and preserve the user base. These markets are identified as economies of scope in demand, since users reap the advantages of large variation (Gawer 2014). Demand-side economies of scope generally take the form of a two-sided market (Eisenmann et al. 2006), in which two groups – normally end-users and application developers – are attracted to each other by a phenomenon, identified by economists, as the network effect (Katz and Shapiro 1994). The value of a particular network depends on the number of users on the other

Digital product innovation  109 side of the network. For example, game developers focus on communities offering a critical mass of players, and, similarly, game players favour communities with a bigger variety of games. Therefore, a two-sided market requires strategies related to building and maintaining a user base. Digital innovation benefits from the presence of platforms (Parker et al. 2016; Tiwana 2015), which have the capacity to “bring together groups of users in two-sided networks” (Eisenmann et al. 2006: 94). Platform-centric ecosystems have proved particularly productive when allowed to emerge relatively freely, in response to the opportunities offered by a general platform. Platforms able to produce such “unprompted change driven by large, varied, and uncoordinated audiences” have generative capacity (Zittrain 2006: 1980). Contemporary research finds that layered architecture (Yoo et al. 2010) is a key enabler of generativity in digital platforms. In contrast to modularity, at least as practised in traditional product innovation, a layered architecture does not require the interfaces to be frozen. Instead, designers define and maintain layers relatively independently from one another. That provides opportunities for designers to pursue largely unconstrained combinatorial innovation by gluing together elements from different layers, using a set of protocols and standards, to create alternative digital products. In this context, a layered architecture accelerates the recombination of digital resources (Henfridsson et al. 2018).

11.2 Paradoxical tensions in digital product innovation Product innovation and digital innovation clearly represent different modes of innovation. We refer to these modes as innovation regimes (e.g., Godoe 2000) to underline that they are shaped by a range of different actors – human and material – which, together, form a web of highly intertwined forces that pull in different directions. However, an innovation regime is constituted, also, by a reasonably stable state – an equilibrium – in which the different forces act in concert. Product innovation and digital innovation meet in a process we call digital product innovation. We define digital product innovation as the use of digital technology for creation and subsequent market introduction of new, redesigned or substantially improved physical products. Illustrative examples are self-driving cars, robotic lawn mowers and remote-controlled heat pumps. When the two innovation regimes meet, tensions arise (Table 11.1). Similar to Acquier et al.’s (2017) reliance on paradox to navigate the tensions inherent in the sharing economy, we use the notion of paradox to conceptualise the clash between innovation regimes. We consider these tensions to be paradoxical in the sense that they are contradictory but “exist simultaneously and persist over time” (Smith and Lewis 2011: 382). Table 11.1 summarises and compares product innovation and digital innovation, by outlining a range of traits that are distinctive to a particular

110  Fredrik Svahn and Bendik Bygstad Table 11.1 Paradoxes of digital product innovation and constituent tensions between innovation regimes

Organising logic Locus of innovation Growth strategy Development process Uncertainty management Governance model Market Market model Dominant cost dynamics driver Competition discriminator Cost reduction strategy Analytical framework Architectural Design focus Structural composition principles Complexity focus Overall objective Functional binding Ontological position

Product innovation

Digital innovation

Firm

Ecosystem

Vertical integration Horizontal integration Linear Nonlinear Flexibility

Agility

Formal control modes Direct sales Marginal cost

Informal control modes Two-sided market Fixed cost

Price

Attention

Economies of scale

Economies of scope

Dominant designs

Platforms

Physical structures Modularisation

Functional structures Layering

Complexity of artefacts Reuse of physical components Early

Complexity of problems Recombination of digital resources Late

Reductionism

Emergence

regime. While existing research includes such ‘footprints’ of product innovation and digital innovation, it is largely silent about how to combine these regimes. That is, it does not discuss how to deal with the tensions that arise when manoeuvring the two regimes simultaneously. Table 11.1 foregrounds these tensions and presents three inductively derived paradoxes – organising logic, market dynamics and architectural composition – that enclose them. In what follows, we introduce the three digital product innovation paradoxes and propose three organisational capabilities that managers need to develop to master them. 11.2.1 Organising logic: functional decomposition versus self-organisation In product development, the firm is at the locus of innovation, and it organises to reflect product structure and development processes. However, the

Digital product innovation  111 flexibility of a modular architecture depends on upfront definition of the organisational structure. To exercise formal control over linear development processes and vertically integrated value chains, roles must be clear and transactions between units and individuals must be well-described. The better the fit between the product structure and the organisational structure, the more efficient and more productive the firm. Digital ecosystems are nonlinear in nature and evolve continuously. People and organisations come and go, and transactions between stakeholders are seldom defined in advance. Unless the firm organises for agility, this volatility will prove disastrous. While it is fundamentally difficult (and harmful) to exercise formal control in digital ecosystems, informal control modes (such as incentives and certification) offer alternative ways to govern. This results in the disintegration of traditional value chains and, instead, a focus on horizontal integration, where niches are expanded across traditional industry boundaries. Although they might seem chaotic and random, self-organising digital practices outperform traditional product innovation in many respects. Contrasting innovation regimes reveals that: Paradox 1. The development and production of physical products are managed most effectively within an independent and functionally decomposed organization, whereas digital functions emerge, primarily, from transparent and self-organizing units engaged in unexpected combinations of digital components. 11.2.2 Market dynamics: supply-side economies of scale versus demand-side economies of scope Physical products are associated to marginal costs. This means that each new unit produced increases the total cost for the manufacturing firm. In practice, marginal costs are a dominant factor for most product- developing organisations, leading to competition over prices and direct sales to customers. Certainly, development is expensive, but the costs associated to production greatly outweigh development costs. As a consequence, any initiative to reduce costs pays off in relation to product volume. This makes a strong argument not just for increasing market shares but also for keeping product variety low. Therefore, innovation quickly transforms, from an experimental state of made-to-order to becoming a dominant design, shaped by a standardised mass-market manufacturing system and powered by scale economies. In contrast to physical products, software is not associated to marginal costs. Once the fixed costs of development are covered, a digital function can be reproduced at no additional expense. This induces new innovation incentives, typically, translating into platform businesses and a two-sided market logic. Such markets offer an abundance of functional options, leading to competition over attention rather than price. Powered by economies

112  Fredrik Svahn and Bendik Bygstad of scope these two-sided markets reward the platform providing the demand side with the largest variation. Therefore, when setting up a new business model for digital product innovation, the firm must consider: Paradox 2. The production of physical goods is made profitable by supply-side economies of scale whereas the economic potential of a self-organizing, digital innovation ecosystem lies in its capability to trigger economies of scope in demand. 11.2.3 Architectural composition: modular versus layered The literature considers modularity as the standard way to deal with the complexity of physical artefacts and manage technological change. When creating a modular architecture, the firm adopts a reductionist perspective and decomposes the product into a hierarchy of, largely, independent parts, in order to increase flexibility and scalability. While this overall decomposition is frozen at an early stage, its parts can be assembled later, in different ways, into readymade products based on aggregation. Thus, modularity centres on the physical structure of products and focuses, particularly, on reuse of components across different variants. Software platform architects pay particular attention to functional structure, resulting in layered rather than hierarchical architectures. Relatively independent layers identify core design problems, at different levels of granularity, and offer replicable rules and building blocks for their solutions. In this sense, a layered software architecture addresses the complexity of problems. Also, compared to a hierarchical structure, independent layers allow largely unconstrained recombination of digital resources, from different layers, for genuinely new purposes. This makes layered software platforms inherently emergent and allows for late and recurring changes in the overall functionality of a digital system. Comparing product and software platforms reveals that: Paradox 3. The reuse of physical components across a range of defined products is effectively enabled by the adoption of a hierarchic product structure whereas reuse of digital components for new purposes requires a layered product architecture. We draw on the paradoxes identified in this section to provide some implications, in the form of general capabilities, for the management of digital product innovation.

11.3 Managing the paradoxes of digital product innovation Managing the paradoxes of digital product innovation is difficult for incumbent firms in that they must learn to master the logic of digital innovation

Digital product innovation  113 and recognise the potential it brings. However, an even greater challenge is finding a working solution allowing the combination of innovation regimes. In what follows, we propose three capabilities to manage the paradoxes of digital product innovation. 11.3.1 Capability for self-organising exploration To manage the organising logic paradox, incumbent firms need to develop what we call the capability for self-organising exploration. Selected parts of their organisation must be allowed to emerge, without a clear view of outcomes, while remaining situated in the context of an existing, functionally decomposed organisation. Successful development and application of the capability for self-organising exploration allows the firm to navigate concurrent engagement in “refinement-oriented local search” and “innovationoriented distant search” (Lopez-Vega et al. 2016). In jockeying for position in the emerging market of self-driving cars, Volvo Cars exploited its existing knowledge about chassis, powertrains and safety while, simultaneously, exploring artificial intelligence, communication technologies and novel sensor solutions within the independent company, Zenuity. According to the corporate website, independence would help to “foster speed and spearhead innovation through cross-functional teams with end-to-end responsibility and maximum freedom.” This manoeuvring of exploitation and exploration requires the firm to develop complementary governance models. Incumbents traditionally exercise process control based on such questions as “how do we get what we have specified, with the right quality?” While they may reduce uncertainties related to product development, process control practices effectively suppress unconventional moves. Therefore, to develop the capability for self-organising exploration, management needs, also, to consider the formative power of incentives. Instead, firms can exercise input control by asking “what would trigger interest?” or “what do they need to be creative?” to allow the sharing of resources with external innovators. As an example, LEGO learned to appreciate its user communities as highly productive resources. Today, LEGO hosts an idea generation community (ideas.lego.com) for the general public and endorses external developer communities for software solutions (e.g., www.ev3dev.org) as well as hardware designs (e.g., www.hackster.io/mindstorms). While it is not feasible to exert explicit control over these innovation communities, LEGO influences indirectly, for example, through exclusive provision of beta releases of upcoming hardware. Research shows that people self-identify for tasks for complex motivational reasons (e.g., Wareham et al. 2014). While money can play a role, community members often seek enjoyment, reputation and learning or may be motivated, simply, by the possibility to resolve a unique user need. At LEGO, concurrent manoeuvring of intrinsic and extrinsic motivations opened the way for integration of community-based digital innovation and internal product development.

114  Fredrik Svahn and Bendik Bygstad As incumbents develop new governance models, they must recognise loosely coupled innovation environments as ecosystems, not as value chains. Rather than fostering competition among innovators, self-organising exploration capability requires management to appreciate the highly collaborative nature of ecosystems. While LEGO donated its EV3 software for collaborative community development, it encouraged competition by announcing, on the corporate website, that “we anticipate the MINDSTORMS community to develop additional languages such as JAVA.” Researchers increasingly often rely on coopetition (Hannah and Eisenhardt 2018) to describe such concurrent use of collaboration and competition. 11.3.2 Capability for horizontal diversification To manage the market dynamics paradox, incumbents must develop capability for horizontal diversification. That involves drawing on the existing firm know-how and resources to create new revenue streams for their existing customer bases (Ansoff 1957). Put differently, firms must figure out how to enable ‘the long tail’ (Brynjolfsson et al. 2010) of digital niche products for business model innovation, without destroying their existing volume businesses. Around 2010, the renowned U.S. bookseller, Barnes and Noble, which was founded 1886, began to experience the disintegration of its existing business model. The arrival of e-books had rendered the company’s existing low-margin/high-volume strategy outdated. To combat its declining profitability, it launched a new strategy, focused on concurrent cost reduction and value creation. It closed over 800 stores and refocused the remaining ones on high-margin niche products such as college books or gift books. At the same time, Barnes and Noble kick-started Nook, a brand of e-reader, to enable the distribution of e-books. Rather than seeing a range of seemingly competing book titles as raw material for weeding out bestsellers, multiplicity became a direct business asset. The broader the scope, the better the business. This example illustrates that digital contexts often make value creation a better profit driver than cost reduction. However, to build complements, firms may have to give away or subsidise a previous core asset (e.g., Parker et al. 2016). Barnes and Noble reinforced its horizontal diversification capability by subsidising Nook. It offered free floor space in its physical stores – something not available to its biggest competitor, Amazon – to allow customers to experience its e-reader before buying. While this move had a negative impact on store sales, it helped to grow the installed base of Nook, which captured 27% of the e-book market in the first two years it was available. Ultimately, the balancing between core and complementary assets aims at utilising the firm’s existing resources and enabling horizontal diversification. Rather than yielding to the instinct to protect its resources to prevent imitation and substitution (Barney 1991), a better firm strategy might be to

Digital product innovation  115 disclose them as boundary resources (Ghazawneh and Henfridsson 2013), to trigger external innovation. In 2012, AstraZeneca found itself in a difficult situation. The company’s R&D pipeline was almost empty, which predicted a steep decline in the coming years. In an attempt to restock its product pipeline, AstraZeneca launched its Bio Venture Hub to promote open innovation. AstraZeneca invited a range of start-ups to co-locate physically and gave them access to AstraZeneca researchers, tools and laboratories, and, with some exceptions, to company know-how. The Bio Venture Hub proved successful and contributed to the product pipeline. This is an excellent example of selective revealing (Henkel 2006), where the decisions to disclose corporate resources brought multiple returns. To master horizontal diversification, firms have to develop a new perspective on risk. Product development traditionally relies on stage-gate strategy (Cooper 1990), where rational decision-makers deal with risk by outlining alternatives and choosing the alternative with the lowest risk–benefit ratio. Digital environments are remarkably diverse and highly volatile, making it difficult to identify the winning horse upfront. Therefore, to manage digital product innovation, incumbents must employ an options strategy (Kulatilaka and Venkatraman 2001), which involves a portfolio of solutions or designs being evaluated and refined in parallel, with the goal of delaying decision-making and increasing responsiveness to market change. When inviting a start-up company to the Bio Venture Hub, AstraZeneca made a small investment in a high-risk option, to enable better and faster decisions in the future. 11.3.3 Capability for open-ended design To address the paradox of architectural composition requires incumbent firms to develop what we describe as capability for open-ended design. Product development traditionally relies on a hierarchically decomposed, modular architecture to offer product variants based on commoditised components (Baldwin and Clark 2000). This mix-and-match strategy delivers variation by substitution of components (Garud and Kumaraswamy 1995), where each component has a well-defined role within a rigid overall system structure. In practice, the need to freeze the overall architecture requires upfront definition of all possible variants. Digital artefacts differ from physical products in that they are reprogrammable. As such, they do not embody predefined functionality. Therefore, to build open-ended design capability, incumbents must figure out how to architect, not just for substitution but also for the evolution of entire systems (Tiwana 2015). Layering is a recognised architectural solution. For example, modern smartphones use an operating system (e.g., iOS or Android) to create architectural separation between the application layer and the underlying hardware. Smartphones do not include prefabricated, permanent App portfolios when bought; these portfolios emerge over the product’s lifetime.

116  Fredrik Svahn and Bendik Bygstad To design a layered architecture requires investment in generalisation, rather than a focus on a specific functionality, used as a template for decomposition. It requires identification of “generic concepts, or patterns, that abstract from irrelevant information related to its implementation” (Henfridsson et al. 2014: 31). Creatively combined, and deployed at different layers of abstraction, these generic concepts can form new, unforeseen applications. To establish generative, open-ended design practices incumbents must strike a compromise between openness and control (West 2003). The architecture must be sufficiently closed to appropriate a reasonable economic return, while being sufficiently open to attract innovators and end-users. In February 2019, a Husqvarna Group press release announced an open application programming interface or API, for its market-leading robotic lawnmowers. The new architecture allowed integration of mowers and an existing smart home innovation ecosystem, while reserving the mower control algorithms to Husqvarna’s exclusive control. Thus, it increased customer value, while maintaining the product’s competitive edge. Finally, capability for open-ended design requires architectures that allow recombination. In digital environments, recombination is a matter of design, but it also takes place in use (Henfridsson et al. 2018). For example, consider the case of Amazon’s Alexa, the ‘brain’ behind the Echo smart speakers. According to Amazon’s website, developers engage in the Alexa voice design through “a collection of self-service APIs, tools, documentation, and code samples.” While such design recombination is important, the service offered by Alexa ultimately depends on the training gained through large-scale use.

11.4 Takeaway We contribute a synthesis of insights to managers who struggle with the implementation of digital product innovation. First, we derive three paradoxes of digital product innovation, that is, inherent tensions between product innovation and digital innovation that are contradictory and persist over time; functional decomposition versus self-organisation; supply-side economies of scale versus demand-side economies of scope; and the reuse of physical components in modular architectures versus the recombination of digital artefacts in layered architectures. Next, we reveal organisational capabilities to master these paradoxes. To manage the first paradox, managers need to stimulate self-organising exploration, that is, allowing parts of their organisation to evolve without a clear view of outcomes. To manage the second paradox, managers should organise horizontal diversification, that is, balance the core and complementary assets. To manage the third tension, managers should support open-ended design, that is, establish architectural solutions that allow unforeseen recombination.

Digital product innovation

117

References Abernathy, W.J. and Utterback, J.M. 1978. Patterns of industrial innovation. Technology Review 80(7): 40–47. Acquier, A., Daudigeos, T. and Pinkse, J. 2017. Promises and paradoxes of the sharing economy: An organizing framework. Technological Forecasting and Social Change 125(Dec): 1–10. Ansoff, H.I. 1957. Strategies for diversification. Harvard Business Review 35(5): 113–124. Baldwin, C.Y. and Clark, K.B. 2000. Design Rules: The Power of Modularity Volume 1. Cambridge, MA: MIT Press. Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management 17(1): 99–120. Boland, R.J., Lyytinen, K. and Yoo, Y. 2007. Wakes of innovation in project networks: The case of digital 3-D representations in architecture, engineering, and construction. Organization Science 18(4): 631–647. Brynjolfsson, E., Hu, Y.J. and Smith, M.D. 2010. Research commentary: Long tails vs. superstars: The effect of information technology on product variety and sales concentration patterns. Information Systems Research 21(4): 736–747. Chandler, A.D. 1977. The Visible Hand. Cambridge, MA: Harvard University Press. Cooper, R.G. 1990. Stage-gate systems: A new tool for managing new products. Business Horizons 33(3): 44–54. Eisenmann, T., Parker, G. and Van Alstyne, M.W. 2006. Strategies for two-sided markets. Harvard Business Review 84(10): 92–101. Garud, R. and Kumaraswamy, A. 1995. Technological and organizational designs for realizing economies of substitution. Strategic Management Journal 16(1): 93–109. Gawer, A. 2014. Bridging differing perspectives on technological platforms: Toward an integrative framework. Research Policy 43(7): 1239–1249. Ghazawneh, A. and Henfridsson, O. 2013. balancing platform control and external contribution in third-party development: The boundary resources model. Information Systems Journal 23(2): 173–192. Godin, B. 2006. The linear model of innovation: The historical construction of an analytical framework. Science, Technology & Human Values 31(6): 639–667. Godoe, H. 2000. Innovation regimes, R&D and radical innovations in telecommunications. Research Policy 29(9): 1033–1046. Hannah, D.P. and Eisenhardt, K.M. 2018. How firms navigate cooperation and competition in nascent ecosystems. Strategic Management Journal 39(12): 3163–3192. Henderson, R.M. and Clark, K.B. 1990. Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms. Administrative Science Quarterly 35(1): 9–30. Henfridsson, O., Mathiassen, L. and Svahn, F. 2014. Managing technological change in the digital age: The role of architectural frames. Journal of Information Technology 29(1): 27–43. Henfridsson, O., Nandhakumar, J., Scarbrough, H. and Panourgias, N. 2018. Recombination in the open-ended value landscape of digital innovation. Information and Organization 28(2): 89–100. Henkel, J. 2006. Selective revealing in open innovation processes: The case of embedded Linux. Research Policy 35(7): 953–969.

118

Fredrik Svahn and Bendik Bygstad

Katz, M.L. and Shapiro, C. 1994. Systems competition and network effects. The Journal of Economic Perspectives 8(2): 93–115. Kulatilaka, N. and Venkatraman, N. 2001. Strategic options in the digital era. Business Strategy Review 12(4): 7–15. Lopez-Vega, H., Tell, F. and Vanhaverbeke, W. 2016. Where and how to search? Search paths in open innovation. Research Policy 45(1): 125–136. Parker, G., Marshall, G., Van Alstyne, W. and Choudary, S.P. 2016. Platform Revolution: How Networked Markets Are Transforming the Economy – And How to Make Them Work for You. New York: WW Norton & Company. Sambamurthy, V., Bharadwaj, A. and Grover, V. 2003. Shaping agility through digital options: Reconceptualizing the role of information technology in contemporary firms. MIS Quarterly 27(2): 237–263. Sanderson, S. and Uzumeri, M. 1995. Managing product families: The case of the Sony Walkman. Research Policy 24(5): 761–782. Selander, L., Henfridsson, O. and Svahn, F. 2013. Capability search and redeem across digital ecosystems. Journal of Information Technology 28(3): 183–197. Smith, W.K. and Lewis, M.W. 2011. Toward a theory of paradox: A dynamic equilibrium model of organizing. Academy of Management Review 36(2): 381–403. Suarez, F.F. and Utterback, J.M. 1995. Dominant designs and the survival of firms. Strategic Management Journal 16(6): 415–430. Svahn, F., Mathiassen, L. and Lindgren, R. 2017. Embracing digital innovation in incumbent firms: How Volvo Cars managed competing concerns. MIS Quarterly 41(1): 239–253. Teece, D.J. 1986. Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy 15(6): 285–305. Tiwana, A. 2015. Evolutionary competition in platform ecosystems. Information Systems Research 26(2): 266–281. Ulrich, K. 1995. The role of product architecture in the manufacturing firm. Research Policy 24(3): 419–440. Wareham, J., Fox, P.B. and Giner, J.L.C. 2014. Technology ecosystem governance. Organization Science 25(4): 1195–1215. West, J. 2003. How open is open enough? Melding proprietary and open source platform strategies. Research Policy 32(7): 1259–1285. Williamson, O.E. 1979. Transaction-cost economics: The governance of contractual relations. Journal of Law and Economics 22(2): 233–261. Yoo, Y. 2012. Digital materiality and the emergence of an evolutionary science of the artificial. In Materiality and Organizing: Social Interaction in a Technological World, Leonardi, P.M., Nardi, B.A. and Kallinikos, J. (eds). Oxford: Oxford University Press: 134–154. Yoo, Y., Henfridsson, O. and Lyytinen, K. 2010. Research commentary: The new organizing logic of digital innovation: An agenda for information systems research. Information Systems Research 21(4): 724–735. Yoo, Y., Lyytinen, K., Boland, R., Berente, N., Gaskin, J., Schutz, D. and Srinivasan, N. 2010. The next wave of digital innovation: Opportunities and challenges: A report on the research workshop digital challenges in innovation research. Fox School of Business & Management, Temple University, Philadelphia, PA.Zittrain, J. 2006. The generative internet. Harvard Law Review 119(7): 1974–2040.

12 When external reporting goes social New conditions for transparency and accountability? Cecilia Gullberg It is frequently claimed that the advent of social media is having significant implications for various organisational practices such as internal collaboration (Treem and Leonardi 2012), marketing (Berthon et al. 2012) and ad hoc organising (Weinryb et al. 2019). Similar claims have been made by scholars of accounting (Bellucci and Manetti 2017; Blankespoor 2018). As a scholar of accounting, I elaborate in this chapter on the idea of social media as an accounting technology and discuss how social media differs from earlier digital technologies and what these differences may imply for what can be seen as the core elements of accounting. First, I provide some examples of how accounting has entered social media. For example, firms tweet their earnings announcements (Blankespoor 2018) and publish their sustainability-related performance on Facebook (Manetti and Bellucci 2016), and philanthropic organisations use Facebook to account for how they use their funds (Bellucci and Manetti 2017). There are various forms of external reporting observed on social media. It might be, also, that various types of internal accounting are dealt with on internal social media, within organisations; however, I would surmise that this is significantly less common. An important component of social media are the digital interactions among individuals that, potentially, are visible to large numbers of other people in real time (Kaplan and Haenlein 2010). This possible large-scale exposure and large-scale interaction are more salient in the context of external reporting and, therefore, are likely to be more frequent in that context. Above all, theoretically, they could reshape the basic tenets and premises of accounting and, consequently, the conditions under which managers produce and/or consume accounting. While accounting scholars have begun to investigate the implications of social media for accounting, this line of research is in a nascent stage. Some of the literature focuses on the quantitative implications, such as the numbers of likes and shares (Bellucci and Manetti 2017) or the types of reactions to different types of accounting produced by organisations (Blankespoor 2018). Other works approach accounting in terms of relationships, for example, how accountability and auditing relationships are altered on rate-andreview platforms such as TripAdvisor (Scott and Orlikowski 2012) and eBay DOI: 10.4324/9781003111245-12

120  Cecilia Gullberg (Kornberger et al. 2017). However, little attention is paid in these literature streams to the nature of accounts per se and how this nature might change with use of social media and what this implies for accountability – and for its longstanding partner – transparency. This chapter outlines and illustrates the phenomenon of organisational external reporting on social media, to initiate a discussion of its implications for transparency and accountability. Section 12.1 provides an overview of the concepts of transparency and accountability and their assumed relations. Section 12.2 examines the characteristics of social media and discusses what they may entail for the nature of accounting and for transparency and accountability. I also discuss earlier digital phenomena in the context of accounting and how social media differs in their capacity to redraw the conditions for transparency and accountability and for accounting production and consumption. Section 12.3 provides some takeaways from this chapter.

12.1 Transparency and accountability: longstanding ideals of accounting So, what are the basic tenets and premises of accounting? Accounting assumes a relationship between two parties, between the performer of activities that are of interest to another party and the party that monitors and acts on these activities at a distance (Robson 1992). Hence, it is a relationship of accountability, in which the different actors can “give and demand reasons for conduct” (Roberts and Scapens 1985: 447) or, to put it differently, where the first actor “has an obligation to explain and justify his or her conduct” and where the other actors “can pose questions and pass judgment” (Bovens 2007: 450). In turn, explanation and justification assume provision of some kind of information of an account (Robson 1992). A typical example in the context of external reporting is the annual or – for some – quarterly financial reports that organisations publish, which contain numbers, texts, diagrams and tables. These and other accounts, such as sustainability reports, are expected to provide a range of actors – stakeholders – with information to allow them to draw conclusions about how the organisation is doing and/or, if necessary, demand additional accounts. Hence, by creating transparency, accounts are expected to pave the way to accountability. Typically, transparency and accountability are expected to increase efficiency and eliminate malfunctions (Bovens 2007; DeFine Licht 2019). The types of stakeholders vary with the type of organisation; they could include taxpayers, customers, owners, beneficiaries or investors, among others. For accounts to create transparency and inform the audience, requires the qualities of mobility, stability and combinability (Robson 1992). First and foremost, accounts are not about what the organisation is doing; they are representations of what the organisation is doing. Representations are necessary since audiences would rarely be able to observe everything going on in an organisation and, even if they did, would be overwhelmed by the sheer

External reporting goes social  121 number of information cues (Latour 1987). As a result, accounts need to be mobile so that they can be transferred across time and space, from the organisation to the audience (Latour 1987). The organisation of accounts needs to be stable in terms of their relationship to the underlying ‘reality’ they represent (Latour 1987). In the context of external reporting, this might imply that accounts are presented according to established formats and definitions, to allow their audiences to make better sense of the information in relation to its context (Robson 1992). In addition, ideally, accounts should be combinable, which allows the audience to compare and accumulate accounts from different parts of ‘reality’, that is, different places and different points in time (Latour 1987). To achieve combinability requires the accounts to be expressed at the same level of aggregation and in the same units to avoid mixing apples and oranges (Robson 1992). This implies a certain amount of work in order to render accounts combinable. In the context of external reporting, accounts from different years might be combined to assess development, or accounts from different organisations or units might be combined to allow a performance ranking. Their quantitative nature and the far-reaching harmonisation efforts involved mean that, typically, financial accounts are considered to be both stable and combinable. However, even more qualitative and less regulated accounts, related, for example, to sustainability reporting, are often expected to adhere to certain standards and reference points. That is, they may be expected to cover certain themes related to specific organisational goals or to provide a balance between positive and negative aspects. To sum up the arguments so far, accounting assumes a relationship which involves one party, the audience of stakeholders, who wants to obtain information, accounts, from another party, for example, an organisation. Provided that accounts are mobile, stable and combinable, they are assumed to provide a basis for transparency. Transparency allows the audience to assess how the organisation is doing and, if necessary, request additional accounts or demand certain measures be taken. Thus, transparency is assumed to enable accountability. Overall, therefore, accounting can be considered a tool that enables managers to communicate with audiences unable to observe directly what happens in the organisation and a tool that allows certain audiences (e.g., investors, customers, other organisations) to make decisions. At the same time, as various literature streams acknowledge, there are limits to both transparency and accountability. One criticism concerns the relationship between transparency and accountability. For example, DeFine Licht (2019) distinguishes between raw and refined transparency, arguing that raw transparency provides a weak basis for accountability and requires systematic organising by some kind of auditor – refinement – in order to enable accountability (compare Tsoukas’s 1997 reasoning about overload). Furthermore, even in the case of refined transparency, there may not necessarily be an interested audience that calls for explanation and justification and, vice versa, accountability that

122  Cecilia Gullberg depends more on trust may be attained without a refined transparency account (DeFine Licht 2019). Hence, the relationship between transparency and accountability is not clear-cut, although many would argue that that the first creates the conditions for the second. Also, as Feldman and March (1981) suggest in their seminal work, the mere existence of information constitutes a symbol of competence that may be sufficient for the audience, in turn, reducing the perceived need for scrutiny. Another criticism concerns the dysfunctional consequences brought by the effort to achieve transparency and accountability. Not only does the production of transparent accounts require time and effort, it can also influence operations. Here, the argument is that accounts are not mere representations of some underlying reality but are constitutive of that reality (Robson 1992; Tsoukas 1997). Put differently, what is made transparent – the requested accounts – can influence the focus of operations, possibly at the expense of other parts of the operations. This type of criticism is linked to my earlier point that accounts are representations of operations and that the process of representing reality is not always straightforward. In the case of financial reporting, this, perhaps, is less pertinent, but choosing what accounts should represent the operations of the organisation is to some degree a subjective process (Robson 1992) and one that cannot fully capture the complexity of the underlying reality (Tsoukas 1997). In sum, the criticisms raised about transparency and accountability, in part, concern the ability and interest of the audience to make sense of and engage with accounts and, in part, are related to the account-giver’s ability to produce a representative account that reflects the potential complexity of the organisation. From a critical perspective, the role of accounting in managerial decision-making is not clear. Having outlined and problematised some of the basic tenets and assumptions of accounting, in the next section I discuss social media and what it means for transparency and accountability.

12.2 Social media and its implications for transparency and accountability As mentioned in the introduction to this chapter, social media involves an important element of the interaction among several parties, potentially in real time. In seeking to define what characterises social media, Treem and Leonardi (2012) point to the persistence and broad visibility of social media content, which distinguishes it from other forms of interactions such as telephone or e-mail conversations. There are also a number of characteristics, which, if not defining and unique to social media, are at least common. One is the tendency for informal, subjective or even emotionalised content (Gerbaudo 2016), another is the importance of recognition from others (Luca 2015), and yet another is the wider mix of formats that include numbers and text and images and videos (Blankespoor 2018).

External reporting goes social  123 Taken together, I believe that the above characteristics boil down to two important ways in which social media differs from earlier digital accounting technologies. First, they are more distributed and decentralised; that is, they involve a larger number of actors who contribute content on an equal basis. Second, they are less standardising; that is, they allow for more variation in length, form and tone of content. Earlier digital technologies, such as enterprise resource planning systems and knowledge management systems, served to reinforce these fundaments of accounting by further standardising and categorising information that then could become a tool for transparency, overview, decision-making and control (Davenport 1998). So, what might these differences imply for the nature of accounting and, in turn, for transparency and accountability? And how do these implications affect a managerial perspective? Below, I elaborate on these aspects (which were briefly presented in a popular science text – Gullberg 2019). 12.2.1 From periodic to continuous While external reporting tends to be periodic, for example, yearly or quarterly, I argue that accounting on social media will necessarily be more continuous. Although the frequency of accounts certainly differs across organisations, studies show that organisations across sectors are publishing monthly or even weekly accounts. For example, both for-profit and nonprofit organisations are reporting on sustainability-related aspects (Manetti and Bellucci 2016), and philanthropic organisations are accounting for how they spend their money (Bellucci and Manetti 2017) outside of the periodic reporting schedules. Although earlier digital technologies allowed some level of frequent and real-time information updates, the broad visibility and fast-paced interactions enabled by social media are coupled to significantly stronger expectations about reporting frequency. Furthermore, the preference for brevity (Blankespoor 2018) – not least on Twitter – and the perceived importance of generating likes and shares (Luca 2015) are likely promoting this frequency. 12.2.2 From holistic to fragmented Whereas external reporting typically requires aggregation of activities and results during a given time period and their presentation as a joint whole, I would argue that accounting on social media is more fragmented. This is likely related to the need to be brief, but continuous, which necessarily implies more frequent reporting. Rather than summarising a whole year’s results and activities, tweets and Facebook posts are likely to provide shortterm pictures of operations and reporting of a particular event or domain of operations. Below I provide an example of a sustainability-related account on a company Facebook page.

124  Cecilia Gullberg We are not only helping our customers to save energy; we are also making ourselves more energy efficient [link to webpage] Cited in Manetti and Bellucci (2016: 1000) Although, in theory, accounts published on social media over time could be accumulated to form a more coherent whole, these different accounts, often, are not read in conjunction. Of course, this could apply to an annual report, where the reader chooses what to read and what to ignore. However, a delimited report would seem more likely to provide a more holistic view of operations, for example, by outlining goals, strategies and results, than a continuous stream of short accounts. Also, the typically more emotional, informal and varied format of accounts on social media, potentially, could influence how accounts are interpreted and are related to each other. Studies show that quantitative accounts on social media are often accompanied by more subjective accounts – particularly in relation to positive performance (e.g., Yang and Liu 2017). I use an example from a company’s financial reporting on Twitter to illustrate this point: It’s been a good year for the business. Another strong set of results; total returns of 25% & stronger operational performance. Cited in Yang and Liu (2017: 680) In addition, accounts are produced not only by the organisation under scrutiny but also by its audience who post comments related to the original message, which can influence how the original message is interpreted. Hence, it seems that various aspects intermingle to render accounting on social media fragmented and that this fragmentation could have consequences for how accounting is interpreted. 12.2.3 From historical to forward-looking While external reporting commonly summarises what has already taken place, I argue that accounting on social media is likely to include significant present and future events. This certainly applies to traditional reports, which include information on both achievements and ongoing and future projects. However, in light of the fast-paced and interactive nature of social media discussed earlier, such accounts are likely to be more common on social media. If organisations are continuously being urged to publish accounts of the progress of their operations, they may be forced to include activities and events which have yet to take place. This might be both expected and acceptable on social media, given the more informal nature and more varied format. Below is an example from the Facebook page of a philanthropic organisation, presenting something great to come. Congratulations to Seattle Seahawks’ Russell Wilson (link) for the launch of his new charitable foundation, the “Why Not You” foundation.

External reporting goes social  125 Seattle Foundation staff members Fidelma McGinn and Mary Grace Roske were able to congratulate Russell in person at the kickoff event last night. And kudos to Russell Investments (link), who announced that in addition to donating $3,000 each time Russell Wilson scores a touchdown, they also are making a $10,000 contribution to his foundation! The foundation will focus on Russell’s passion of impacting and influencing kids’ lives. Cited in Bellucci and Manetti (2017: 892) Taken together, what do these potential shifts in the nature of accounting hold for transparency and accountability and, ultimately, the production and consumption of accounting? 12.2.4 Transparency On the one hand, continuous accounting could be seen as a promoting transparency by providing the audience with more timely information – perhaps an earlier idea of how operations are progressing. Also, although perhaps not providing real transparency, continuous accounting might signal competent management and reduce demands for additional information (Feldman and March 1981). On the other hand, fragmented accounts, read, perhaps, out of sequence, and not easily accumulated, might question the notion of transparency (compare Robson 1992). How is the audience to make sense of fragments? To what standards and/or goals are they related? It could be argued that increasingly forward-looking accounting provides earlier insights, similar to more frequent accounting. However, maybe forward-looking accounts could divert attention from historical achievements and non-achievements (see “the journey metaphor,” Milne et al. 2006)? In addition, as the content on social media seems to be driven by maximising the numbers of likes and shares, this could question how much such accounts are representations of ‘reality’ (compare Robson 1992). Informal and emotional accounts, which include both numbers and text, and also images and/or videos, could be considered closer to reality since they provide depictions rather than representations, but this is no guarantee of their representativeness of the organisation’s entire operations (compare Preston and Oakes 2001). Who selects these accounts and on what grounds? Such questions could and should be asked in relation, also, to traditional annual reports, but since accounting on social media is an emergent practice, I argue that these questions are even more worthy of investigation in the context of web reporting. To what extent accounts on social media provide transparency is likely to depend on ‘the eye of the beholder’. The target audience could include a diverse set of stakeholders, some of whom may favour more vivid descriptions and images of specific situations and others of whom might prefer aggregated statistics illustrating the implementation of key strategies (Connolly and Hyndman 2013). Thus, accounting on social media and traditional accounting could have different importance for different stakeholder groups.

126  Cecilia Gullberg 12.2.5 Accountability Typically, transparency is considered an important precondition for accountability. So, if transparency is raw rather than refined (DeFine Licht 2019), what does that imply for the possibility of the audience to assess operations and request justification or explanation? Judging from the literature, social media audiences do not hesitate to ask for justifications and explanations (Bellucci and Manetti 2017; Manetti and Bellucci 2016). Also, since social media has an important interactive component, audience’s expectations related to responses to their requests tend to be high (Agostino and Sidorova 2017). Lack of a response from the organisation can be interpreted as lack of accountability – by a potentially large audience, given the broad visibility of content on social media (Treem and Leonardi 2012). From this perspective, it is unclear whether it is perception of transparency per se or the interactive nature of the medium that is lowering the threshold for holding the organisation to account, which is driving accountability. However, if demands for accountability are not predicated on accounts that are perceived to be transparent, accountability is enacted on rather unclear grounds (compare Scott and Orlikowski 2012). This raises the question of what organisations should be held accountable for. The extent of organisations’ response to demands for accountability seems to vary; some studies suggest that their engagement with questions and comments from the audience is limited (Bellucci and Manetti 2017; Manetti and Bellucci 2016) and other studies show that organisations make every effort to provide a swift response (Agostino and Sidorova 2017; Scott and Orlikowski 2012). There is variation, also, in how organisations address the issue at hand; while some may provide superficial answers, aimed at constructing legitimacy (Manetti and Bellucci 2016), others may incorporate the audience viewpoint in their operations, thereby enacting far-reaching accountability (Scott and Orlikowski 2012). It seems that social media could have quite diverse and, possibly, contradictory implications for transparency and accountability, but what about the production and consumption of accounting? Based on the above reasoning, it would seem that accounting on social media could satisfy certain stakeholder groups and, therefore, could be an important complement to traditional accounting. It should be noted, also, that although distinct from earlier digital technologies in many ways, social media should not be seen as uniform. The phenomenon includes a range of channels, each of which emphasises a particular format (e.g., pictures on Instagram, and short messages on Twitter), some of which are favoured more by certain age groups. This suggests that organisations should consider a mix of reporting on social media platforms alongside more traditional channels. However, this raises other questions related to the organisational competences that need to be combined to produce these different types of accounting (compare Agostino and Sidorova 2017) – to what extent these different processes should

External reporting goes social 127 be formalised and how far organisations would be willing to incorporate the views of stakeholders resulting from this more interactive approach to accounting?

12.3 Takeaway In this chapter, I elaborated ideas in recent literature regarding social media as a technology of accounting. I discussed two key aspects – transparency and accountability – and how they may be reshaped when accounting is transformed. I identified three ways in which accounting on social media might differ from traditional forms of accounting. It has the potential to be more frequent, but less periodic; more fragmented, but less holistic; and more forward-looking, but less historical. These differences may challenge what transparency means and to whom and on what grounds accountability is enacted. Furthermore, novel formats of accounting raise questions about how organisations could combine different channels for accounting and how these processes should be managed and what competences this would require and what level of formalisation. As the effects of digitalisation are shaped by the interaction between macro- and micro-level aspects (Treem and Leonardi 2012), the above conclusions call for further enquiry.

References Agostino, D. and Sidorova, Y. 2017. How social media reshapes action on distant customers: Some empirical evidence. Accounting, Auditing and Accountability Journal 30(4): 777–794. Bellucci, M. and Manetti, G. 2017. Facebook as a tool for supporting dialogic accounting? Evidence from large philanthropic foundations in the United States. Accounting, Auditing & Accountability Journal 30(4): 874–905. Berthon, P.R., Pitt, L.F., Plangger, K. and Shapiro, D. 2012. Marketing meets Web 2.0, social media, and creative consumers: Implications for international marketing strategy. Business Horizons 55(3): 261–271. Blankespoor, E. 2018. Firm communication and investor response: A framework and discussion integrating social media. Accounting, Organizations & Society 68–69: 80–87. Bovens, M. 2007. Analysing and assessing accountability: A conceptual framework. European Law Journal 13(4): 447–468. Connolly, C. and Hyndman, N. 2013. Charity accountability in the UK: Through the eyes of the donor. Qualitative Research in Accounting & Management 10(3–4), 259–278. Davenport, T. H. 2000. Mission Critical: Realizing the Promise of Enterprise Systems. Boston, MA: Harvard Business School Press. DeFine Licht, J. 2019. The role of transparency in auditing. Financial Accountability and Auditing 35(3): 233–245. Feldman, M.S. and March, J.G. 1981. Information in organizations as signal and symbol. Administrative Science Quarterly 26(2): 171–186.

128

Cecilia Gullberg

Gerbaudo, P. 2016. Constructing public space rousing the Facebook crowd: Digital enthusiasm and emotional contagion in the 2011 protests in Egypt and Spain. International Journal of Communication 10: 254–273. Gullberg, C. 2019. Bokslut utan slut? In Trendrapport 2020: 10 spaningar med betydelse för insamling och givande, Ben Azzouz, J. (ed.). Stockholm: Giva Sverige: 20–21. Kaplan, A. and Haenlein, M. 2010. Users of the world, unite! The challenges and opportunities of social media. Business Horizons 53(1): 59–68. Kornberger, M., Pflueger, D. and Mouritsen, J. 2017. Evaluative infrastructures: Accounting for platform organization. Accounting, Organizations and Society 60: 79–95. Latour, B. 1987. Science in Action: How to Follow Scientists and Engineers through Society. Cambridge, MA: Harvard University Press. Luca, M. 2015. User-generated content and social media. In Handbook of Media Economics, Anderson, S.P., Waldfogel, J. and Strömerg, D. (eds.). Amsterdam: North-Holland: 563–592. Manetti, G. and Bellucci, M. 2016. The use of social media for engaging stakeholders in sustainability reporting. Accounting, Auditing and Accountability Journal 29(6): 985–1011. Milne, M.J., Kearins, K. and Walton, S. 2006. Creating adventures in Wonderland: The journey metaphor and environmental sustainability. Organization 13(6): 801–839. Preston, A. and Oakes, L. 2001. The Navajo documents: A study of the economic representation and construction of the Navajo. Accounting, Organizations and Society 26(1): 39–71. Roberts, J. and Scapens, R. 1985. Accounting systems and systems of accountability – understanding accounting practices in their organisational contexts. Accounting, Organizations and Society 10(4): 443–456. Robson, K. 1992. Accounting numbers as “inscription”: Action at a distance and the development of accounting. Accounting, Organizations and Society 17(7): 685–708. Scott, S.V. and Orlikowski, W.J. 2012. Reconfiguring relations of accountability: Materialization of social media in the travel sector. Accounting, Organization and Society 37(1): 28–40. Treem, J.W. and Leonardi, P.M. 2012. Social media use in organizations: Exploring the affordances of visibility, editability, persistence, and association. Communication Yearbook 36(1): 143–189. Tsoukas, H. 1997. The tyranny of light – the temptations and the paradoxes of the information society. Futures 29(9): 827–843. Weinryb, N., Gullberg, C. and Turunen, J. 2019. Collective action through social media: Possibilities and challenges of partial organizing. In Organization Outside Organizations, Ahrne, G. and Brunsson, N. (eds). Cambridge: Cambridge University Press, 334–356. Yang, J.H. and Liu, S. 2017. Accounting narratives and impression management on social media. Accounting and Business Research 47(6): 673–694.

13 Robotic process automation and the accounting profession’s extinction prophecy Matthias Holmstedt, Fredrik Jeanson and Angelina Sundström

This chapter examines robotic process automation (RPA) and the revitalised extinction prophecy of the accounting profession. RPA is a digital solution that enables automatic administrative procedures previously undertaken by white-collar workers. Syed et al. (2020: 1) describe RPA as follows: This term amalgamates robotics, referring to software agents acting as human beings in system interactions, and process automation, i.e. workflow management systems or, more generally, systems that are process-aware. In essence, RPA is a relatively new technology comprising software agents called ‘bots’ that mimic the manual path taken by a human through a range of computer applications when performing certain tasks in a business process. In contrast to cognitive automation, for example, artificial intelligence (AI), RPA draws on rules to structure and process data (e.g., Lacity and Willcocks 2016) and requires tangible human input. Notably, RPA is not a new type of digital solution; working in Excel using macros is equivalent to an RPA solution, with the difference only that RPA works within and across different software. The number of firms implementing solutions that automate specific administrative procedures has exploded in recent years. As much as 53% of the respondents to the Deloitte Global RPA survey (Deloitte 2018) declared having embarked on the implementation of RPA, and this proportion is expected to increase to 72% by 2020. The Deloitte shows, also, that 78% of respondents who had implemented RPA were likely to increase their investment up to 2021. The Protiviti RPA survey (Protiviti 2019) provides similar data and highlights the quite widespread implementation of RPA. It suggests that most contemporary firms will continue to invest in RPA in the next two years. The RPA hype has taken over, and its implementation is set to increase substantially in the near future. This will result in the roboticisation of many traditional white-collar administrative processes and a reshaped administration organisation. DOI: 10.4324/9781003111245-13

130  Matthias Holmstedt et al. The impact of RPA and other automation solutions on white-collar occupations has promoted huge speculation about the future. The media has included alarming and threatening headlines, such as “No longer a question if the robots will take over – the question is when” (Malmström 2016), and “The robots are coming for your job, too” (Wolf 2019). The media is also offering advice to employees about what they should do when robots make them redundant, evidence in headlines, such as “How to cope when robots take your job” (Kuper 2016). These headlines are supported by statements such as “The bottom line is that 45 per cent of work activities could be automated using already demonstrated technology” Chui et al. 2016: 5). Several websites, such as BBC.com, are offering applications to assess the likelihood of robots taking over particular jobs. However, other news embraces the creative power of white-collar work automation, for example, headlines such as “Robots will boost rather than destroy jobs” (Bland 2018) and “World Economic Forum: Robots ‘will create more jobs than they displace’” (BBC News 2018) and “Why the Automation Age might still need us around to work – Yes, the robots are coming – but take a breath” (Colagrossi 2019). The accounting profession is frequently portrayed as one of the main targets of RPA solutions. The previously mentioned BBC’s “Will a robot take your job?” application estimates the likelihood of different types of occupations being automated, based on Frey and Osborne’s (2017) research. Table 13.1 summarises the occupations covered by the “Will a robot take your job?” app that are most closely related to the accounting profession. Table 13.1 suggests that most of these accounting-related occupations will disappear in the future. If we look at the complete list of occupations included in the app, we observe that there are many accounting-related occupations in the top part of the list. Table 13.1 shows, also, that there is a perception that the most accounting-related tasks are standardised and rule-based and easy targets for RPA. Several organisations implementing Table 13.1 Perceptions of occupations that will disappear in future (BBC.com) Occupation

Likelihood (%)

Financial accounts manager Bookkeeper, payroll manager or wages clerk Sales administrator Financial administrative worker Financial and accounting technicians Debt, rent and other cash collector Chartered and Certified Accountant Records clerk Credit controller Finance and investment analyst and adviser Sales accounts and business development manager Management consultant and business analyst Financial manager or director

98 97 97 97 96 95 95 70 51 41 16 7 7

Robotic process automation and accounting  131 RPA have started by automating their accounting-related processes. According to one of Protiviti’s directors, Angelo Poulikakos (Cohn 2019): Accounting contains a lot of processes that are high-transaction, repeatable, well structured, rules-based processes that lend themselves to robotic process automation. A lot of times RPA initiatives also start with accounting because accounting oftentimes rolls out to a CFO, and it catches the CFO’s attention that you can have a ton of cost savings through the use of RPA. This is akin to an extinction prophecy related to the accounting profession and the notion that RPA will eliminate many professional accounting business process tasks. This extinction prophecy is not new; a form of it emerged in the 1970s when it was assumed that computers would put accountants out of work (cf., Baldvinsdottir et al. 2009). Lindell (2015) refers to a similar discourse related to the effects of digitalisation on the future labour market. Evaluations of whether or not the contemporary extinction prophecy can be considered valid need to be judged on the basis of the actual tasks performed within the profession. It is possible that these alarming headlines and predictions are based on a myth about what accountants do. We suggest that the extinction prophecy is based on the outdated image of an accountant as a bean counter prediction. We propose a conceptual model that distinguishes between six groups of accounting tasks and review the literature on RPA in the accounting field to provide a more nuanced view and more fine-tuned predictions related to how RPA is likely to affect the accounting profession.

13.1 Conceptualising accounting and the accounting profession RPA allows the automation of specific and standardised administrative tasks. To estimate the potential of RPA and its effect on the accounting profession, we need to identify the tasks performed by accountants. Accounting-related tasks include a proportion of standardised tasks relate to recording, storing and processing data. These tasks refer to recording of incoming invoices, reconciliation of accounts, preparation of routine reports, sending out invoices to customers and enabling payments. Accounting tasks also include some semi-standardised tasks that require case-by-case evaluation. Examples include recordkeeping related to stock inventories, tax deferrals, preparation of customer invoices, investment calculations, and reviews of fixed assets values and costs and revenue related to project work. Accounting involves several non-standardised tasks such as interpretation of figures, selecting key indicators, translating strategy, ad hoc reports, identification of cost drivers and training of others. Accounting tasks can be categorised, also, depending on whether the task is reactive or proactive, whether it focuses on describing the past or predicting the future.

132  Matthias Holmstedt et al. Table 13.2 Accounting tasks in a two-by-three matrix (authors’ own representation) Accounting task

Reactive

Proactive

Standardised Semi-standardised None-standardised

Q1 Q3 Q5

Q2 Q4 Q6

A 2 × 3 (see Table 13.2) matrix allows a categorisation of accounting tasks according to degree of standardisation and time perspective. The matrix in Table 13.2 portrays accounting as a profession distinguished by a variety of tasks that are both administrative and analytical in nature. Quadrant 1 (Q1) includes routinised tasks related to the past, such as account reconciliation. Quadrant 2 (Q2) includes routinised tasks related to the future, for example, provision of unpaid invoices. Quadrant 3 (Q3) includes semi-routinised tasks that need case-by-case evaluation but include stock inventories, which follows a predetermined routine, and obsolescence inventories, which require human evaluation. Quadrant 4 (Q4) includes forward-looking but routine tasks such as investment calculations, which are guided by investment manuals and human-determined parameters. Quadrant 5 (Q5) includes tasks that require human evaluation and involve interpretations of the past, such as interpretation of economic statistics. Quadrant 6 (Q6) includes tasks involving human judgements and interpretation that are forward-looking and include, for example, the selection of critical indicators translated from strategic prioritisation. The portfolio of accounting tasks provides a picture of the accounting profession that seems to deviate from common assumptions. The bean counter stereotype became established in the 1970s (Balvindsdottir et  al. 2009) and was based on the notion of accounting as limited to bookkeeping, that is, to paperwork and number-crunching. It suggests that accountants are mainly preoccupied with standardised and semi-standardised tasks (i.e., those in Q1) and some of the tasks in Q2 and, despite being a misrepresentation of the contemporary accounting profession, persists in some parts of society (Carnegie and Napier, 2010; Christensen and Rocher, 2020). Frey and Osborne’s (2017) and the BBC’s question of whether a robot is going to take your job suggests that this stereotype has contaminated analysis and is exaggerating the opportunities and consequences of automatising accounting work. Since RPA applies mainly to the tasks in Q1 and Q2, Table 13.2 would seem to allow more valid predictions about how RPA will affect the accounting profession. We are not suggesting that RPA will not have a substantial impact on various organisations since it has the potential to eliminate certain standardised accounting tasks and enable the organisation to downsize or relocate personnel involved in this type of work. However, RPA will

Robotic process automation and accounting  133 also allow organisations to dedicate more time to semi-standardised and non-standardised tasks that should enhance their operations, tactics and strategy. In other words, RPA will allow an increased focus on more analytical accounting tasks.

13.2 RPA: a forthcoming frontline in accounting research? Google Scholar shows that interest in RPA is recent; it began to increase only in 2017 (see Figure 13.1). We searched Google Scholar, including both academic and semi-academic texts, using the keyword term ‘robotic process automation’ in the title of publications. Figure 13.1 shows that the first publication was in 2015. Google Trend tells a similar story; the number of web searches on ‘RPA’ and ‘Robot Process Automation’ increased significantly after 2016. Thus, RPA is new to both the academic community and society more generally. Researchers have only recently begun to explore the opportunities offered by RPA and examine how the technology will impact on and change organisations. We used the Web of Science to identify accounting-related publications on RPA. The Web of Science is used frequently for literature reviews (see Gusenbauer and Haddaway 2019). A search using the keyword term ‘robotic process automation’ identified only eight articles before 2020. Of these, six were related to accounting. These six publications were published in Accounting Horizons (1), Asian Journal of Accounting and Governance (1), Electronic Markets (1), International Journal of Accounting Information Systems (2) and MIS Quarterly Executive (1). One of the articles was published in 2016, one in 2018 and the remaining four in 2019 demonstrating the nascent

Figure 13.1 Number of RPA-related publications in Google Scholar.

134  Matthias Holmstedt et al. nature of RPA research. However, it is likely to attract increased research attention because of the claims about its effect on the accounting profession and overall public interest in solutions that automate white-collar tasks. In Section 13.4, we review these six articles to illustrate the current state of the knowledge on how RPA will affect the portfolio of accounting tasks and the overall accounting profession.

13.3 RPA-related research in accounting – an early review Lacity and Willcocks (2016) studied RPA implementation in a mobile telecom firm. Fernandez and Aman (2018) studied the implementation of RPA in a global accounting services firm and how it affected the firm’s business and finance functions. Hofmann et  al. (2019) provided a review of the literature focusing on RPA implementation. Kokina and Blanchette (2019) studied four (anonymous) firms that adopted RPA for their accounting and finance tasks. Cooper et al. (2019) studied RPA implementation in a public accounting setting, and Huang and Vasarhelyi (2019) focussed on RPA implementation in the auditing industry. Five of these pieces of research are based on empirical observation, and one is a literature review. Most adopt a qualitative approach, employing a case study design and interviews to gather information. All six studies are characterised by two themes: (1) what should be automated and (2) the actual implementation of RPA in organisations. To decide what should be automated, the studies rely on the criteria of repetitive, tedious, mundane tasks that do not require much mental effort. These tasks exist in both private and public accounting and auditing practices. Examples include accessing databases, validating data and generating documents and reports. All six articles focus on the opportunities for RPA to help organisations reduce costs, minimise errors, make accurate performance measurements and improve process documentation and report quality. RPA is described as the solution that substitutes for the human worker, and most of these studies discuss the ability of RPA to imitate a human worker as positive for the organisation. RPA is presented as a tool for organisations to reduce their workload, reduce the number of employees and reduce human negligence due to the ability to take over repetitive and rule-based tasks (e.g., Lacity and Willcocks 2016; Fernandez and Aman 2018; Hofmann et al. 2019; Huang and Vasarhelyi, 2019). By replacing human workers, some of the studies suggest that this frees up accountants to focus on other tasks that require creative thinking, analytical skills, judgment, follow-up actions and social skills (e.g., Fernandez and Aman 2018; Hofmann et al. 2019; Huang and Vasarhelyi 2019). Fernandez and Aman’s (2018) is the only study that explores the potential downside to RPA implementation. They consider that, similar to other automation technologies, RPA could have positive or negative influences on individuals and firms. More specifically, they stress that motivation,

Robotic process automation and accounting  135 emotions and productivity are three aspects likely to be influenced by RPA implementation. They then adopt a profession logic lens to point out that implementation of RPA can cause a change in the role of accountant since the accountant will formulate and adapt to new work tasks. On the basis of previous studies, Fernandez and Aman (2018) point out that, following the implementation of RPA, there will be fewer work routines, improved motivation to learn, increased ability to develop professional skills, increased ability to carry out management analysis and greater work efficiency. Alongside these positive aspects, they discuss how RPA implementation might negatively influence the accountant role by creating fear and worry about new work activities and processes. The authors stress that implementation can cause an unnecessary competition between humans and robots, underpinned by the accountants’ fear of being replaced by a robot. None of these studies of RPA in accounting addresses in detail how RPA affects the accounting profession task portfolio. Instead, they discuss changes related to adoption of RPA and how it changes internal tasks. However, there is no support for the bean counter stereotype found in Frey and Osborne (2017); thus, the extinction prophecy receives weak or no support. Therefore, the literature flashlight headings addressed at the beginning of this chapter would seem to provide an exaggerated picture of the future, at least of the accounting profession.

13.4 Some concluding remarks This chapter investigated the implementation of RPA and the extinction prophecy in the context of the accounting profession. The extinction prophecy is fuelled by alarmist and threatening headlines. In turn, these alarmist views are fuelled by reports written by global consultancy firms, which predict that RPA will take over routinised and rules-based accounting tasks, making the accountant redundant. However, they do not specify which among the portfolio of accounting tasks is most likely to be taken over. For example, reports by Deloitte (2018) and Protiviti (2019) highlight rates of RPA implementation and investment in RPA but are not specific about the tasks that RPA will perform. It would seem that the extinction prophecy stems from external stakeholders (e.g., Malmström 2016). After conceptualising the portfolio of accounting tasks and reviewing the RPA-related research in accounting, we show that the prophecy appears exaggerated. Our literature review shows that, undoubtedly, RPA will change the accounting profession by taking on repetitive and standardised tasks. This should streamline accounting functions within organisations and reduce the number of the white-collar workers in those functions. However, RPA cannot and will not perform all accounting tasks; however, it will allow for greater attention to analytical, entrepreneurial and managerial roles undertaken by accountants. The analytical tasks in the accounting profession portfolio will remain and will likely be extended by the implementation of

136 Matthias Holmstedt et al. RPA. We suggest that scepticism is in order in the context of the extinction prophecy but that this should be paralleled by an openness to the opportunities afforded by RPA.

13.5 Takeaway The extinction prophecy in the context of the accounting profession seems exaggerated. We envisage a future where the task portfolio of the accounting profession will continue to change and where the RPA is just another step, perhaps a significant one, in an already ongoing transformation. In other words, we forecast continuing change rather than the demise of the profession. This contrasts with descriptions of RPA as threatening the whole of the accounting profession. The task portfolio of the accounting profession was experiencing changes before digitalisation and is likely to continue to change in the post-digitalisation era. It is likely that the change to accounting tasks will be accompanied by a change to the image of the accounting profession.

Acknowledgement The work in this chapter was, in part, financed by Eskilstuna Municipality through the project Sörmlandskontraktet and, in part, by post doc financing from Mälardalen University’s School of Innovation, Design and Engineering.

References Baldvinsdottir, G., Burns, J., Nørreklit, H. and Scapens, R.W. 2009. The image of accountants: From bean counters to extreme accountants. Accounting, Auditing & Accountability 22(6): 858–882. https://doi.org/10.1108/09513570910980445 BBC News. 2018. WEF: Robots “will create more jobs than they displace.” September 17. Accessed March 5, 2020: https://www.bbc.com/news/business-45545228. Bland, B. 2018. Review of robots will boost rather than destroy jobs, ADB says. Financial Times, April 18. Accessed March 5, 2020: https://www.ft.com/ content/69602a90-3d4a-11e8-b9f9-de94fa33a81e. Carnegie, G.D. and Napier, C.J. 2010. Traditional accountants and business professionals: Portraying the accounting profession after Enron. Accounting, Organizations and Society 35(3): 360–376. Christensen, M. and Rocher, S. 2020. The persistence of the accountant beancounter image in popular culture. Accounting, Auditing & Accountability Journal 33(6): 1395–1422. Chui, M., Manyika, J. and Miremadi. M. 2016. Four fundamentals of workplace automation. The McKinsey Quarterly 1: 1–9. Cohn, M. 2019. Robotic process automation comes to accounting. Accounting Today. May 13. Accessed March 5, 2020: https://www.accountingtoday.com/news/ robotic-process-automation-comes-to-accounting.

Robotic process automation and accounting

137

Colagrossi, M. 2019. Review of why the automation age might still need us around to work- yes, the robots are coming – but take a breath. Big Think, August 16. Accessed March 5, 2020: https://bigthink.com/technology-innovation/ automation-robot-jobs. Cooper, L., Holderness, D.K., Sorensen, T. and Wood, D.A. 2019. Robotic Process Automation in Public Accounting. Accounting Horizons, 33(4): 15–35, Available at SSRN: https://ssrn.com/abstract=3193222 or http://dx.doi.org/10.2139/ ssrn.3193222. Deloitte United States. 2018. Robotic Process Automation (RPA) trends and scaling best practices Deloitte United States. February 16. Accessed March 5, 2020: https://www2.deloitte.com/us/en/pages/operations/articles/global-roboticprocess-automation-report.html. Fernandez, D. and Aman, A. 2018. Impacts of robotic process automation on global accounting services. Asian Journal of Accounting and Governance 9: 123–132. Frey, C.B. and Osborne, M.A. 2017. The future of employment: How susceptible are jobs to computerization? Technological Forecasting & Social Change 114: 254–280. Gusenbauer, M. and Haddaway, N.R. 2019. Which academic search systems are suitable for systematic reviews or meta‐analyses? Evaluating retrieval qualities of google scholar, PubMed, and 26 other resources. Research Synthesis Methods 11(2): 181–217. Hofmann, P., Samp, C. and Urbach, N. 2019. Robotic process automation. Electronic Markets 30(1): 99–106. Huang, F. and Vasarhelyi, M.A. 2019. Applying Robotic Process Automation (RPA) in auditing: A framework. International Journal of Accounting Information Systems 35: 100433. Kokina, J. and Blanchette, S. 2019. Early evidence of digital labor in accounting: Innovation with robotic process automation. International Journal of Accounting Information Systems 35: 100431. Kuper, S. 2016. How to cope when robots take your job “When your industry goes, you lose both your income and your identity.” Financial Times, October 6. Accessed March 5, 2020: https://www.ft.com/content/ ed208574-8b4d-11e6-8cb7-e7ada1d123b1. Lacity, M.C. and Willcocks, L.P. 2016. Robotic process automation at Telefonica O2. MIS Quarterly Executive 15(1): 21–35. Lindell, E. 2015. Framtidens Arbetsmarknad i Massmedia. Delrapport 2 Eskilstuna: Mälardalen University, Västerås. Malmström, M. 2016. Inte Längre Fråga Om Robotarna Tar Över – Utan När. Svenska Dagbladet, March 27, sec. Näringsliv/Digitalt. Accessed March 5, 2020: https://www.svd.se/inte-langre-fraga-om-robotarna-tar-over--utan-nar. Protiviti. 2019. Review of 2019 Global RPA survey results: Taking RPA to the next level. Protiviti. Accessed March 5, 2020: https://www.protiviti.com/sites/default/ files/united_kingdom/insights/2019-global-rpa-survey-protiviti_global.pdf. Syed, R, Suriadi, S., Adams, M., Bandara, W., Leemans, S.J.J., Ouyang, C., ter Hofstede, A.H.M., van de Weerd, I., Thandar Wynn, M. and Reijers, H.A. 2020. Robotic process automation: Contemporary themes and challenges. Computers in Industry 115: 103162. https://doi.org/10.1016/j.compind.2019.103162. Wolf, Z.-B. 2019. I. I. Accessed March 5, 2020. https://edition.cnn.com/2019/08/24/ politics/economy-us-workforce-automation/index.html.

14 Managing digital employeedriven innovation The role of middle-level managers and ambidextrous leadership Izabelle Bäckström and Peter Magnusson The contemporary innovation field includes a much wider range of innovators than previously acknowledged. One of these innovators, overlooked by traditional innovation studies, is the group of non-R&D and non-managerial employees. These employees are referred to as ‘ordinary’ employees by the novel field of employee-driven innovation (EDI). These employees often have no formal innovation function but are hugely knowledgeable about products, markets, clients, services and organisational practices which knowledge is valuable for innovative work (Høyrup, RedienCollot and Teglborg-Lefevre 2018). Since innovation became the key to achieving competitive advantage in crowded markets, an increasing number of organisations are making efforts to invite and involve all of their employees to participate in their innovation activities such as idea generation, idea development and idea implementation. To facilitate employee innovation, many organisations have abandoned traditional suggestion boxes and are turning, instead, to digital tools to promote and manage flows of employee ideas (Beretta, Björk and Magnusson 2018). Information and communication technology (ICT)-based idea management systems (IMS)1 are being introduced to support ordinary employees’ innovative endeavours and allow managers to structure the innovation process. However, research shows that these tools need to be properly integrated into already existing structures and work routines in order to enrich innovation (Gressgård et al. 2014). This chapter discusses a successful and a somewhat less successful case of IMS adoption. Both involve the same company and the same IMS but are located in geographically separated locations. By comparing these two cases we can identify the factors that matter for successful engagement of the firm’s ordinary employees as part-time innovators working with IMS. The literature identifies non-managerial and non-R&D employees as potential sources and drivers of innovation, based on their supply- and demand-side knowledge which is needed to produce valuable ideas for innovations. Recognition of the potential of ordinary employees triggered emergence of the notion of EDI (Høyrup 2012) as “the generation and the implementation of new ideas, products, and processes – including the everyday remaking of jobs and organisational practices, originating from interaction DOI: 10.4324/9781003111245-14

Digital employee-driven innovation  139 of employees, who are not assigned to this task” (Høyrup et al. 2018: 318). Although they may contribute to innovation, these ordinary employees are not formally assigned to perform innovative work. They are hired mainly to focus on exploitation related to current business operations. However, to realise their innovation potential, they need, also, to engage in exploration, activities outside their formal job description. The literature considers concurrent exploitation and exploration to be complex (March 1991). In the management literature, the ability or aim to handle exploitation and exploration simultaneously is referred to as “ambidexterity” (Tushman and O´Reilly III 1996). Management of ambidexterity requires a specific type of leadership which has been described as “ambidextrous leadership” (Rosing, Frese and Bausch 2011). In addition to the influence of leadership style on employees’ ability to conduct both exploitive and explorative work for innovation, ICT-based tools, such as IMS, facilitate exploration and, thus, can contribute to firm innovation. Currently, there are several IMS tools that can be used to collect, evaluate and selecting among employee ideas. They are seen as enabling employee ambidexterity. These tools act as an interface between employee and management, which allows the employee to contribute ideas that embody their unique contextual knowledge. In theory, this should allow ordinary employees to exploit their innovative potential and become part-time innovators. This chapter analyses the factors contributing to success or failure when integrating an IMS to manage (collect, evaluate and select) employees’ ideas for future products and services. It consists of a case study of two geographically separated sites – South and North – which belong to the same IT firm’s Swedish subsidiary. The South site was successful, and the other not, regarding the innovative output from the employees. Both sites use the same IMS to manage their EDI activities, which allows comparison of the factors related to success. We show that successful digital management of EDI activities using IMS depends on the leader’s ability to actively incorporate the tool into everyday work routines and existing structures to stimulate explorative behaviour from employees. This suggests that the adoption of IMS to manage EDI must be companioned, also, by a leadership that supports both exploitation and exploration, that is, an ambidextrous leadership. In other words, technology on its own is not enough for successful digitalisation – it is its management that makes the difference.

14.1 Digital employee-driven innovation In the past, the emphasis in innovation studies on employees has been associated, mainly, with the firm’s innovation-specific functions (Hiltunen and Henttonen 2016). The traditional innovation literature tends to downplay the role of ordinary employees (i.e., employees with no formal innovation role) and to focus on technological experts, innovation specialists and R&D employees (Høyrup 2012). To expand this research conversation to include

140  Izabelle Bäckström and Peter Magnusson a wider range of sources and drivers of innovation, Høyrup (2012) proposed the notion of employee-driven innovation (EDI). EDI assumes that ordinary employees have unique expertise in various processes, products and organisational practices in their workplace. However, despite this unique and valuable knowledge, they are an underutilised source of innovation (Bäckström and Bengtsson 2019; Buhl 2018). Another significant aspect that distinguishes work on EDI from the traditional innovation literature is that the EDI concept interconnects the phases of idea generation, idea development, idea promotion and idea implementation that traditional innovation literature tends to study in isolation (Deslée and Dahan 2018; Haapasaari, Engeström and Kerosuo 2018). This interconnectedness of the innovation phases allows both successful and unsuccessful innovation outcomes to be highlighted (Bäckström and Lindberg 2018). This is significant since the innovation literature generally focuses only on the successful aspects and outcomes of innovation – described as a “pro-innovation bias” (Gripenberg, Sveiby and Segercrantz 2012). The growing interest in web-based tools for EDI-oriented work seems to have spurred further developments (cf. Bäckström and Lindberg 2019; Gressgård et al. 2014). Integration of ICT tools in firm innovation processes has been highlighted as an interesting topic for EDI studies and in the context, especially, of digital employee suggestion systems (cf. Bäckström and Bengtsson 2019; El-Ella et al. 2013). However, so far, few studies scrutinise the phenomenon of employee innovation in relation to management tools for promoting and developing employees’ innovation ideas. In particular, there have been calls for more attention to the digital arrangement of EDI activities and how these are combined with management practices such as structures, incentives and support routines (Bäckström and Bengtsson 2019). An exception here is the study by Gressgård et al. (2014), which leads the authors to conclude that the organisational and social context in which the ICT tool is applied should be taken into account. Gressgård and colleagues suggest that these tools need to be aligned to daily work routines and, hence, need to be integrated in already existing structures and processes through timely and regular feedback to employees and inclusion of employees in the later innovation phases of idea refinement and implementation. However, little is known about managerial interventions to support and empower employees to engage in innovative activities beyond their day-to-day tasks, that is, to engage in exploration.

14.2 Ambidextrous leadership The ambidextrous organisation concept (Tushman and O´Reilly III 1996) refers to the inclusion of the two necessary processes of exploitation and exploration identified by March (1991). The first is aimed at replicating and aligning what the organisation already does, in the most efficient manner; the latter is about questioning the way that the firm is currently doing things

Digital employee-driven innovation  141 to create and adapt new and better ways. Thus, exploitation behaviour has a short-term orientation and is linked to maximising current resources utilisation, while exploration has a long-term horizon and is aimed at developing organisational resources. Ambidexterity describes the ability to handle both simultaneously. The literature describes two different types of ambidexterity: structural ambidexterity and contextual ambidexterity. Structural ambidexterity involves separating exploitation activities from exploration activities. Contextual ambidexterity describes when both modes are combined into the same unit or even individual (Mueller, Renzl and Will 2020). This chapter examines the case of two sites that were expected to handle both ordinary routinised work (exploitation) as well as to contribute innovation ideas (exploration), that is, to be ambidextrous. Interestingly, the South site was successful, but the North site was not. A potential reason for this difference might be middle-level managers’ leadership styles. Middle-level managers have the responsibility for making sense of partially incoherent tasks for subordinates and should be able to manage ambidexterity (Gibson and Birkinshaw 2004). The literature suggests that the ability to be ambidextrous depends on leadership style. Transformational leadership has been advocated for exploration, and for exploitation transactional leadership is more appropriate (Crossan, Lane and White 1999). Transactional leadership implies that the leader assigns tasks to subordinates in exchange for a promised reward or benefit. Transformational leadership involves asking the subordinates to go beyond their short-term self-interest for the longer-term good of the group or the organisation or even the whole of society. The transformational leader is often a role model (Bass 1990). It should be noted that many great leaders in history have had the ability to be both transformational and transactional, depending on the situation. It has been suggested that middle-level managers play an important role in orchestrating operational ambidexterity. The study by Hodgkinson, Ravishankar and Aitken-Fischer (2014) shows that middle-level managers’ actions and leadership were decisive for units’ ability to work ambidextrously. The importance of frontline managers to achieve ambidexterity is underlined, also, by Zimmermann, Raisch and Birkinshaw (2015).

14.3 An illustrative case This chapter discusses the case of two Swedish subsidiary units of a global IT firm, located on two different sites which we call South and North. In 2014, the IT firm implemented a joint digital innovation platform to collect, evaluate and select among employees’ creative and valuable ideas, within certain themes that the top-level management considered significant for the company’s current and future business activities. Some examples of previous themes included sustainability, digitalisation and healthcare. Thus, the themes are broad and span several sectors, which allows employees to relate

142  Izabelle Bäckström and Peter Magnusson to and draw parallels with ongoing business projects or ideas from other industries. The implementation of the IMS enabled all employees, regardless of their function in the firm, to submit ideas and receive feedback and ratings from colleagues. A group of experts were appointed by the innovation manager to evaluate the ideas submitted by an employee and to select what they considered to be winning ideas. The average number of ideas submitted was around 30 in each round, from which the experts selected two or three ‘winners’ and published them on the firm’s intranet. Whether or not the ideas received funding depended on clients’ willingness to fund a part of the project and whether the main board of directors approved the funding proposal. The initiative resulted in very few ideas from the North site, but numerous submissions and several winning ideas were produced by the South site. This led to the research question in this chapter related to why some more than other employees are likely to propose ideas for innovation using an IMS. The comparative analysis in this chapter allows us to analyse the reasons underlying the different outcomes of using an IMS in the arrangement of EDI activities. The existing research points out, also, that the formal integration of ICT tools is not enough on its own to nurture employee innovation; there is a need for appropriate managerial support and empowerment interventions (Bäckström and Bengtsson 2019; Bäckström and Lindberg 2019). However, from a theoretical perspective, the two aspects of how this integration is enacted in the workplace and when does the top-level management collect, evaluate and select employee ideas are less clear. The EDI literature tends to treat top-down managerial interventions and structures in isolation from bottom-up employees’ responses to, and perceptions of, the activities (Lempiälä, Yli-Kauhaluoma and Näsänen 2018). This chapter contributes by providing a leadership perspective that focuses on the top-down and bottom-up interactions between managers and employees. We propose ambidextrous leadership as a way to manage the concurrent processes of exploration and exploitation when integrating an IMS in EDI activities.

14.4 Lessons from the Swedish subsidiary units Comparative analysis of what happened at the two sites in their EDI work of integrating an IMS identifies several dichotomies related to exploration and exploitation, which is presented in Table 14.1. 14.4.1 Lessons from the South site One of the factors that contributed to effective integration of the IMS at the South site was the frequent communication among employees and middle-level managers when an innovation invitation was posted on the platform. This made it clear that the innovative efforts were considered a collective action. One middle-level manager explained:

Digital employee-driven innovation  143 Table 14.1 Comparison of the two sites based on the number of employee ideas that have been submitted to the joint digital innovation platform South site Attitude towards innovation

A collective action that is a part of the organisational identity and culture Attitude towards the idea Supportive management system (IMS) Management focus/key Employee engagement performance indicators (KPIs) Time horizon for business Short- and long-term

North site Driven by individuals as a separate formal activity Nuisance Profitable client projects Short-term

We talk about it [employees’ idea submissions] all the time … what ideas that have been submitted and which of these ideas that originate from our site…. We discuss them and remind each other about deadlines, and we encourage one another to comment on each other’s ideas and vote for the ideas that we like. Middle-level managers at the South site promoted the use of IMS by initiating discussions with employees. In addition, physical idea meetings were part of their monthly and weekly meeting agendas which allowed employees to discuss their ideas. Thus, explorative activities were integrated in the firm culture. To induce explorative behaviour, managers encouraged employees to “think outside the box, to move beyond the given frames by initially ignoring the limitations, because this can be dealt with later” (interview with a middle-level manager). Explorative idea sharing was encouraged by managers at the South site, who agreed that it was crucial to create a sense of belonging, safety and tolerance “so that you [the employee] will be keen to share crazy ideas without being or feeling judged by anyone” (middle-level manager). This mind-set resonates with transformative leadership (Bass 1990). At the South site, importance was put also on establishing and maintaining a climate of idea generation, nurtured by mutual respect and curiosity, allowing employees and managers to benefit from sharing continuous feedback. One manager said, “If you present an idea there is always someone who is willing to listen to you.” In addition, when developing an idea, both top-level and middle-level managers at the South site paid attention to employees’ motivations and aspirations in having proposed the idea. Given that idea refinement is a long-term activity and can result in modifications and changes to the original idea, care was taken not to dismiss any of the ideas submitted without careful consideration, even if the immediate business value of the idea was not apparent. Rather, middle-level managers at

144  Izabelle Bäckström and Peter Magnusson the South site actively encouraged employees to use the IMS to structure their thoughts and tweak their ideas and respond to feedback from peers working at the company’s other sites in Sweden. 14.4.2 Lessons from the North site At the North site, there seemed to be a degree of middle-level manager distrust in the employee innovation setup. One middle-level manager said: When we have had an innovation theme running on the platform, we tried to arrange brainstorming sessions but I feel like we aren’t listening to each other as carefully as we should … we need more of that in order to build trust and a willingness to openly share ideas … I think we need to let go of our formal roles and the prestige that comes with it to be able to start open-minded conversations about our ideas. This suggest that at the North site innovative efforts were mainly individual endeavours and not collective activities. At the North site, the IMS appeared to be separate from the ongoing business projects, which was in sharp contrast with the situation at the South site. The above extract suggests that both middle-level managers and employees at the North site were aware that there was no culture of sharing. They pointed to the need for physical meetings, aimed specifically at discussing and refining ideas together, in order to increase the number of ideas submitted to the joint digital platform. However, so far, it seems that top-level management at the North site considered innovation to be an additional formal activity that should be performed individually. Top-level managers emphasised that it was an individual responsibility to participate in EDI activities. Similarly, one employee commented that “if you want something to be done, do it yourself without asking someone, the general rule is do it first and then ask.” This reflects the absence of a collective innovation culture and is illustrated by a middle-level manager’s experience of formulating an idea and in preparing for its submission to the joint digital platform: I felt a sense of resistance to formulate an idea all by myself and to sharing it on the platform. To me it is important to sit down with other people, discuss ideas and receive feedback before I am actually willing to put my own idea out there.… I would rather share my idea with colleagues first. This extract underlines the importance of the IMS being integrated in daily working routines, after or during idea refinement with colleagues, to enable long-run employee engagement. At the North site, middle-level managers communicated a lack of trust and safety when discussing the IMS. For them, the organisation of employee innovation activities was perceived as

Digital employee-driven innovation  145 yet another structure that had been imposed on them, and they had chosen not to promote the IMS to their employees. This lack of promotion led to employees feeling that the IMS was more of a nuisance than an aid to innovation. One North site employee commented: Innovation is not supposed to be fancy words in strategy documents … it might look good on paper but the actual problem we face is to combine our creative efforts with the daily work routines. Thus, there seemed to be a conflict between exploiting and exploring behaviours at the North site. This tension was demonstrated, also, by management’s focus and priorities. Instead of supporting explorative activities to enable innovation, middle-level managers at the North site focused mainly on ongoing client projects which they saw as a separate activity from the IMS. One middle-level manager commented on employees who worked on idea projects while also trying to keep abreast of their ongoing daily work and client projects: “But that’s not good, really, we’re not supposed to do that because we’re not getting paid for it.…” Instead of embracing the idea of EDI activities, namely employee engagement, top-level and middle-level managers at the North site tended to emphasise short-term client satisfaction and client assessments. The organisation of employee innovation was perceived as an activity to advertise the company’s innovative potential to clients, as a branding strategy, rather than an activity to focus employees’ efforts and ideas. Rather than accentuating collaboration and idea refinement with colleagues at the site, the North site stressed “working on solutions together with clients” (employee interview). This reflects exploiting behaviour in which clients’ needs are primary and guide the innovation activity; that is, the client defines the framing of the innovation.

14.5 Discussion Table 14.1 presented important differences between the two sites regarding leadership that affects the successful (or unsuccessful) adoption of the IMS to achieve EDI. We showed that there is a need for some level of organisational contextual ambidexterity to enable successful EDI, which is an explorative activity and is different for exploitative and routinised work. A major difference between the two sites was the business time horizon; the South seemed to be able to manage both short- and a long-term perspectives, but the North site’s management was focused purely on short-term client projects and their importance. To achieve contextual ambidexterity – the ability to handle both exploration and exploitation within the same structure – both of the mind-sets need to be integrated in the culture at the site, which the South site had accomplished. However, the North site treated exploration as a formal ‘add-on’, to be tackled on an individual basis without the active support of managers.

146

Izabelle Bäckström and Peter Magnusson

The main driver of innovation activity at the North site was the direct input and demand from the clients, whereas at the South site innovation activity was driven by employees’ creativity and ideas and keenness to explore. The first style could be defined strategically as market/customerdriven, that is, to exploit current needs. The second refers to exploration of new opportunities, that is, market/customer-focused (Jaworski, Kohli and Sahay 2000). In increasing the willingness to adopt an IMS, it is important for both top-level management and middle-level management to be supportive and to promote the structure and highlight its benefits to employees and also to use the tool themselves to increase trust among employees and inspire them. There were significant differences, in this regard, between the sites. At the South site, management actively encouraged employees to submit their ideas to the IMS and posted ideas themselves on the digital platform. To conclude, the comparative analysis in this chapter highlights decisive differences between successful and less successful uptake of IMS. The South site had achieved ambidextrous leadership, which was shown, by the experience at the North site, to be necessary to successfully utilise IMS for EDI-oriented work.

14.6 Takeaway The findings from this study have implications for knowledge-intensive businesses aiming to expand their employee’s innovation capacity through implementation of an idea management system (IMS). However, we found that the adoption of IMS to manage employee-driven innovation (EDI) needs to be accompanied by a leadership that supports both exploitation and exploration, that is, an ambidextrous leadership. Leadership thus matters for successful digitalisation.

Note 1 Henceforward, we will use the abbreviation IMS implicitly understood that these are ICT-based.

References Bäckström, I. and Bengtsson, L. 2019. A mapping study of employee innovation: Proposing a research agenda. European Journal of Innovation Management 22(3): 468–492. Bäckström, I. and Lindberg, M. 2018. Behavioural implications of employee-driven innovation – A critical discourse analysis. International Journal of Innovation Management 22(7):1–18. Bäckström, I. and Lindberg, M. 2019. Varying involvement in digitally enhanced employee-driven innovation. European Journal of Innovation Management 22(3): 524–540.

Digital employee-driven innovation 147 Bass, B.M. 1990. Bass & Stogdill’s handbook of Leadership: Theory, research, and managerial applications: New York: The Free Press. Beretta, M., Björk, J. and Magnusson, M. 2018. Moderating ideation in web‐enabled ideation systems. Journal of Product Innovation Management 35(3): 389–409. Buhl, A. 2018. Do it yourself-a lean startup toolbox for employee-driven green product innovation. International Journal of Entrepreneurship and Innovation Management 22(4–5): 526–544. Crossan, M.M., Lane, H.W. and White, R.E. 1999. An organizational learning framework: From intuition to institution. Academy of Management Review 24(3): 522–537. Deslée, C. and Dahan, A. 2018. Employee-driven innovation into practice: Managing the tension between organisation and innovation. International Journal of Entrepreneurship and Innovation Management 22(4–5): 323–337. El-Ella, N., Marrtin Stoetzel, A., Bessant, J. and Pinkwart, A. 2013. Accelerating high involvement: The role of new technologies in enabling employee participation in innovation. International Journal of Innovation Management 17(6): 1–22. Gibson, C.B. and Birkinshaw, J. 2004. The antecedents, consequences, and mediating role of organizational ambidexterity. Academy of Management Journal 47(2): 209–226. Gressgård, L.J., Amundsen, O., Aasen, T.M. and Hansen, K. 2014. Use of information and communication technology to support employee-driven innovation in organizations: A knowledge management perspective. Journal of Knowledge Management 18(4): 633–650. Gripenberg, P., Sveiby, K.-E. and Segercrantz, B. 2012. Challenging the innovation paradigm: The prevailing pro-innovation bias. In Challenging the Innovation Paradigm, Sveiby, K.E., Gripenberg, P. and Segercrantz, B. (eds.), New York: Routledge: 15–26. Haapasaari, A., Engeström, Y. and Kerosuo, H. 2018. From initiatives to employee-driven innovations. European Journal of Innovation Management 21(2): 206–226. Hiltunen, E. and Henttonen, K. 2016. “I have ideas but I don’t want to say them aloud.” Employee-driven innovation discourses at a retail chain store. International Journal of Entrepreneurship and Innovation Management 20(5–6): 349–359. Hodgkinson, I.R., Ravishankar, M.N. and Aitken-Fischer, M. 2014. A resourceadvantage perspective on the orchestration of ambidexterity. The Service Industries Journal 34(15): 1234–1252. Høyrup, S. 2012. Employee-driven innovation: A new phenomenon, concept and mode of innovation. In Employee-Driven Innovation. A New Approach, Hoyrup, S. Bonnafous-Boucher, M., Hasse, C., Lotz, M. and Moller, K. (eds.), New York: Palgrave Macmillan: 3–33. Høyrup, S., Redien-Collot, R. and Teglborg-Lefevre, A.-C. 2018. Introduction. International Journal of Entrepreneurship and Innovation Management 22(4–5): 317–322. Jaworski, B., Kohli, A.K. and Sahay, A. 2000. Market-driven versus driving markets. Journal of the Academy of Marketing Science 28(1): 45–54. Lempiälä, T., Yli-Kauhaluoma, S. and Näsänen, J. 2018. Similar structures, different interpretations: Perceived possibilities for employee-driven innovation in two teams within an industrial organisation. International Journal of Entrepreneurship and Innovation Management 22(4–5): 362–380.

148 Izabelle Bäckström and Peter Magnusson March, J.G. 1991. Exploration and exploitation in organizational learning. Organization Science 2(1): 71–87. Mueller, J., Renzl, B. and Will, M.G. 2020. Ambidextrous leadership: A meta-review applying static and dynamic multi-level perspectives. Review of Managerial Science 14(1): 37–59. Rosing, K., Frese, M. and Bausch, A. 2011. Explaining the heterogeneity of the leadership-innovation relationship: Ambidextrous leadership. The Leadership Quarterly 22(5): 956–974. Tushman, M.L. and O´Reilly III, C.A. 1996. Ambidextrous organizations: Managing evolutionary and revolutionary change. California Management Review 38(4): 8–30. Zimmermann, A., Raisch, S. and Birkinshaw, J. 2015. How is ambidexterity initiated? The emergent charter definition process. Organization Science 26(4): 1119–1139.

15 Digital gamification of organisational functions and emergent management practices Edward Gillmore

Gamification is incentivisation of people’s engagement in non-game contexts and activities, by using game-style mechanics. Gamification is achieved by using a game design in non-game contexts. It is the newest trend in the rich history of the intersection between games and management – which includes business simulation games, role-play as leadership training, serious play, innovation and design games, and serious games related to advertising, training and recruitment (Deterding 2019; Morschheuser and Hamari 2019). This chapter extends our understanding of emerging management practices based on the introduction of digital gamification processes in business firms. We present the findings from a Nordic-based logistics firm’s (Aditro Logistics) implementation of a virtual game space for the use of employees during working hours. The virtual game and the avatars are designed to make use of gamification logic to complement and substitute for the firm’s Human Resources Management (HRM) function, by motivating, monitoring, evaluating and rewarding Aditro employees. These emergent managerial practices are a response to issues related to the introduction of a digital gamification platform by Aditro Logistics and the associated rapidly evolving technological environment and changing working arrangements. To manage the changing priorities related to implementing gamification requires innovative and proactive management to overcome organisational resistance to, inadequate support for and sponsorship of the initiative. Digitalisation has opened up all manner of opportunities for the gamification of firm processes, which go beyond the previous learning arenas. One such opportunity is the substitution of existing business functions or structures. This requires an assessment of the useful and useless management practices in order that companies can experiment with ways of working and managing and reap the potential benefits of gamification (Millar, Groth and Mahon 2018). Small-scale experimentation and flexibility are crucial for gamification of management process and substitution of organisational functions. Firms that decide to innovate by exploiting gamification and introducing it across the whole organisation often focus on technological DOI: 10.4324/9781003111245-15

150  Edward Gillmore innovation, that is, the design of the gamification processes (Hamari, Koivisto and Sarsa 2014). This has resulted in a focus on the diffusion and adoption of gamification in organisations (Rapp et al. 2019). To introduce a process, such as gamification, requires adaptations to the managerial structure and to management processes and practices (Vaccaro et al. 2012; Deterding 2019). The technological changes introduced may trigger organisational changes (Mol and Birkinshaw 2008, Vesa et al. 2017) and require new management techniques to handle the uncertainties that may arise (Birkinshaw 2018a). This chapter shows the importance of organisational management’s understanding of its role to enable the firm to exploit the opportunities of gamification. It shows, also, how this management understanding influences others’ (i.e., senior executives and the workforce) alignment to a particular process (Floyd and Lane 2000). In the study of gamification of the HRM process at Aditro Logistics, presented in this chapter, we identify specific management practices and how they emerge are linked to the introduction of gamification. The introduction of a virtual game space in Aditro Logistics reveals the issues that managers must deal with when introducing gamification processes into their business. It was necessary for Aditro managers to maintain the firm’s existing HRM department while proposing and structuring the gaming platform to support the new HRM function. This required implementation of internal processes to both maintain the existing function and introduce a new HRM function that is aligned to the gamification platform. The empirical vignettes emphasise the need for a social and less aggregated perspective to understand emergent management practices. The chapter is organised as follows. Section 15.1 introduces key theoretical tenets of gamification that explain why gamification has not been employed on a wide scale in firms. Most research on gamification focuses on its introduction in non-business settings and emphasises learning, that is, simulation and role-play as in the case of Lego Serious Play. This focus overlooks the potential business opportunities and managerial implications of introducing a game theoretic tool into firm functions through digital media. Section 15.2 makes links to management innovation theory, which is the theoretical foundation for the implementation of gamification in business and the resulting management practices. Section 15.3 discusses three management practices at Aditro Logistics, which emerged to manage and overcome the duality involved in introducing a digital game to complement and substitute for the HRM function.

15.1 What is gamification? Gamification in the 21st century describes the digital processes that enhance a service and provide game-like experiences that support the user’s overall

Digital gamification of organisation   151 value creation (Huotari and Hamari 2012). This definition highlights the goal – the experiences that it attempts to give rise to – rather than the gamification method. Previous definitions of gamification rely on the notion that it is based on the use of game elements. However, there seems to be no clearly defined set of methods related to implementing gamification elements into organisations. The emergence of gamification is considered to be due to a number of converging factors, including cheaper technology, personal data tracking, eminent successes and prevalence of the game medium (Deterding 2012). In the past few years, elements of gamification have emerged as a trend within business sectors focusing on services and marketing endeavours, such as points cards, rewards and memberships, and educational structures, most notably scholastic levels, grades and degrees (Nicholson 2015; Deterding 2019). However, gamification is not a new tool; it has been used for simulation purposes by private and public organisations for many years (Hamari, Huotari and Tolvanen 2015). Gamification as an academic topic of study is relatively young, and there are few well-established theoretical frameworks or unified discourses (Hamari et al. 2015). In the past few years, gamification has sparked interest from both industry and academia (Huotari and Hamari 2012; Hamari et al. 2014, 2015; Nicholson 2015). For example, the success of mobile services, such as Foursquare and Nike+, is often attributed to gamification (Huotari and Hamari 2012). However, discussion has remained mostly confined to game studies and social science (Hamari et al. 2015). Although an increasing number of gamification processes are offered as services to consumers, only very few such processes are introduced in business organisations; most are confined to the education, services and marketing domains (Hamari et al. 2015; Deterding 2019). As digitalisation and artificial intelligence change the business landscape, organisations increasingly are adopting more radical digital processes such as gamification. So far, the economics of firm rewards and penalties, used to motivate workers, has relied largely on monetary incentives and overlooked motivational capital. At the same time, firm functions are increasingly being digitalised, and gamification can be employed to build on this momentum. More accessible and affordable digital technologies are prompting businesses to explore the introduction of gamification to replace or support various functions (Vesa et al. 2017). At Aditro Logistics, digitalisation has allowed the firm to complement its HRM function through the introduction of a game platform, designed to make employees feel more connected, productive and effective at work. However, it must be remembered that although the integration of digital game processes into business structures and operations may bring many benefits, they require management and new fit-for-purpose practices (Birkinshaw 2018b).

152  Edward Gillmore

15.2 Emerging managerial practices triggering new ways of working A management innovation can be defined as a “marked departure from traditional management principles, processes, and practices or a departure from customary organisational forms that significantly alter the way the work of management is performed” (Hamel 2006: 3). In other words, management innovation refers to a change in how management is enacted and the actions managers must perform. Some refer to the “implementation of new management practices, processes, and structures” (Birkinshaw and Mol 2006: 81), showcasing a shift from current norms. In the management innovation literature, the focus is on how practices, processes and structures are introduced or changed to achieve organisational goals (Birkinshaw, Hamel, and Mol 2008), with little reference to digitalisation. In this process perspective, management innovation refers to routines and rules, on which basis work is accomplished within the organisation (e.g., Vaccaro et al. 2012; Khanagha et  al. 2013; Peris-Ortiz and Hervás-Oliver 2014). Management innovation focuses on managerial work at firm level (Vaccaro et  al. 2012) and ignores the effect of digitalisation on the managerial process. In a business organisation, changing how managers work requires reinvention of the processes that govern the work, which, often, is programmed, but may be organic and directed by a change agent (Khanagha et al. 2013). Management processes, such as strategic planning, capital budgeting, project management, employee assessment, executive development and knowledge management, are the mechanisms that convert management principles into everyday practices. In the context of a digital revolution, such as introducing a root and branch gamification process to substitute for a previous function, management processes are key to the successful implementation but must be adapted and embedded (Birkinshaw 2018a). Management innovation applied to the introduction of gamification into business organisations has two advantages. First, management innovation champions the idea of experimentation and incremental change, which are conducive to the processes involved in implementing gamification and adapting the gamified platform to suit the organisational context. Second, management innovation establishes the recipes and rituals that, over time, govern the work of managers. These recipes and rituals emerge from experimentation with working processes that are context-specific to the given organisation undertaking digital transformation (Peris-Ortiz and Hervás-Oliver 2014).

15.3 The gamification of the HRM function at Aditro Logistics All firms have a dedicated management whose job it is to maintain organisational functions and address the concerns of internal actors. This creates

Digital gamification of organisation   153 interdependencies between their managerial activities within the firm, managerial activities involving others between managers, and the managerial activity itself. Here, managerial activity is understood as the innovative activity undertaken, the social action taken and the social awareness and support among managers to accomplish the implementation of gamification. The implementation of gamification at Aditro Logistics, to substitute for HRM practices, required constant adaption, which needed to be managed. Below, we present three vignettes describing emergent management practices related to the practical introduction of gamification and managerial innovations. In ongoing research on the introduction of a digital gamification platform at Aditro Logistics, we identified three different management practices which seem critical for the successful introduction of digitalised gamification in Aditro Logistics. These are described in the vignettes. 15.3.1 Vignette 1: revolutionary reconfiguration of HRM practices at Aditro Logistics Overall, Aditro Logistics management subscribed firmly to the belief that the HRM function was important and was linked to management and employee engagement. However, there was a small group of senior managers who believed that the status quo had prevailed for too long and that to capture the attention of the firm’s workforce, which included a strong millennial demographic, required a new approach. Influenced by this small group, the firm decided to break up the existing HRM function and introduce a digitalised gaming platform. These influential managers had started a revolution based on the adoption of gamification principles by Aditro Logistics. Our interviews with these managers showed that although they did not begin testing the gamification platform until 2019, the idea had been mooted in late 2018, and a business case and feasibility study has been prepared. The forward-thinking of this small group of Aditro Logistics managers allowed connection with the workforce which facilitated the break from the existing HRM model. The idea was not that the platform and access to big data would allow more effective measurement of workforce performance, but rather that it would enable more radical thinking about the workforce and, through contact via the platform, would allow changes to be made to working habits. The gamification platform was developed and ‘tested’ at Aditro Logistics’ Jonkoping site; the aim was to roll it out, across the whole organisation, at all its different locations. This required a significant ‘selling’ effort. Although proposed as a way to digitalise the HRM function and provide game mechanisms that would increase collaboration, a team mentality and a rewards system, the platform was considered a non-core business. As such it required ‘selling’ by the management team so as to gain sympathy from executives and employees for a radical departure from previous HRM thinking.

154  Edward Gillmore Aditro Logistics has logistics hubs throughout Scandinavia, including in Goteborg, Stockholm and Jonkoping, where the traditional factors of production, such as land, labour and capital, are readily available. Some members of Aditro Logistics management saw traditional solutions to workplace disengagement as outworn and considered that motivating the workforce required a unique approach. Aditro Logistics’ chief information officer suggested that the only meaningful resource is knowledge about the workforce. This sparked the idea of a digital solution to HRM that would capture employees’ attention. This was a radical change and involved fundamental change to established functions and roles but the same actors. The replacement of a role by a digital gamification platform (Birkinshaw 2018a) has been described as revolutionary reconfiguration. An example of revolutionary reconfiguration is the reconfiguration that occurred at Ford Motors which affected the automobile industry in the early 1900s. The production technology was radically reconfigured, but the key actors, that is, managers, employees, competitors and suppliers, remained. Similarly, the introduction of digital gamification platform did not change Aditro Logistics management’s and employees’ understanding of their roles; however, it triggered a functional reconfiguration of the HRM unit which has had a beneficial impact on employee engagement and productivity. 15.3.2 Vignette 2: internal validation practices at Aditro Logistics The second managerial practice that emerged referred to validation of the idea, the platform and the potential ‘return’ on investment, among stakeholders and Aditro Logistics management. It took two forms and comprised multiple steps. The two forms of internal validation were designed to determine whether internal stakeholders (i.e., employees at all of Aditro Logistics’ sites, senior management and unions) agreed to the radical change in the approach to HRM. The second form was an ongoing process to check that project implementation was in line with specifications. The director of staffing played a significant role in this activity. He was one of the small group of managers who were behind the idea, and he was very enthusiastic about the digital gamification process. The project specifications were initially quite loose but became more detailed as investment in the platform increased. The management team who initiated the process met regularly and were responsible for evaluating implementation to ensure it matched requirements. The broad experience of the project team allowed a detailed evaluation of the different validation phases. The project team had a unique dynamic which pivoted between fastidious verification and embracing validation. Specifically, the chief information officer was detailed in his due diligence of validating the project stages while the director of staffing was the ‘front man’ of the gamification initiative and enthusiastically sought to bring

Digital gamification of organisation   155 understanding to senior management and employees in an embracing manner. This change to the HRM function at Aditro Logistics provided the opportunity for the company to change its employee management and, unlike the previous system, allow for recognition and empowerment. Early in the introductory phase of implementing the digital gamification platform, it was realised that the management had some competence gaps. A new actor was recruited with software experience and knowledge which the management team lacked. To avoid technological problems, it was essential to have an expert who had the relevant experience and, also, was able to interact with other members inside the company and external actors and increase legitimacy with stakeholders. 15.3.3 Vignette 3: management adhocracy at Aditro Logistics The notion of adhocracy was proposed in the late 1960s, to describe flexible, informal management and an alternative to bureaucracy. More recently, management scholars have redefined the concept to distinguish it from other forms of leadership and organising in firms (Birkinshaw and Ridderstråle 2010). There was evidence of management adhocracy in Aditro Logistics. The management team responsible for implementing the gamification platform privileged decisive and intuitive actions. It recognised the power derived from sharing information throughout the organisation while valuing decisive action. The management team believed that too much information would encourage overreliance on this information and reduce the goodwill and willingness throughout the organisation to embrace the change process. The team responsible for implementing the platform included well-respected managers with experience of ‘analysis paralysis’. This describes a situation of fragmented senior management attention and delayed decisions due to overreliance on data analytics and bureaucratic processes. In the implementation of the platform, the team wanted swift action and no distractions during the initiation and testing phases of the gamification process. Adoption of an adhocratic approach to the management of the gamification process at Aditro Logistics led to the emergence of three key management team practices which allowed them to remain attentive to the gamification initiation process and maintain enthusiasm for it within the firm. The first practice involved coordinating the gamification project activities around opportunities. The director of staffing told us that the idea for the gamification process was not presented formally to Aditro Logistics chief executive officer; instead, it was mooted informally, over a lunch, after the staffing director’s attendance at a gaming event in Jonkoping. This set the tone for the project coordination; they focused on exploiting opportunities as they emerged. The choice of Jonkoping to ‘test’ the gamification platform was based on the fact that Jonkoping is home to E-sports and gaming

156  Edward Gillmore in Sweden and offered a rich environment for ad hoc ideas and access to skilled programmers. The second practice was the management team’s experimental approach to decision-making. The team adopted the Swedish way of making decisions based on open discussion and consultation with the wider organisation, to maintain support of internal stakeholders. To speed up implementation, the consultation and formal stage-gate processes and committees were cut out. Instead, the management team opted for experimenting at the Jonkoping test site to obtain fast feedback and to see what worked as opposed to testing unproven ideas in a contained environment. The third management practice involved motivating both the management team and those involved in the development and testing of the gamification platform, by ‘belonging and purpose’ in relation to the creative environment of the project. The actors involved were made responsible for finding solutions to problems that arose related to responsibilities and resources. These efforts were rewarded at the Jonkoping site by the provision of an E-sport room and working-time allowances for engagement in the gaming activities. This set a strong team mentality and a willingness to try out new ideas and emphasise ‘gaming’ among the workforce.

15.4 Mastering management practices when implementing gamification This chapter has discussed the findings from a study that combined two theoretical perspectives – gamification and management innovation – to examine the factors influencing business adoption of innovative digital substitutes for organisational functions. The main finding was that while both managers and the organisational context are determinants of the adoption of gamification by organisations, their relative importance is influenced by the implementation stage. The process of developing radical new ways of working, such as gamification, is inevitably risky, but consideration of the following three management themes could give managers an advantage in relation to organisational innovation. The first theme is revolutionary reconfiguration or a culture of questioning and fighting functional inertia and allowing managers to question the organisational and structural causes of the problem. In this process, managers are encouraged to challenge and not to resort to stereotypical responses but rather to find new ways to explore and solve the problem. The second theme is validation of the initiative in a multidimensional way, by making use of insiders and selected outsiders to substantiate goals. It is important, also, that managers actively support the project and motivate organisational members also to support it. The third theme refers to encouragement of adhocratic management practices to build capacity for contained experimentation. This requires decisive action from the management group and leapfrogging of the normal stage-gate and

Digital gamification of organisation

157

reporting procedures. Project team empowerment and empathetic leaders are important for resolving problems related to the introduction of gamification.

15.5 Takeaway The gamification platform was new not just to the case firm but also to the entire logistics industry, meaning the integration process of the gamification platform at Aditro is a unique context for observing digital transformation and emergent practices. The findings of this chapter show that management must pay attention to the following: (1) to get the gamification initiative off the ground, managers had to take radical and bureaucracy-busting actions to promote the initiative; (2) when introducing a radical initiative such as digital gamification and departing from an existing firm function, managers need to adopt an engaged and continuous validation strategy with both internal and external stakeholders; and (3) when introducing digital gamification in a firm, the responsible managers must privilege decisive and intuitive action by the project team, to not only create a sense of purpose but also allow for experimentation.

References Birkinshaw, J. 2018a. How is technological change affecting the nature of the corporation? Journal of the British Academy 6(1): 185–214. Birkinshaw, J. 2018b. What to expect from agile. MIT Sloan Management Review 59(2): 39–42. Birkinshaw, J., Hamel, G. and Mol, M.J. 2008. Management innovation. Academy of Management Review 33(4): 825–845. Birkinshaw, J. and Ridderstråle, J. 2010. Adhocracy for an agile age. Organization Science 22(5): 1286–1296. Birkinshaw, J.M. and Mol, M.J. 2006. How management innovation happens. MIT Sloan Management Review 47(4): 81–88. Deterding, S. 2012. Gamification: Designing for motivation. Interactions 19(4): 14–17. Deterding, S. 2019. Gamification in management: Between choice architecture and humanistic design. Journal of Management Inquiry 28: 131–136. Floyd, S.W. and Lane, P.J. 2000. Strategizing throughout the organization: Managing role conflict in strategic renewal. Academy of Management Review 25(1): 154–177. Hamari, J., Huotari, K. and Tolvanen, J. 2015. Gamification and economics. In S.P. Walz and S. Deterding (Eds.), The Gameful World: Approaches, Issues, Applications, (pp. 139–161). Cambridge, MA: MIT Press. Hamari, J., Koivisto, J. and Sarsa, H. 2014. Does gamification work? – A literature review of empirical studies on gamification. In R. Sprague et al. (Ed.), 47th Hawaii International Conference on System Sciences, (pp. 3025–3034). Waikoloa, HI. Hamel, G. 2006. The why, what, and how of management innovation. Harvard Business Review 84(2): 72–84.

158 Edward Gillmore Huotari, K. and Hamari, J. 2012. Defining gamification – A service marketing perspective. In Proceedings of the 16th International Academic MindTrek Conference, Tampere, Finland, October 3–5: 17–22. Khanagha, S., Volberda, H., Sidhu, J. and Oshri, I. 2013. Management innovation and adoption of emerging technologies: The case of cloud computing. European Management Review 10(1): 51–67. Millar, C.C., Groth, O. and Mahon, J.F. 2018. Management innovation in a VUCA world: Challenges and recommendations. California Management Review 61(1): 5–14. Mol, M.J. and Birkinshaw, J. 2008. Giant Steps in Management: Innovations That Change the Way You Work. London: Prentice-Hall. Morschheuser, B. and Hamari, J. 2019. The gamification of work: Lessons from crowdsourcing. Journal of Management Inquiry 28: 145–148. Nicholson, S. 2015. A RECIPE for meaningful gamification. In T. Reiners and L.C. Wood (Eds.), Gamification in Education and Business (pp. 1–20). New York: Springer. Peris-Ortiz, M. and Hervás-Oliver, J.-L. 2014). Management innovation and technological innovation: friends or foes? In M. Peris-Ortiz and J.-L. Hervás-Oliver (Eds.), Management Innovation (pp. 1–17). Heidelberg: Springer International Publishing. Rapp, A., Hopfgartner, F., Hamari, J., Linehan, C. and Cena, F. 2019. Strengthening gamification studies: Current trends and future opportunities of gamification research. International Journal of Human-Computer Studies 127: 1–6. Vaccaro, I.G., Jansen, J.J., Van Den Bosch, F.A. and Volberda, H.W. 2012. Management innovation and leadership: The moderating role of organizational size. Journal of Management Studies 49(1): 28–51. Vesa, M., Hamari, J., Harviainen, J.T. and Warmelink, H. 2017. Computer games and organization studies. Organization Studies 38(2): 273–284.

16 Leveraging digital technologies in Enterprise Risk Management Jason Crawford and Jan Lindvall

16.1 Closing the gap: ERM and digitalisation Organisations are facing unprecedented challenges and opportunities stemming from regulatory, competitive and technological environments. Stakeholders’ expectations are increasing, and organisations are expected to react quickly and decisively, making better decisions amidst growing levels of uncertainty. Organisations are also struggling to make sense of the growing volumes of data, and expectations to leverage digital technologies to make faster better-informed decisions are rising. Organisations are accelerating investments in decision-support technologies and new operating models aimed at increasing speed, scale and connectivity. Analytics is becoming central to decision-making, and organisations are faced with the challenge of having to use various types of analytics applications to support managerial work in different functions (Khatri and Samuel 2019). One area where digital technologies can be leveraged is Enterprise Risk Management (ERM). ERM is a holistic and integrated approach to the management of all risks that organisations face (Arena et al. 2017). It has received growing attention from practitioners – as organisations attempt to implement ERM models such as the Committee of Sponsoring Organisations of the Treadway Commission (COSO) ERM-Integrated Framework – and from researchers, as they examine ERM implementations in practice, the results of which are published in a growing number of field studies (see Fujita et al. 2018). Normative texts present ERM as a one-size-fits-all process and framework. It includes governance, strategy, performance, control and reporting components which, in theory, should be aligned with the business model and integrated with business practices to enhance strategy and performance. In practice, ERM is shown to be an assemblage of different processes tools and networks of actors, applied to different risks with varying degrees of success (Arena et al. 2017). Many organisations struggle with ERM implementation, due to the inherent technical and social challenges (Jean-Jules and Vicente 2021). DOI: 10.4324/9781003111245-16

160  Jason Crawford and Jan Lindvall There is considerable disparity between COSO’s ERM integration ideal and the heterogeneous forms of ERM observable in practice. Risk management research focuses predominately on the design and implementation of risk calculation techniques, models and representation artefacts, while overlooking the social aspects of risk management and the relationship between risk artefacts and human actors. Updates to ERM models attempt to rectify this problem by placing more emphasis on the qualitative aspects of risk management, yet the obsession with developing increasingly complex risk quantification techniques and more risk tools in practice continues unabated. In the recent debate on the future of ERM, practitioners and researchers called for the gap between ERM and digitalisation to be closed. The updated COSO ERM-Integrated Framework acknowledges this gap and highlights the potential for digital technologies to contribute to an increased understanding of risk while acknowledging the gap: As more and more data becomes available and at the speed at which new data can be analysed increases, enterprise risk management will need to adapt. The data will come from both inside and outside the entity, and it will be structured in new ways. Advanced analytics and data visualisation tools will evolve and be very helpful in understanding risk and its impact – both positive and negative. (COSO 2017: 7) ERM models have contributed to practice by promoting formalised and structured approaches to managing risk, providing universal guidance and a single ERM language to facilitate risk dialogue in organisations. However, ERM implementation and use continues to be seen as a technocratic process, which takes little account of contextual, social and behavioural issues (Jeitziner et al. 2017). This is concerning, especially when one considers that better and shared understandings of risk and how those risks should be managed are a product of social interaction, interpretation and negotiation, where intuition and expert judgement play important roles. Organisations are already leveraging decision-support technologies, that is, analytics applications, at least to some extent in managerial work (Khatri and Samuel 2019). However, they are struggling to transform data into insights useful for decision-making due to non-integrated digital technology infrastructure, limited knowledge and resources, and an enduring commitment to traditional/standardised forms of routine analysis and reporting (Khatri and Samuel 2019). Many organisations already have access to structured and unstructured data, which can be analysed to provide risk-informed insights that decision-makers can evaluate to help them to assess how certain risks can impact the business in the short, medium and long term and what the organisations response should be. However, most organisations remain committed

Enterprise Risk Management  161 to traditional approaches to data management and analysis. Static reports and interactive dashboards account for between 56% and 64% of analytics applications used by organisations for planning, implementing and controlling aspects of finance work for example, while prescriptive analytics account for a mere 5% or less (Khatri and Samuel 2019: 104). Risk registers are a typical example of a poorly leveraged digital technology. They record and store risk incident information, but the data are often limited to measurable and explicable information which disregards the value of intuition and expert judgement (Budzier 2011). While, ideally, risk registers should support organisational-wide risk communication by making risks visible across the organisation, the literature shows that in many cases risk registers fail to capture important details due to template design. Risk managers who own these registers seldom have the time or analytics tools necessary to drill down into data contained in registers to produce insights for the business. Instead, their time is spent on producing standardised reports for internal committees and external bodies. In line with risk managements’ technocratic history and development, the calculation of risk has been increasingly promoted as a science, in which probabilistic reasoning blurs the classical demarcation between risk and uncertainty. Experts produce evidence based on increasingly sophisticated scientific techniques and methods, in line with computational thinking. In doing so, these experts, to various degrees, have created information and knowledge boundaries around themselves and the evidence they produce. They attempt to collapse the space between the concept of risk and, uncertainty, by attempting to push calculative practices into areas previously reserved for human judgement (Mikes 2011). Claims about the superiority of scientific risk knowledge are well supported in scientific and practitioner journals, and these claims are increasingly shaping risk technologies, organisational structures and human cognition. This raises numerous tensions between risk scientists and executive and operational management, which frustrates the emergence of shared understanding. As the boundaries in modern, complex and geographically dispersed organisations increase, these tensions have become more apparent and are barriers to the sharing and integration of information and knowledge. Managing risk is not just about the scientific techniques used to produce evidence; it is also about values, which influence both the production of scientific evidence and its evaluation. This despite claims that the scientific production of evidence is value-free (Aven 2016). The production of risk evidence and its evaluation are always subject to value judgements as humans rank different risks depending on the criteria chosen. Organisations need to be aware of this and need to acknowledge that ERM involves a mix of technical and social challenges that must be addressed if integration is to be achieved. This will become more important as organisations are faced with “wicked problems,” which extend far beyond what probabilistic reasoning is capable of addressing (King and Kay 2020: 22). It will also require an

162  Jason Crawford and Jan Lindvall

Leveraging Digital Technologies to Enhance Risk Computations

Synatactic Boundary Promotes a common language. Assumes that uncertainty be transformed into risk and be captured in a single language.

The Computational `Dimension of ERM

Semantic Boundary Leveraging Digital Technologies to Enhance Risk Interpretations

Promotes shared understandings.

The Interpretational Dimension of ERM

Assumes that shared understandings and in all cases possible/desirable and that all actors are fluent in the shared single language.

Pragmatic Boundary Leveraging Digital Technologies to Enhance Risk Coordination

Promotes shared interdependcies Assumes that all actors are willing to engage in knowledge transformation.

The Political Dimension of ERM

Figure 16.1 The technologies, boundaries and dimensions of ERM.

understanding of the social context, human behaviour and intentions concerning digital practices (Ågerfalk 2020), which are not currently apparent in research or practice. Closing the gap between ERM and digital technologies will require organisations to see beyond the technocratic approaches commonly used in risk management. It will require practitioners to expand their attention towards investigating how digital technologies can facilitate shared understandings and knowledge management among groups of distributed actors as they attempt to manage risk and uncertainty. This chapter develops and presents a model as a means for practitioners and researchers to discuss and better understand how digital technologies can be leveraged to reduce information and knowledge sharing boundaries that span the science and values of risk management and impact risk-based decision-making. Figure 16.1 below provides a visual representation of the model, the elements of which and the relationships between them will be discussed in the remainder of this chapter.

16.2 The tension between science and values ERM can be thought of as a sociotechnical process, where digital technologies (e.g., risk reports, registers and maps) and actors (e.g., analysts, risk managers, business unit managers) interact in various decision-making situations, to frame and discuss complex ambiguous problems. Risk management is not merely the science of calculating probability distributions

Enterprise Risk Management  163 which many perceive it to be (King and Kay 2020). Risk-based decisionmaking comprises of several phases, which link the “science-based stages” of decision-making – the production of factual evidence and a knowledge base, by scientists and experts, to the “value-based stages” of decisionmaking – the evaluation and use of scientific and other information through the lens of policy and other considerations by decision-makers (see Aven 2016: 3, Figure 1). Digital technologies are increasingly implicated in the science-based stages of risk-based decision-making and, to some extent, in the value-based stages. In the science-based stages, they include digital technologies used for computational modelling to produce risk-informed forecasting and scenario analysis. In the value-based stages, they include digital technologies used for representation, to mediate the relationships between actors (Jordan et al. 2013). However, little is known about how digital technologies are being used in ERM in specific organisational contexts (Scott and Perry 2012) and, especially, nonfinancial contexts. In going from science to values, we propose that risk-informed decision-making crosses three dimensions of ERM. These dimensions represent interrelated contexts in which risk information and knowledge are generated, interpreted and made actionable in networks of organisational actors. These dimensions are informed by insights from ERM research and Carlile’s (2002) work on knowledge and boundaries but appear here for the first time. They are not included in normative models of ERM; rather, they span the science and value-based stages of decision-making and exhibit syntactic, semantic and pragmatic barriers to information and knowledge sharing, which need to be considered when leveraging digital technologies. Together, the ERM and knowledge boundary literatures evoke the many problems related to ERM implementation and use experienced by organisations. This work highlights the importance of knowledge management as a key cornerstone of ERM integration. Organisations, especially those in the financial sector, focus a great deal of effort on the computational dimension and the identification and calculation of risks using scientific techniques. These techniques include methods and software to enable large-scale numerical calculations and to eliminate human error in the production of risk information. The interpretational dimension refers to efforts to achieve shared understandings and includes dialogue sometimes supported by risk tools. This dimension includes problems related to different perceptions and risk language fluency. The political dimension includes efforts to resolve disagreements arising from lack of coordination among the different organisational actors. Extant research has indicated that multiple tensions emerge within and at the intersection of the three dimensions we put forward in our model. These tensions can be a result of overly complex methodologies to compute risks that produce a risk language in a format that is incomprehensible to large parts of the organisation. They can be a result of different interpretations of

164  Jason Crawford and Jan Lindvall the same risk information, which makes the achievement of shared understandings difficult. Moreover, they can be the result of political problems, where different groups of actors cannot or are unwilling to engage with each other to transform knowledge (Stoel et al. 2017). The choices made in one of these risk dimensions have been shown empirically to have at least some effect on one or both of the other dimensions in terms of either reducing or reinforcing information and knowledge sharing boundaries. The choices made are also reflective of the organisation’s risk culture, which can facilitate or frustrate knowledge sharing and integration. Actors in a network may act together displaying “heedful interrelating,” resulting in quick responses and learning (Hardy et al. 2020: 1041) or may push against each other displaying different forms of professional protectionism. It is important that organisations consider the relationship between science and values in risk management carefully and scrutinise whether they are fostering or frustrating information and knowledge sharing. Science-based evidence, mainly produced in the computational dimension of ERM, plays an important role in decision-making along with intuition and expert judgement used to evaluate the evidence in the interpretational and political dimensions. Both science and values need to be mobilised appropriately in response to well-defined risks and ill-defined problems characterised by high levels of uncertainty.

16.3 The challenges to information and knowledge sharing Information and knowledge sharing are major preoccupations for many organisations and an important area within organisational research (Zahra et  al. 2020) and ERM (Arena et  al. 2017). Knowledge management is an important organisational capability, enabled through interactions between technologies and networks of actors. It is also influenced by the risk culture of the organisation. The growing prevalence of functional teams makes information and knowledge sharing more pertinent if risk-based decision-making is to be improved, value created and competitive advantage achieved. It is also increasingly challenging as the level and variety of specialisations within functions expand and the risks that organisations are faced with require new identification, assessment and mitigation approaches (Hardy et al. 2020). Each organisational function represents a specific niche of domain-specific knowledge. Those working in each function have their own way of thinking about risk and have their own methods, tools and vocabulary (Jean-Jules and Vicente 2021: 258). Yet these functions need to find ways to exchange information and knowledge quickly and effectively if they are to achieve a shared understanding of specific problems and decide upon possible remedies, given that risk-based decision-making is often cross-functional. In implementing ERM, organisations have established independent risk functions, implemented a variety of processes and tools and appointed

Enterprise Risk Management  165 chief risk officers – experts in risk quantification and control. These new functions, processes, tools and experts capture the sociotechnical nature of ERM, and they exist alongside those already in other parts of the organisation. In some cases, ERM implementation has resulted in partnerships among actors working in traditional control functions and those working on risk management. This can facilitate information and knowledge sharing but in some cases can result in professional rivalry and competition between different groups to attract executive attention, which strengthens rather than reduces information and knowledge boundaries (Hall et al. 2015). Empirical accounts show that, in some situations, information and knowledge sharing is not an issue because all the actors have similar skills and expertise and perceive one another as equals (Meidell and Kaarbøe 2017). In other situations, information and knowledge sharing is difficult due to knowledge, generational and hierarchical differences. Wahlström (2009: 61) shows how these differences play out between recently employed junior statisticians working in the risk function and senior bankers as they disagree about the future direction of the business – capturing the tensions between science and values. The arguments of one of the parties is based on risk calculations, while the arguments of the other are based on the evaluation of the numbers produced by those calculations combined with their deep knowledge of the banking industry and expertise built up over decades. The new organisational forms that have emerged to accommodate ERM require a shift of thinking as to how and in what ways digital technologies are implicated in information and knowledge sharing and how they relate to the broader set of organisational control arrangements. 16.3.1 Knowledge integration – technical and social approaches in focus Knowledge integration is an organizational capability for creating novel combinations of different strands of knowledge, which have utility for solving organizational problems, from competent knowledge sourced from within and beyond the organization, and across time, and which derive from individual and group contributions, facilitated by both formal and social processes. (Zahra et al. 2020: 10–11) Knowledge integration can be achieved through technical (formal) and social approaches. Technical approaches focus on the processes, technologies and tasks that are required to transform raw data into insights for decision-making (Jean-Jules and Vicente 2021). Technical approaches relate to the science-based aspects of information and knowledge integration and facilitate the calculation of risk as well as the establishment of structural interfaces between different organisational levels, to enable the dissemination of risk evidence.

166  Jason Crawford and Jan Lindvall While few studies on ERM integration exist, preliminary evidence suggests that technical approaches are more or less successful depending on the specific context and design attributes of ERM artefacts. In some cases, technical approaches, aimed at promoting organisational learning, enable distributed actors working in different functions to see and understand each other’s activities. In other cases, technical approaches have been developed to meet compliance requirements and have limited decision support or knowledge transformation capabilities. Social approaches focus on the behavioural aspects of information and knowledge use and transformation. The pay particular attention to the degree to which actors are engaged emotionally, behaviourally and cognitively with each other in efforts to develop knowledge-based competencies and new attitudes to risk management. They examine how the work environment and senior management provide support by putting mechanisms in place to help groups of actors deal with conflicting interests and power dynamics which inhibit information and knowledge integration across boundaries (Zahra et al. 2020). The social approach also pays attention to the value-based aspects of information and knowledge integration and, in particular, to how actors in decision-making networks engage with each other to develop shared understandings and resolve conflicts that might prevent knowledge transformation. It is worrying that so few studies focus on the social aspects of ERM; however, studies as part of the artefactual turn (see Power 2016) suggest that there is an interdependence between technical and social approaches. They have the potential to complement each other or frustrate information and knowledge integration depending on the dynamics between them. Therefore, organisations need to consider these dynamics carefully. 16.3.2 Managing boundaries Boundary-reducing activities should incorporate several important characteristics at the syntactic, semantic and pragmatic boundaries. At the syntactic boundary, individuals should have a common language to represent their knowledge. At the semantic boundary, individuals should have the means to specify and learn about their differences and dependencies across a given boundary. At the pragmatic boundary, a process to facilitate the transformation of knowledge is required (Carlile 2002). The boundaries become increasingly complex as one moves from the syntactic to the pragmatic boundary. These boundaries also have difference, dependence and novelty characteristics, which make the movement of information and knowledge across boundaries more or less difficult. Difference refers to the difference in domain-specific knowledge within a functional area. Dependence focuses on the degree of dependence between two or more parties as they attempt to achieve a specific goal. Novelty refers to the degree of novelty on either

Enterprise Risk Management  167 side of the boundary; a low/high degree of novelty on either side implies a high/low capacity to share and integrate information and knowledge (Carlile 2004). In the context of ERM, the knowledge boundary can be expected to be predominantly syntactic within the computational dimension of ERM, predominantly semantic within the interpretational dimension and predominantly pragmatic within the political dimension. Disagreements among risk experts working in the same function about what constitutes risk, how it should be calculated and what evidence is produced should be minimal. Tensions emerge when information produced in one function is mobilised to other parts of the organisation. The more complex the information is, the more likely it is that interpretational difficulties will arises. In some cases, these tensions can be resolved by translating information into a language decision-makers understand or presenting it in a format that meets their expectations. In the ERM literature, most of the attention has been on boundary objects and their potential to act as integrating devices. Much less attention has been given to boundary-spanning and boundary work, where the former focuses on actors’ efforts in importing external knowledge and integrating internal knowledge (Jean-Jules and Vicente 2021), and the latter focuses on how actors either act to open up boundaries to get things done or act to preserve barriers to maintain their independence, tools and tacit knowledge (Mikes 2011). As cross-functional collaboration increases and produces dependencies under ERM, organisations may strive to achieve a single rather than a common language. However, language fluency issues across functions and in decision-making situations are a growing problem, particularly if the actors involved belong to specialised areas that are highly novel. As actors move further away from each other in terms of their specialisations and domain knowledge and novelty increases, a single language is of less importance, as meaning evolves through translation, interpretation and negotiation.

16.4 The computational dimension of ERM Digital technologies transform yet unmaterialised risk objects into uniform materialised ‘things’, through computing, balancing and calculation (Kalthoff 2005). Calculations make things visible by creating objects deemed to exist in the real world and presenting them as mathematical representations (Kalthoff 2005). These calculations may not be accurate representations of what is observed in the real world and do not have to be exclusively numerical. Through the computational lens, risk can be understood in two ways – producing risk objects as ‘facts’ or producing risk objects as ‘expressions’. Both facts and expressions can be represented using different media, in formulae, ratios, writing or pictures (Kalthoff 2005). However, mathematical

168  Jason Crawford and Jan Lindvall representations are generally considered to be more rigorous than other forms because they are assumed to be less susceptible to misinterpretation. Mathematical representations assume that actors outside the risk function have a sufficient level of fluency and foundational knowledge to be able to interpret the evidence provided. If not, digital technologies can be leveraged to provide representations of the output of complex models in more accessible formats, such as risk maps, which reduces the cognitive demands on the decision-makers. Organisations should re-examine their continuing commitment to traditional procedural tools and standardised approaches to risk analysis. They should explore the potential value of investing in analytics techniques, such as predictive modelling and optimisation, which address questions critical for the business in the future. For example, what may happen in the future, what could be done and how best outcomes could be achieved are all questions related to value creation and competitive advantage. ERM has the potential to leverage digital technologies to provide new and novel ways of creating and disseminating risk knowledge through the use of conceptual and empirical tools, for example, simulation and visualisation tools; however, current use of such tools in ERM is limited. If organisations are serious about developing more mature ERM practices, they will also need to rethink the role of the risk function. Should it be exclusively focused on producing increasingly complex risk calculations as the basis for creating a single language that large parts of the organisation do not understand or, alternatively, whether it is possible to engage as a business partner in decision-making networks to assist in the creation of shared understandings and knowledge transformation.

16.5 The interpretational dimension of ERM There is an ongoing debate on the potential of digital technologies to augment human cognition and automate judgement-intensive activities. Some leading financial firms are already using advanced analytics to automate decision-making in areas such as forecasting revenue and customer growth. This involves data scientists interacting with business managers to transform small, well-defined business problems into statistical problems and then building and training models to generate predictive analytics. The level of support provided by digital technologies to decision support is growing and has potential; however, there are limits to how far scientists can push predictions into spaces characterised by uncertainty. The implications of encouraging excessive “quantitative enthusiasm” (Mikes 2009) need to be carefully considered, especially where scientists are encouraged to produce evidence with very weak background knowledge, thus expressing stronger knowledge than what is justified. Alternative techniques and methods, involving collaboration between experts and managers, may be more appropriate in managing uncertainty (Aven 2016).

Enterprise Risk Management  169 While intuition and judgement are devalued in the computational dimension, they come back into view in the interpretational dimension as risk objects are considered incomplete constructions that need to be stabilised and made whole through communication and negotiation between different risk experts and other organisational actors (Kalthoff 2005). It is in this evaluation of evidence that initial conceptualisations of risk objects can be changed and transformed, either through recalculation or other means to extend the existing knowledge base. On one side, scientists and experts attempt to make predictions of what will happen by producing numbers, while decision-makers will have expectations about what will happen which they express in stories. Humans don’t express expectations in probabilistic form; they express expectations in the form of narratives (King and Kay 2020). From this starting point, decision-informers and decision-makers can work together to construct a shared reference narrative, a story that combines science and values into an expression of their realistic expectations of what will happen concerning a particular problem and how it may be solved (King and Kay 2020). Reference narratives are an expressed form of shared understandings that can be used to mobilise risk information and knowledge throughout the organisation, to raise risk awareness of particular issues and to provide direction in the face of uncertainty by playing out different scenarios. Reference narratives can be a useful means of combining numbers and stories. Digital technologies allow these reference narratives to be shared throughout the organisation to facilitate shared understandings of risk and its relationship to strategy, performance and control issues.

16.6 The political dimension of ERM The political dimension is where technical and social approaches to information and knowledge integration come together as risks are prioritised and paths to action are decided. Knowledge about what happens in the political dimension is limited; practitioners and researchers have tended to ignore the social aspects of ERM. Extant research suggests that this dimension is fraught with tensions as actors from different functions with different domain knowledge come together to negotiate plausible responses to impending problems based on the evidence provided, other information and their own political goals. These tensions can be exacerbated by poorly designed risk tools and/or professional rivalries that need to be addressed if knowledge transformation is to be achieved. Well-designed risk governance frameworks should include information and knowledge integration-supporting principles and guidance related to leveraging digital technologies. Mechanisms can be defined to facilitate relational coordination, that is, the quality of relationships in groups, paying particular attention to the quality of cross-functional communication and the establishment of mutual respect and trust between different groups

170 Jason Crawford and Jan Lindvall (Okhuysen and Bechky 2009). This dimension constitutes a major barrier to ERM integration. Therefore, practitioners and researchers need to examine the implications of digital technologies and whether they can be leveraged to resolve these tensions.

16.7 Takeaway There is a considerable gap between Enterprise Risk Management (ERM) and digital technologies. Digital technologies can enhance each of the dimensions of ERM and contribute to meeting specific information and knowledge sharing and knowledge integration needs in individual organisations. Such efforts promise to improve decision-making, create value and lead to competitive advantage. To close this gap will require organisations to carefully consider how digital technologies are implicated in their technical and social approaches to risk management. By leveraging digital technologies to enhance risk computation, interpretation and coordination – ERM can emerge having a valuable business-partnering role in organisations in the future.

References Ågerfalk, P.J. (2020. Artificial intelligence as digital agency. European Journal of Information Systems 29(1): 1–8. Arena, M., Arnaboldi, M. and Palermo, T. 2017. The dynamics of (dis) integrated risk management: A comparative field study. Accounting, Organizations and Society 62: 65–81. Aven, T. 2016. Risk assessment and risk management: Review of recent advances on their foundation. European Journal of Operational Research 253(1): 1–13. Budzier, A. 2011. The risk of risk registers–managing risk is managing discourse not tools. Journal of Information Technology 26(4): 274–276. Carlile, P.R. 2002. A pragmatic view of knowledge and boundaries: Boundary objects in new product development. Organization Science 13(4): 442–455. Carlile, P.R. 2004. Transferring, translating, and transforming: An integrative framework for managing knowledge across boundaries. Organization Science 15(5): 555–568. Committee of Sponsoring Organizations of the Treadway Commission. 2017. Executive Summary: Enterprise Risk Management – Integrating with Strategy and Performance. Fujita, S., Iwasawa, K. and Yoshida, E. 2018. Enterprise risk management in accounting research: A. Journal of Modern Accounting and Auditing 14(7): 380–389. Hall, M., Mikes, A. and Millo, Y. 2015. How do risk managers become influential? A field study of toolmaking in two financial institutions. Management Accounting Research 26(1): 3–22. Hardy, C., Maguire, S., Power, M. and Tsoukas, H. 2020. Organizing risk: Organization and management theory for the risk society. Academy of Management Annals 14(2): 1032–1066.

Enterprise Risk Management

171

Jean-Jules, J. and Vicente, R. 2021. Rethinking the implementation of enterprise risk management (ERM) as a socio-technical challenge. Journal of Risk Research 24(2): 247–266. Jeitziner, J., Mikes, A. and Oyon, D. 2017. Risk management: Towards a behavioural perspective. In Routledge Companion to Behavioural Accounting Research (edited by Libby, T. and Thorne, L.). Abingdon: Routledge: 459–469. Jordan, S., Jørgensen, L. and Mitterhofer, H. 2013. Performing risk and the project: Risk maps as mediating instruments. Management Accounting Research 24(2): 156–174. Kalthoff, H. 2005. Practices of calculation: Economic representations and risk management. Theory, Culture and Society 22(2): 69–97. Khatri, V. and Samuel, B.M. 2019. Analytics for managerial work. Communications of the ACM 62(4): 100–108. King, M. and Kay, J. 2020. Radical Uncertainty. London: The Bridge Street Press. Meidell, A. and Kaarbøe, K. 2017. How the enterprise risk management function influences decision-making in the organization – A field study of a large, global oil and gas company. The British Accounting Review 49(1): 39–55. Mikes, A. 2009. Risk management and calculative cultures. Management Accounting Research 20(1): 18–40. Mikes, A. 2011. From counting risk to making risk count: Boundary-work in risk management. Accounting, Organizations and Society 36(4–5): 226–245. Okhuysen, G.A. and Bechky, B.A. 2009. Coordination in organizations: An integrative perspective. The Academy of Management Annals 3(1): 463–502. Power, M. (ed.) 2016. Riskwork: Essays on the Organizational Life of Risk Management. Oxford: Oxford University Press. Scott, S. and Perry, N. 2012. The enactment of risk categories: The role of information systems in organizing and re-organizing risk management practices in the energy industry. Information Systems Frontiers 14(2): 125–141. Stoel, M.D., Ballou, B. and Heitger, D.L. 2017. The impact of quantitative versus qualitative risk reporting on risk professionals’ strategic and operational risk judgments. Accounting Horizons 31(4): 53–69. Wahlström, G. 2009. Risk management versus operational action: Basel II in a Swedish context. Management Accounting Research 20(1): 53–68. Zahra, S.A., Neubaum, D.O. and Hayton, J. 2020. What do we know about knowledge integration: Fusing micro-and macro-organizational perspectives. Academy of Management Annals 14(1): 160–194.

Part 3

Framing digitalisation

17 The end of business intelligence and business analytics Matthias Holmstedt and Peter Dahlin

Today we are facing something of a data revolution, where making use of relevant data has become essential for most businesses. Successful use of analytics refers to the ability to extract insights from data, which, today, is, and will become, a criterion for survival in the contemporary and future business landscapes, respectively. New technologies have facilitated access to data, and new analytic solutions have changed the prerequisites for decisionmaking in organisations (Hindle et al. 2020; Schrage, 2016). In this age of analytics, organisations’ ambitions to become ‘data-driven’ and to use evermore sophisticated techniques and procedures to obtain insights to support decision-making have increased (Bean and Davenport 2019; McKinsey & Co. 2016). Data, analytics and Artificial Intelligence (AI) are expected to be imperative for business success during the Covid 19-crisis that the world is fighting currently and in the post-Covid-19 world (Gartner 2020). The expectation that all companies should master advanced analytics, regardless of their core product, service and competence, is unrealistic. However, this provides opportunities for information technology (IT) consultancy firms to take the lead in the digital transformation and to develop solutions, products and services to allow organisations to overcome technical barriers and make use of their data. These changes have disrupted the development of organisational capability to use analytics to increase the core business value. We believe that businesses need analytics to enable insights from their data, but that it should be the business perspective that dictates the use of methods and tools, not vice versa. The speed of the analytic transformation has caused some problems, including, primarily, muddled discourse and somewhat pretentious terminology. In the age of analytics, business students, researchers and professionals need a common language and understanding. The inconsistent definitions characterising the analytics field are a source of confusion, misinterpretation and communication problems and constitute a hindrance to achieving the full potential of the analytic transformation. This chapter focuses on the concepts business intelligence (BI) and business analytics (BA), two terms frequently used in relation to data-driven and evidence-based decision-making. A review of how these concepts are DOI: 10.4324/9781003111245-17

176  Matthias Holmstedt and Peter Dahlin used in practice and within academia reveals the existence of conflicting and competing definitions within and across both communities. We provide evidence of a trend shift in terms of the popularity of these concepts in both academia and in practice, which might indicate some weakening of their previous strong positions. Considering the trend shift and the inconsistency problems surrounding these concepts, we would suggest that it is time to abandon these terms and to see them as buzzwords linked to the first phase in the history of the analytic revolution. We would propose that the alternative generic term analytics should be adopted and linked to established methods and tools for extracting insights from data on the one hand, and creating value for decision-makers on the other hand. For example, in a business context, we would use the term “Analytics for Business”’, or in more specified areas of use, Analytics for marketing, Analytics for HRM and so on. We believe that this change to the terminology would benefit firm data-driven and evidence-based decision-making since (i) both BI and BA are vague intermediary concepts and their exclusion would eliminate one source of confusion, and (ii) the analytics etiquette is more straightforward, less pretentious, more aligned to generic skillsets and tools and simpler to integrate with organisational capabilities. Our suggestion is in line, also, with contemporary practice implemented by leading global consulting firms such as McKinsey & Co., the Boston Consulting Group, EY, and Bain & Company.

17.1 Business intelligence and business analytics – two concepts, multiple definitions Understanding BI and BA, their interrelations and their potential uses and benefits for business is challenging. There are no clear, agreed and discrete definitions of BI and BA, which means that the use of these terms can be confusing. Academic research has adopted different definitions and ways of addressing BI and BA, and so has business practice. Perhaps especially problematic is that academic definitions often differ from how the concepts are understood outside of academia. Academic research and business practice are equally responsible for creating a situation of confusion surrounding the analytic revolution. It is not surprising that neither the Cambridge nor the Oxford dictionaries define BA or BI; how could they without a common understanding of the concepts? Although the use of the term ‘business intelligence’ goes back to the late 1950s, it became widespread only during the 1990s (Pope 2014). It might be assumed that the term BI had had time to mature and that academia and business would have converged towards a shared understanding of what it means. However, this development has not materialised. Instead, a number of different understandings of the concept have emerged over time, which has added to the confusion. As stated by Trieu (2017, 111): “Rather than having a well-accepted and specific definition, BI is typically used as

End of business intelligence  177 an ‘umbrella’ term to describe a process, or concepts and methods, that improve decision making by using fact-based support systems.” Olszak (2016) summarises definitions of BI as (1) tools, technologies and software; (2) knowledge management; (3) decision-support systems (DSS); (4) dashboards; (5) culture of working with information; (6) a process; (7) analytics; (8) competitive intelligence; and (9) Big data. Al-Eisawi and Lycett’s (2012) list of definitions demonstrates the divide between the managerial and technical perspectives and ways of understanding the term. Several of the definitions included in their review imply that BI is good or is something that contributes to decision-making; otherwise it is not BI. Similarly, Mashingaidze and Backhouse’s (2017) review shows how divided the field is in terms of understanding what BI is and what it is not. The authors demonstrate, also, that business and academia use different definitions. Therefore, rather than achieving a consensus about the meaning of the BI concept, the literature makes it fuzzier. This lack of coherence creates barriers by complicating progress towards improved, data-driven decision-making. It might be assumed that the relative recency of the BA concept, and its more limited spread in the academic community, might mean that its definition would be less affected by confusion and inconsistency. However, Holsapple et al.’s (2014) review includes a myriad of definitions, some of which are contradictory while others are so bland that one may even question the need of the term. Power et al.’s (2018: 51) review of the notion of BA concludes that: The concept of business analytics is still evolving. There is no single, widely known, authoritative definition of business analytics. That goal seems unreasonable to expect given the varied usages of the term in practice, academic programs, and research. Also, what we teach as ‘Business Analytics’ varies among universities. For instance, there is no consensus on whether BA is restricted to quantitative data or also includes qualitative approaches to achieving insights from data. Similarly, there is no agreement about whether BA has descriptive, predictive or prescriptive ambitions. BA sometimes is defined as a movement and at other times as a collection of practices and technologies. Yet others have argued that the concept refers to a certain type of thought process. Mashingaidze and Backhouse’s (2017) review highlights differences in the definition of BA in business practice compared to academic research. Considering the confusion surrounding this concept, and Power et  al.’s (2018) view that there is no point in expecting a shared understanding of what BA means, one might wonder why so many insist on using such a fuzzy concept. Comparisons of BA and BI are equally confusing. Bayrak (2015) and Chen et  al. (2012) treat both concepts as synonymous. Mashingaidze and Backhouse’s (2017) work shows that BI can be understood as part of BA or vice versa, and their academic references show both that BI and BA are used

178  Matthias Holmstedt and Peter Dahlin interchangeably and that, in some cases, BA is considered a subset of BI. Harvard Business Analytics tries to create some order out of this messy situation (HBR 2018). They acknowledge that BA and BI are used interchangeably in business practice and that there is an ongoing debate over whether BI is a subset of BA or vice versa. They suggest that BI should be understood as a subset of BA. They suggest, also, that BI refers to descriptive features and day-to-day operations, whereas BA is related to prescriptive ambitions and strategic concerns. However, the conceptual confusion over BA or BI is not dissipated by how they relate to each other. Practitioners and researchers seem to be engaged in some kind of mutual self-mutilation by insisting on using both concepts. It is surprising, also, that there is a lack of debate on the conceptual disarray characterising the analytics revolution and a lack of questioning about what is going on.

17.2 BA and BI – two fading concepts? Although BA and BI continue to be used frequently in, for example, job descriptions, marketing material and strategy documents, there has been a trend shift. The world’s top consultancy firms today avoid these terms when describing their services. For instance, the Boston Consulting Group refers to advanced analytics, Artificial Intelligence and Big Data when marketing their services, and Bain & Company also refers to advanced analytics. McKinsey & Co talks about data and analytics and religiously avoids the terms BI and BA when presenting their services and views. EY also refers to analytics when describing its services. All of these actors invisibilise BA and BI by using different terms to describe their data-driven offerings. However, the practice of consistently avoiding BA and BI is not unanimous within the management consultancy industry. Accenture and KPMG include BI and BA as core concepts while Deloitte and Capgemini refer to BA in their marketing materials. However, BA and BI are no longer the primary labels used to identify services aimed at improving data-driven decision-making within organisations. In academic research, BI has for long been a core concept in the transformation towards data-driven decision-making and is more popular in this arena than BA. Bayrak (2015) argues that this is because the IT community prefers the term and because it existed long before the term BA emerged. However, the use of BI in academia seems to have peaked in 2012, based on publications in Google Scholar (see Figure 17.1). The graph in Figure 17.1 shows a steady downward trend in the use of the term, implying that the hype surrounding this concept is fading and the concept is losing ground. The origins of BA as a concept go back only to the late 1990s (Power et al. 2018), making it much newer than BI. Consequently, to date, its frequency in academic research is lower compared to BI. However, based on the number of research papers with the words ‘business analytics’ in their title, the

End of business intelligence  179 100 90

Google Trend index

80 70 60 50 40 30 20 10 2020-01

2019-01

2018-01

2017-01

2016-01

2015-01

2014-01

2013-01

2012-01

2011-01

2010-01

2009-01

2008-01

2007-01

2006-01

2005-01

2004-01

0

Year-month

BA

BI

Publications having the concept in title

1200 1000 800 600 400 200 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

Figure 17.1 Trends in the use of the concepts BI and BA.

popularity of this concept is increasing, although it is far from matching the frequency of BI. This might, of course, be due to inertia and the delays associated with academic publishing. It is too soon to claim a shift from BI to BA, although trends are suggestive. However, so far, BI has made a much larger impact on academic research compared to BA. If we examine the use of these concepts outside of academia, Google Trends proxies for their broader popularity, including in business practice, by showing the frequency of their use as search terms. The trends are similar

180  Matthias Holmstedt and Peter Dahlin to the case of academic research but are more pronounced. Interest in BI shows a steady downwards trend since 2004 (first available data), whereas interest towards BA has increased since that date. Google Trends detects contemporary and even momentary interest, whereas academic publications are subject to various delays. Nevertheless, these trends suggest that we will see increased interest in BA in future years. Based on their comprehensive review of the BA concept, Power et  al. (2018) describe it as “more than a buzz and faddish marketing term.” The introduction to Scheps’s (2008: 1) Business Intelligence for Dummies includes the following extract: If you picked this book up off the shelf, you’ve probably heard of BI but aren’t sure what it means. Sure, it’s got the feel of another one of these techno-buzzwords that will fade out of fashion in a few years, But BI is here to stay. However, it seems that some of these views are becoming outdated. The downturn of the BI concept and the slow take-off of the BA concept might indicate that neither is more than a buzzword applied to the early analytics revolution. As such, they might be consigned to the same bins as the terms cyberspace, scientific management and Lean Six Sigma. Such a scenario does not seem unlikely, considering the trend shift in business practice and the diminishing use of BI in academia. However, this terminology will not disappear suddenly. Numerous people and organisations have invested heavily in these concepts, and many will try to defend them.

17.3 Breaking the conceptual divide The trend shift in the consulting sector, the diminishing use of BI and the limited spread of the BA concept are likely related to the confusion surrounding these concepts. Lack of consensus on the meaning and definition of a concept and its relation to other concepts can lead to confusion and loss of clarity. Therefore, the reluctance of some leading consultancy firms to use the terms BI and BA is not surprising; they certainly do not want to confuse potential customers regarding their products and services supporting data-driven decision-making. In line with these leading consultancy firms, we suggest that the academic community should begin to search for a more reliable way to describe the next phase in the analytics revolution. Killing off the BA and BI concepts would clear the way for a fresh start and would get rid of historical baggage, thereby lowering the threshold to understanding and speaking the analytics language and promoting data-driven decision-making. The current situation would suggest there is more to be gained from killing than from retaining these concepts. Considering their vagueness, the cost of phasing them out should not be high relative to the

End of business intelligence  181 extent of the overall movement. The exceptions will be those individuals who have invested time and resources in these concepts and whose reputation rests on their being considered experts with influence and interpretative prerogative. We believe continuing efforts to advance data-driven decisionmaking would benefit from losing the confusion introduced by these concepts, whose indistinctness can only impede the development. One solution might be to get rid of any reference to business in order to indicate that the analytics revolution will affect more than just the business landscape. The public sector and non-profit organisations have a significant stake in, and potentially could benefit from, data-driven decision-making. Removing the emphasis on business would include these other actors who could benefit from the technology, procedures, mind-sets, craftsmanship and culture related to the data-driven decision-making movement. However, the terms intelligence and analytics might also be problematic. We suggest that the notion of intelligence should be dropped and primacy given to less pretentious ideas about analytics. This would align the movement to the generic field of analytics and its developments and be more consistent with the etiquette of leading consulting firms. While intelligence implies the existence of covert actors and behaviours (Andrew et al. 2009), analytics refers more directly to the analysis of data without specifying their type, methods or objectives. This makes it a more useful concept in the transformation to data-driven business.

17.4 Analytics at the expense of the BI and the BA concepts We propose a broad and inclusive approach to the conceptualisation of analytics, to reflect the umbrella approach applied in historical definitions of BA and BI. We start our conceptualisation by showing that analytics refers to a structured procedure of generating insights out of data. In other words, it is a thought process, starting from an explicit purpose, which targets different insights related to a decision problem. This thought process includes developing relevant perspectives and frameworks, data collection and analytical techniques to produce the targeted insights. This is in line with the Institute for Operations Research and the Management Sciences definition: “Analytics is the scientific process of transforming data into insight for the purpose of making better decision” (INFORMS n.d.). We support this view, which emphasises insights to benefit business, and we see no reason to exclude qualitative data and qualitative analytic approaches since data-driven decision-making should be based on the most appropriate approach for the problem at hand. Similarly, both structured and non-structured data have a place in analytics. For some problems, structured data will provide the necessary insights, whereas others might require unstructured data and associated analytic techniques to extract insights from the available and relevant data. We see no point in excluding descriptive and prescriptive ambitions from analytics; the objective is to

182  Matthias Holmstedt and Peter Dahlin achieve relevant data-driven and evidence-based insights, as different types of insights are suited to different types of problems and situations. Analytics relies on a solid process (or ‘method’) to interpret the data to address the specified questions while considering and respecting the limitations of the results. This includes both standardised and non-standardised analytic procedures to deliver insights. To avoid conceptual confusion, we avoid introducing terms such as culture, mind-set, application, craftsmanship and technology, primarily because these concepts would be treated more appropriately separately from analytics terms.

17.5 The future for analytics in business Looking ahead, we envisage development in which companies realise that being data-driven refers more to the whole firm’s business-relevant analytic skills and less to investment in IT systems. Data, no matter how big, are of limited value outside of their context. Analytic skills combined with relevant domain knowledge are critical for making data useful in regard to specific business needs (Leonelli 2019). Breaking free from the ‘productified’ notions of BI and BA will empower organisations to take control of their processes and the insights from their data to support decision-making and increase business value. Ownership of the organisation’s data and responsibility for their use should be given to a Chief Analytics Officer (CAO) rather than a Chief Information Officer (CIO). This emphasises that analytics should be a company-wide responsibility, not an IT issue. Identifying and handling the opportunities and challenges raised by analytics is a human and organisational skill that cannot (yet) be left to BI and BA products.

17.6 Takeaway Availability of more data will accelerate the digital transformation and provide opportunities for businesses and organisations to create value from data. For those keen to develop data-driven decision-making, care should be taken to avoid being misled by vague intermediary concepts such as business intelligence (BI) and business analytics (BA). These can be a barrier to the building of internal capabilities, and the organisation might be tempted to rely on ‘productified’ solutions promoted by IT consultants, software companies and academic researchers. The term ‘business intelligence’ is used more frequently than ‘business analytics’, but its popularity is declining. We suggest that both concepts be replaced by the more generic ‘Analytics,’ which emphasises the fundamental goal: to create insights through analysis of data. It suggests that being data-driven is an organisational effort, not primarily addressed through investment in IT. It is also aligned with the developments in the generic field of analytics, with powerful methods and techniques.

End of business intelligence

183

Acknowledgement The work in this chapter was partly financed by Eskilstuna Municipality through the project Sörmlandskontraktet.

References Al Eisawi, D. & Lycett, M. 2012. Business intelligence: Definitions, managerial effects and aspects: A systematic literature review. In Proceedings of the 14th International Conference on Enterprise Information Systems, 209–214, Wroclaw, Poland: SCITEPRESS. doi: 10.5220/0004005902090214. Andrew, C. M., Aldrich, R. J. & Wark, W. K. (eds.) 2009. Secret Intelligence: A Reader. Abingdon: Routledge. Bayrak, T. 2015. A review of business analytics: A business enabler or another passing fad. Procedia – Social and Behavioral Science 195: 230–239. Bean, R. & Davenport, T. H. 2019. Companies Are Failing in Their Efforts to become Data-Driven. Harvard Business Review, 5 February 2019. Retrieved from https://hbr.org/2019/02/companies-are-failing-in-their-efforts-to-become-datadriven, last accessed June 3, 2021. Chen, H., Chiang, R. H. L. & Storey, V. C. 2012. Business intelligence and analytics: From big data to big impact. MIS Quarterly 36(4), 1165–1188. Gartner Inc. 2020. Top Trends in Data and Analytics For 2020, October 19, Retrieved from https://www.gartner.com/smarterwithgartner/gartner-top-10-trends-indata-and-analytics-for-2020/, last accessed January 8, 2021. Harvard Business Analytics. 2018. Business Intelligence vs. Business Analytics, November 30, Retrieved from https://analytics.hbs.edu/blog/businessintelligence-vs-business-analytics/, last accessed June 3, 2021. Hindle, G., Kunc, M. Mortensen, M., Oztekin, A. and Vidgen, A. 2020. Business analytics: Defining the field and identifying a research agenda. European Journal of Operational Research 281(3): 483–490. Holsapple, C., Lee-Post, A. and Pakath, R. 2014. A unified foundation for business analytics. Decision Support Systems 64: 130–141. INFORMS. n.d. Best definition of analytics. The Institute for Operations Research and the Management Sciences, Retrieved from https://www.informs. org/About-INFORMS/News-Room/O.R.-and-Analytics-in-the-News/Bestdefinition-of-analytics, last accessed June 3, 2021. Leonelli, S. 2019. Data governance is key to interpretation: Reconceptualising data in data science. Harvard Data Science Review 1(1). https://doi. org/10.1162/99608f92.17405bb6. Mashingaidze, K. & Backhouse, J. 2017. The relationship between definitions of big data, business intelligence and business analytics: A literature review. International Journal of Business Information Systems 26(4): 488–505. McKinsey & Co. 2016. The Age of Analytics: Competing in a Data-Driven World, December 2016, McKinsey Global Institute. https://www.mckinsey.com/~/media/ mckinsey/industries/public%20and%20social%20sector/our%20insights/the%20 age%20of%20analytics%20competing%20in%20a%20data%20driven%20world/ mgi-the-age-of-analytics-full-report.pdf. Olszak, C. M. 2016. Towards better understanding and use of business intelligence in organisations. Information System Management 33(2): 105–123.

184 Matthias Holmstedt and Peter Dahlin Pope, A. D. 2014. Business intelligence: Applying the unified theory of acceptance and use of technology. Unpublished doctoral thesis, Capella University. Power, D. J., Heavin, C., McDermott, J. & Daly, M. 2018. Defining business analytics: An empirical approach. Journal of Business Analytics 1(1): 40–53. Scheps, S. 2008. Business Intelligence for Dummies- Harness BI Tools for Forecasting and Decision Making. Hoboken, NJ: Wiley Publishing. Schrage, M. 2016. How the BIG data explosion has changed decision making. Harvard Business Review, August 26. Trieu, V-H. 2017. Getting value from business intelligence systems: A review and research agenda. Decision Support System 93: 111–124.

18 ‘Deleted User’ Signalling digital disenchantment in the post-digital society Cristina Ghita, Claes Thorén and Martin Stojanov

I had three pieces of limestone on my desk, but I was terrified to find that they required to be dusted daily, when the furniture of my mind was all undaunted still, and I threw them out the window in disgust. – Henry David Thoreau

In the opening quote, American writer Henry David Thoreau warns that while an abundance of material possessions may increase one’s life quality, it can also become the source of future worry. We can see this sentiment mirrored in today’s increasingly popular approach to consumerism that values minimalism. Thoreau ([1854] 2016: 96) famously wrote that “we do not ride the railway, it rides upon us,” critiquing the increased industrialisation of his time. Transposing Thoreau’s words to our digital society of today, one could similarly argue that “we do not use social media, social media uses us.” Thoreau’s solution to the distraction of modern society was selfimposed exile from the material comforts of the city; he constructed a remote cabin where he worked, undisturbed, for two years between 1845 and 1847. Echoes of Thoreau’s philosophy have recently come to inspire a contemporary technology rejection movement. In digitalised societies, where the use of Internet-connected devices is ubiquitous, there are increasing signs of organised technology rejection practices. Examples range from Mark Boyle’s The Way Home: Tales from a Life without Technology – a narrative of complete technology rejection wherein the author, in true Thoreauian style, built a cabin in a secluded location in Ireland (Boyle 2019), to more organised events like The National Unplug Day, whose adherents pledge to disconnect from their devices and spend more time offline. These types of initiatives that seek to limit technology use are multiplying. In a world where Internet access is defined as a human right (United Nations General Assembly 2011) and large-scale digitisation processes have become synonymous with progress, one wonders what might be the motivations of the increasingly large numbers of individuals who look past the promises of digitalisation and actively try to reduce their digital use? Such questions are increasingly discussed as part of a broader field of inquiry that describes a DOI: 10.4324/9781003111245-18

186  Cristina Ghita et al. post-digital condition, a societal turn distinguished by a critical perspective on digitalisation. In this chapter, we articulate the concept of post-digital as capturing a change in how users are purchasing, using and relating to digital technologies. We exemplify and expand upon the concept of the post-digital by exploring the Reddit virtual community of ‘/r/nosurf’, where the theme of reducing online screen-time is discussed. The aim is to provide an overview of the post-digital concept in ways that illustrate its place as a theoretical concept for future scholarly work, as well as its applicability to the ongoing exploration of the evolving relationship between humans and our digital devices.

18.1 From pro-digital to post-digital The rate at which technology has developed in recent decades is staggering. An illustrative example is the computational power of the technology supporting Apollo 11, state-of-the-art when it landed on the moon in 1969, which pales in comparison to present-day smartphones which are estimated to be 100,000 times more powerful (Kendall 2019). The omnipresence of the smartphone has fuelled recent discussions on how its connectivity is fundamentally changing how we work, communicate and even think (Turkle 2016). In addition, the large amounts of data a smartphone produces through location-based services and biometrics promote imaginaries of a future where prediction will be simple and accurate. In 2008, Wired magazine writer Chris Anderson proclaimed “the end of theory,” arguing provocatively that with enough data there is no need for analysis, because the answers can be found in the numbers (Anderson 2008). Digitalisation, understood as a reorientation towards digital-based communication and media infrastructure (Brennen and Kreiss 2016), would appear to be a success story, enthusiastically presented in progressive government policies, conferences, research agendas, media articles and inspirational talks. However, we are beginning to see signs of a changing perspective, where the optimism and fascination for the digital are giving way to a moderate, even critical perspective of digitalisation. Much like Henry Thoreau, Mark Boyle and other proponents of technology rejection, increasingly large numbers of individuals are looking at the relationship between humans and technology with a critical eye, postulating that today’s taken-for-granted digital technology does not necessarily offer only benefits. Already in 1998 Nicholas Negroponte, the founder of the MIT Media Lab, a multidisciplinary space for research groups focused on the development of innovative technologies and solutions, declared that “the digital revolution is over” (Negroponte 1998). In light of an emerging discourse on the topic of limiting the use of digital technologies, Negroponte’s words proved not only prophetic but also became the starting point for Kim Cascone’s (2000) proposal of the concept of the post-digital, referring to a

‘Deleted User’  187 societal turn which took a step back from the promises of speed and productivity. Cascone (2000: 112) argued that the “revolutionary period of the digital information age has surely passed” and that the “tendrils of digital technology have in some way touched everyone.” Cascone’s (2000) article referred to the musical genre of glitch, which deliberately uses digital imperfections to challenge the idea of a perfect Digital. Later, Florian Cramer (2015), building on Cascone’s text, discussed the notion of the post-digital in a wider context to establish a definition. Cramer’s (2015) definition of post-digital describes a state occurring after digitalisation characterised by technological saturation, where disenchantment with the now-ubiquitous digital devices is an ongoing process in which hybrids of old and new media are born and older technologies are functionally repurposed. Indeed, the concept reaches into so many disciplines (arts and humanities, education, social sciences, architecture, business, communication studies and others) and is used in different ways, albeit with some common specifics. However, inspired by Cramer’s (2015) work, we identify that at the core of this concept is the end of the fascination with the digital, which has led to a disenchantment with the best and latest devices and, in some cases, to a renewed interest in pre-digital technologies. Cramer’s definition is exemplified in David Sax’s (2016) book The Revenge of Analog, an investigation into the recent resurgence of analogue technologies such as vinyl records, notebooks, film photography and board games. Not only are these analogue devices experiencing a rebirth, they are reborn as hybrids, which means they are being used in conjunction with or as replacements of digital media (Thorén et al. 2019). To clarify, the post-digital as a perspective does not claim that digital is without its usefulness or that digital technologies should be shunned entirely. Rather, the post- digital celebrates and recognises the beauty of digital and analogue imperfection. A good example is analogue (or film) photography, which can be used to replace the digital capturing process, but whose final product (photographs) are, nonetheless, edited and shared on digital platforms, often indexed under hashtags such as #analogphotography (which at the time of writing amount to almost 10 million posts on Instagram). At first glance, these examples might seem counterintuitive, but they are indicative of instances where the digital and the analogue intersect, coexist, and evolve into post-digital hybrids. The disenchantment with the latest digital devices has several origins. While some individuals might feel that devices such as smartphones are distractions that potentially steal precious time that could be spent working, creating or socialising, others refer to debilitating difficulties in trying to restrain themselves from using these types of devices excessively. Such issues are the focus of a growing body of research on the topic of digital addiction, which focuses on the problematic use of digital devices among specific vulnerable target groups such as children (Hawi et al. 2019), or in the case of specific social media platforms (Cao et al. 2020). Furthermore,

188  Cristina Ghita et al. the more automated and algorithm-dependent the devices and services become, the less their users are likely to understand the data these devices and services collect, produce and distribute. This might eventually result in real concerns over privacy and surveillance that constitute reasons for partial disengagement or outright rejection (Humayun and Belk 2020). Epistemologically, the opaqueness of the computational leads to a state in which we are alienated from understanding our technologies because our ‘knowing’ has become mediated through what has been called grey media (Fuller and Goffey 2012). In contrast to progressive digitalisation narratives, the deliberate simplicity of digital automation risks black-boxing the computational logic of the digital infrastructure, which in turn leads to a trajectory of ignorance. Thus, we are in danger of entering a time of a new illegibility (Berry and Fagerjord 2017) and automation bias where, in a manner of speaking, we can no longer read what we are writing. Indeed, in increasingly digital societies, individuals are surrounded by algorithms and computations. In order to fully understand the implications of digitalisation processes, there is a need to stop viewing the digital as static and instead consider its trajectories (Berry 2014). Moreover, the post-digital foregrounds a convergence of technostress, technology disillusionment and adoption of alternative or outdated technologies, not for their own sake, but for the benefits provided by their lack of connectivity. The post-digital builds upon the already existing disruptions to the digital, in which outdated technologies are revived and repurposed as a reaction to modern ones (Cramer 2015). The disillusionment with the digital is, paradoxically, visible at first glance in the virtual environment as online communities discuss and support attempts to restrict online (over)use. To reduce the amount of time spent Internet-surfing, a small selection of activities such as communicating online or online entertainment services are proposed by members of user communities, such as the Reddit-based /r/nosurf, as an alternative that will help users regain control over their technology use.

18.2 /r/nosurf: a post-digital online community Reddit is a discussion website where users engage in conversations organised in well-defined topics or communities, called subreddits, written in the format r/[topic] (e.g. r/science, or r/news). Discussions within a subreddit can be ranked by Reddit members through a voting system (upvote/downvote), which determines the post’s visibility on the website. Reddit has become a popular platform; the site’s official statistics showing 153 billion posts and 1.2 billion comments in 2018, from 330 million monthly active users. One specific online community of interest for the exploration of the post-digital is the subreddit /r/nosurf, a space where individuals interested in reducing screen time discuss different strategies to achieve this. The community’s motto, “stop spending life on the net,” reflects the general approach

‘Deleted User’  189 that tends to regard overuse of digital devices as addictive behaviour with detrimental effects on an individual’s well-being. The range of discussions taking place within /r/nosurf is broad but generally converges around the specific digital devices or services that should be limited, strategies to do this and practical guides in this regard. Social media platforms and entertainment services are some of the most discussed examples of digital services that ‘nosurfers’ believe should be used minimally or eliminated completely. Social media platforms are perceived negatively since they are seen as responsible for removing the intimate connection in traditional face-to-face interactions. Also, the many hours spent on online streaming services are conceived as wasted time, which should be replaced by more meaningful and offline interactions. Social media tends to be characterised as addictive, the purpose of nosurfers being to regain agency lost to the respective platforms and harness some time which then can be spent productively. Nosurfers are actively engaged in regaining agency, but problematic digital use has been shown to be something for which the users are solely responsible. In the context of social media, addiction has been proven to be a result of both the user’s enjoyment of the platform and technical factors such as the design of the platform, which in combination can lead to emotional and functional attachment (Cao et al. 2020). In this case, the /r/nosurf community represents an instance of organised resistance to a self-diagnosed unhealthy attachment to social media platforms and entertainment services. By tackling the problematic side of the digital, the community comes together to discuss ways in which its members can disengage from the online. Strategies such as dopamine fasting are described as beneficial and achieved by not using a smartphone, not watching TV and, generally, being selective about engagement in online activities. These strategies are meant to work in a similar way to other techniques to curtain addictive behaviours – by cutting out the object of addiction completely. Nosurfers use dramatic expositions, advising their readers to disable all their social media accounts and to never look back. If successful, one day those who recover will realise how their time was spent ‘mindlessly’ (a word often used by the community in conjunction with surfing the Internet extensively and without purpose). Community members advocate reading physical books, writing or keeping a journal and developing new offline habits (especially physical activities). The use of physical objects and analogue technologies as replacements for digital devices and services has been seen as emerging from a desire to disconnect from the digital (Humayun and Belk 2020). Humayun and Belk (2020: 649) note that objects such as physical notebooks and film cameras are “objects to escape the digital” which provide ways to avoid digital use. As nosurfers reflect on the myriad of digital devices and services they should restrain from using, it is also impossible to ignore that they are doing this online, in a virtual community enabled by digitalisation. This resonates with Cramer’s (2015) articulation of post-digital hybridisation

190  Cristina Ghita et al. which combines old and new technologies, repurposing older media for current needs. Thus, the adoption of film cameras, notebooks and basic function phones is not due to their original functions but related to their newly assigned role of supporting and mediating disengagement from the digital. As the adoption of analogue offline products to avoid the perils of the online emerges as a popular practice, Humayun and Belk (2020) note their place within the post-digital context, referring to them as postdigital consumption practices. For the /r/nosurf community, post-digital consumption is a solution to the intense digital consumption and use of pervasive technologies. Using analogue/offline devices to replace digital ones, such as smartphones, constitutes a creative workaround. Nosurfers often call for smartphones to be replaced by basic phones (known affectionately as dumbphones), for online chatting to be replaced by face-to-face conversations and for digital planners to be replaced by bullet journals or personal organisers. However, there is no consensus about the degree of digital rejection; for example, while some members agree that smartphones should be avoided entirely, others note that it is social media, specifically, that leads to their overuse and their other features are still needed (e.g., GPS, e-mailing, banking applications, productivity tools). This is in line with Cramer’s (2015) notion that the post-digital is not a rejection of the digital but rather a state where the boundaries between the analogue and digital are amorphous and older technologies are repurposed. The value to be found in analogue replacements, such as notebooks instead of note-taking apps, or film cameras instead of smartphone cameras, lies in the trade-off between digital convenience and the preciousness of the analogue. In this view, the analogue does not completely replace the digital but interjects in everyday activities as something whose aesthetic, functional and mindfull values can increase the life quality. A similar situation is explored by Wickberg (2020) in a subreddit focused on handwriting, the author conceptualising the observed practices as post-digital handwriting; Wickberg (2020) suggests that the activity is not enjoyed for its functionality but, instead, enjoyed for the added intimacy and closeness brought by the act of writing and its aesthetic qualities. Intimacy or pleasing aesthetics can be found in analogue objects (notebooks, pen and paper note-taking, dumbphones, mechanical clocks etc.) and practices (face-to-face communication, walks, journal-writing) which members of communities such as /r/nosurf see as highly desirable and lacking in their digital counterparts. Nosurfers also discuss the benefits of a slower tempo, since by slowing down the pace of their activities they achieve more meaningful interactions with others and perceive time as being spent more wisely. Such approaches to technology are discussed increasingly in the context of the slow technology movement, which advocates for slower and, therefore, more mindful use of technology, challenging the culture of acceleration and automation for increased productivity. The slow movement has its roots in the slow food

‘Deleted User’  191 movement, which opposes the idea of food cooked and consumed quickly and promotes traditional ways of preparation and cooking, insisting that time should be a carefully calculated ingredient of meals which should be enjoyed and not rushed. The slow technology movement has emerged as a statement against productivity based on speed and proposing increased reflection in relation to the use and design of technology (Hallnäs and Redström 2001). Slow technology encompasses post-digital ideals of using older technologies, resulting in a slower but more meaningful interaction; by trading speed and efficiency for a slower and more meaningful engagement with technology, nosurfers avoid technostress and being overwhelmed by the myriad functionalities concentrated in devices such as smartphones, allowing them to control how their time is spent. In a post-digital context, these aims are central and are indicative of the end of the fascination with the digital (Cascone 2000) and the turn towards the hybridisation of old and new media to achieve more meaningful engagement. Members regard the ultimate mark of success for the nosurfer to be deletion of their Reddit account. The Reddit social media platform has been criticised as encouraging intensive, addictive use. Accordingly, ‘[deleted]’ user, the name automatically assigned to members who have deleted their profile (but whose posts and comments remain published on the platform), is proof of success and is often remarked on by members who peruse that individual’s posts. The existence of the [deleted] user and its function as a signifier of success in a community such as /r/nosurf signals the post-digital condition in a visible way. The [deleted] user could not exist without the digital, yet it signals a departure from the digital. This label shows that, through post-digital practices of technology disengagement, we do not simply abandon the technology; rather, we are developing a new, more reflexive and cautious relationship, taking into account how we affect technology development and how, in return, technology development affects us. Both within and outside the digital world, the [deleted] user shows that the initial author has proactively chosen to limit their screen time (at least on the Reddit platform), and [deleted] is decoded as providing aspiration for the continuing members who see it as a proof of success of the main aim of the /r/nosurf community. This acts as a visible trace of the post-digital convergence between offline and online (Cramer 2015) where digital absence is, nonetheless, virtually present. The very existence of communities such as /r/nosurf renders the relevance of the post-digital visible. Never before have societies been as reflexive to and as critical of personal use of digital technology. The dissatisfaction expressed by the members of /r/nosurf comes from the increased black-boxing of digital technologies, which further reduces their understanding of their functionality and their algorithms. This mistrust is targeted at the manufacturers of such devices, which are often accused of intentionally developing addictive designs. Not knowing what data are collected and for what purpose is a frequent concern within and outside the space of /r/nosurf. Although

192  Cristina Ghita et al. the benefits of digitalisation are undeniable, so is the increased scepticism towards tech giants such as Google, Microsoft and Facebook (Mosco 2017). The reasons for this fall under the overarching theme of ethics as concern over the ownership of data, over unwanted surveillance or over black-boxed technology are morality issues. The view that societies increasingly are governed by tech giants (Mosco 2017) can be seen in numerous accounts about distrust in digital services in relation to privacy, and inability to understand devices’ functionality, which negates (or complicates) the possibility that users understand what they are signing up for. Decelerating practices and instances of digital disengagement attempt to inject a level of meaningful interaction or human agency into everyday practices, on which communities, such as /r/nosurf, are focusing their efforts. Thus, the rejection of automation is not a complete rejection of modern technology; rather, it is a demonstration of the distrust and increased worry caused by the inability to understand its functionality. Not knowing how devices used in everyday functions is, indeed, leading to a revival of old – often analogue and mechanical – technology, where tinkering with them provides an understanding of their functionality. If the initial argument is true, that the digital has redefined many of the ways we work and socialise, the increasingly post-digital practices referred to by the online /r/nosurf community have the potential, by the same logic, to redefine our future. Many of the changes we are seeing in disparate settings are already theoretically articulated within a post-digital understanding; for example, in the political reconfiguration of academic publishing, discussed by Jandrić and Hayes (2019) as postdigital challenges, and the addition of mindfulness in technology consumption, described by Humayun and Belk (2020) as postdigital consumption. The aim of the nosurf community to avoid digital devices and instead adopt the slower and more mindful interaction with older technologies is precisely how Cramer (2015) conceptualises the post-digital condition: seeing through the excitement of digitalisation towards more reflective and meaningful technology use. The logic of the post-digital, as observed in the example of /r/nosurf, is the rejection of the digital as unquestionably beneficial, opening up for an increasing integration of analogue objects and activities in everyday life and adoption of emergent hybridisation between repurposed analogue objects and ubiquitous digital devices.

18.3 Takeaway The initial assumption about the /r/nosurf community might be that it is promoting neo-luddism. However, this is not the case. Rather, communities such as /r/nosurf should be considered as evidence of the post-digital condition, based not only on their content but also on their very existence. It is important to understand how control and human agency have become hard currency with increased automation and the subsequent need for increased

‘Deleted User’

193

technological transparency. Balancing automation and convenience with manual control is vital for how we approach and understand the implications of digital technologies in the future. Finally, recalling the quote at the beginning of the chapter, we draw attention to how Thoreau’s limestone stands in for the technology of today: initially desired for its seductive functionalities, but increasingly criticised for its effects. While this thinking might have seemed odd 150 years ago, it is becoming increasingly common in today’s post-digital society.

References Anderson, C. 2008. The end of theory: The data deluge makes the scientific method obsolete. Wired Magazine, June 23, 2008. https://www.wired.com/2008/06/ pb-theory/ Berry, D.M. 2014. Critical Theory and the Digital. New York: Bloomsbury. Berry, D.M. and Fagerjord, A. 2017. Digital Humanities: Knowledge and Critique in a Digital Age. Cambridge: Polity Press. Boyle, M. 2019. The Way Home: Tales from a Life without Technology. London: Oneworld Publications. Brennen, J.S. and Kreiss, D. (2016). Digitalization. In Jensen, K.B., Rothenbuhler, E.W., Pooley, J.D. and Craig R.T. (Eds.), The International Encyclopedia of Communication Theory and Philosophy, Chichester: Wiley-Blackwell: 556–566. Cao, X., Gong, M., Yu, L., and Dai, B. 2020. Exploring the mechanism of social media addiction: An empirical study from WeChat users. Internet Research 30(4): 1066–2243. Cascone, K. 2000. The aesthetics of failure: “Post-digital” tendencies in contemporary computer music. Computer Music Journal 24(4): 12–18. Cramer, F. 2015. What is ‘post-digital’? In Berry, D.M. and Dieter, M. (Eds.), Postdigital Aesthetics: Art, Computation and Design, Basingstoke: Palgrave Macmillan: 12–26. Fuller, M. and Goffey, A. 2012. Evil Media. Cambridge, MA: MIT Press. Hallnäs, L. and Redström, J. 2001. Slow technology – Designing for reflection. Personal and Ubiquitous Computing 5(3): 201–212. Hawi, N.S., Samaha, M. and Griffiths, M.D. 2019. The digital addiction scale for children: Development and validation. Cyberpsychology, Behavior, and Social Networking 22(12): 771–778. Humayun, M. and Belk, R. 2020. The analogue diaries of postdigital consumption. Journal of Marketing Management 36(7–8): 633–659. Jandrić, P. and Hayes, S. 2019. The postdigital challenges of redefining academic publishing from the margins. Learning, Media and Technology 44(3): 381–393. Kendall, G. 2019. Would your mobile phone be powerful enough to get you to the moon? The Conversation, July 1, 2019. https://theconversation.com/ would-your-mobile-phone-be-powerful-enough-to-get-you-to-the-moon-115933 Mosco, V. 2017. Becoming Digital. Bingley: Emerald Publishing. Negroponte, N. 1998. Beyond digital. Wired Magazine, December 1, 1998. https:// www.wired.com/1998/12/negroponte-55/ Sax, D. 2016. The Revenge of Analog: Real Things and Why They Matter. New York: Public Affairs.

194

Cristina Ghita et al.

Thoreau, H.D. [(1854) 2016]. The Illustrated Walden: Thoreau Bicentennial Edition. New York: Penguin Books. Thorén, C., Edenius, M., Lundstrom, J. and Kitzmann, A. 2019. The hipster’s dilemma: What is analogue or digital in the post-digital society? Convergence – The International Journal of Research into New Media Technologies 25(2): 324–339. Turkle, S. 2016. Reclaiming Conversation: The Power of Talk in a Digital Age. New York: Penguin. United Nations General Assembly. 2011. Report of the Special Rapporteur on the Promotion and Protection of the Right to Freedom. Report No. A/HRC/17/27, Geneva: United Nations. Wickberg, A. 2020. New materialism and the intimacy of post-digital handwriting. Trace: A Journal of Writing, Media, and Ecology 4(1): 11–20.

19 The role of boundaryspanners in the post-digitalised multinational corporation Henrik Dellestrand, Olof Lindahl and Jakob Westergren

Multinational corporations (MNCs) face a conundrum; their activities and processes are spatially distributed across the globe, which makes it problematic to coordinate the activities of their locally embedded subsidiaries in countries with various cultural, institutional and historical differences. For better or for worse, digitalisation – the use of digital technologies to facilitate business operations and exploit opportunities – is both an opportunity and a challenge for the coordination of modern MNCs. A consequence of subsidiary embeddedness within the corporation and in the local host country environment is that integration with other subsidiaries and the headquarters is important, especially if the aim is to leverage and incorporate the subsidiary’s local knowledge. This local knowledge is unique due to the particularities of the host country market. Tapping into knowledge1 outside the organisational boundaries is increasingly critical for firms to remain competitive in a rapidly changing business environment (Klueter and Monteiro 2017). This activity can be especially advantageous for MNCs, which are able to add value by integrating globally dispersed pockets of knowledge in their innovation processes, making them more effective than those of domestic rivals (Tushman and Katz 1980; Zander 2011). Due to the spatial distribution of subsidiaries, the MNC must overcome external boundaries, such as national borders and legal jurisdictions and, also, internal boundaries, such as different national and corporate cultures, all of which can pose problems for MNC management. In addition, these internal and external boundaries can be formal and informal in nature, exemplified by the existence of a formal national border and the informal expression of a specific national culture. To cope with the complexity arising from spatially distributed activities, MNCs rely on boundary-spanners, that is, individuals or corporate units, which are tasked with or which assume responsibility for facilitating the integration of esoteric knowledge across existing internal or external firm boundaries (Tushman and Scanlan 1981; Kärreman 2010; Schotter et al. 2017). The scope of the boundary-spanning activity increases in a multinational context and can be more difficult if it involves different cultures and languages and long distances, which, potentially, can impede communication DOI: 10.4324/9781003111245-19

196  Henrik Dellestrand et al. (Janowicz-Panjaitan and Noorderhaven 2008). However, boundary-spanners are vital for MNCs to mitigate knowledge and culture differences between subsidiaries and the MNC headquarters (Schotter et al. 2017). The complexity related to boundary-spanning is undeniable, especially when it occurs in multifaceted organisations, such as large MNCs, where headquarters and subsidiaries have to overcome multiple boundaries. It has been suggested that, ultimately, peripheral boundary-spanners are responsible for MNC success and, especially, since MNCs are renowned for their ability to learn from their periphery (Zander 2011). To the joy or dismay of boundary-spanners, digitalisation is allowing easier access to information, which, traditionally was provided by these actors. Digitalisation is making it easier for distributed actors across the MNC to stay in touch without the help of a boundary-spanner and is likely enabling MNCs to reap the benefits of internationalisation (Khanagha et al. 2014). However, the advent of the digital era has meant, also, that the amount of information firms are exposed to has increased. Potentially, digitalisation allows the collection and communication of information across globally dispersed MNC subsidiaries, which suggests that the significance of some of the boundaries faced by MNCs has changed. For example, digital communication tools, such as Zoom, have made it easier to cross geographical boundaries and allow more rapid communication compared to a physical visit to the corporate headquarters by subsidiary actors. However, due to the flux and relatively recent incorporation in many firms of digital technologies with embedded information and support processes, how boundaries and boundary-spanning activity in MNCs should be understood is not entirely clear. The questions addressed in this chapter are: who are boundary-spanners? What constitutes a boundary? Which boundary-spanning activities should persist in the digitalised corporation, to understand what is unfolding within MNCs? To do this, we consider some of the main manifestations of boundary-spanning, describe some important effects of digitalisation and explore these themes by analysing how the boundary-spanning activity in MNCs can be expected to change. We propose some directions for further research on the influence of digitalisation on boundary-spanning in MNCs and outline some of the managerial challenges that can be expected to emerge.

19.1 Boundaries and how to overcome them MNCs have to cope with multiple external and internal boundaries. These include the boundaries separating the MNC from external, locally embedded business actors such as customers, suppliers and competitors. Here, boundary-spanners mediate between these actors and the firm to help integrate locally embedded knowledge, skills and opportunities in the organisation. By bridging between the organisation and the external environment, individuals and, sometimes, entire organisational units, can act

Boundary-spanners in post-digitalised MNCs  197 as boundary-spanners (Thompson 1967; Tushman and Katz 1980). However, MNC units, typically, are assigned specific roles and responsibilities; boundary-spanners tend to be specialised units, working at the frontier between the organisation and the external environment (Ciabuschi et al. 2011). Boundary-spanning units scout for new technological solutions, knowledge and partnerships likely to be in the interests of internal and external stakeholders (Monteiro and Birkinshaw 2017). Within the organisation, there are internal boundaries, such as between headquarters and subsidiaries, and between subsidiaries. Internal boundaryspanning focuses on bridging between hierarchies and spanning divisions, for example, to help other organisational actors understand the value of local foreign knowledge (Roberts and Beamish 2017). Both subsidiaries and headquarters can act as boundary-spanners within the MNC to manage vertical and lateral flows of knowledge to generate innovative output within the network (Dhanaraj and Parkhe 2006). However boundary-spanning is defined, it involves two critical activities. To use Aldrich and Herker’s (1977) terminology, they engage in information processing, which refers to information filtering. Based on their expert knowledge, the boundary-spanner selects which information from the external environment reaches the organisation. They engage, also, in representation, which refers to a focus on resources acquisition, maintenance of the outward corporate image to other stakeholders, and legitimisation internally of the boundary-spanner role. We would add a refinement to these two main activities, that is, information processing and representation, and suggest that they are concerned with the integration of different perspectives and practices. At the core of the boundary-spanning role is the ability to master esoteric – abstruse – knowledge (Kärreman 2010), related, perhaps, to technological competence or cultural aptitude. Figure 19.1 depicts the relationships between boundary-spanners and the internal and external environments.

19.2 Boundary-spanners meet digitalisation There are some interesting parallels to digitalisation that emerge from the boundary-spanner’s primary tasks of representation and information processing. The term digitalisation is often used to refer to the third industrial revolution whose referents are standalone information and communication technologies and automation (Sturgeon 2019), and more empirical research is needed to understand the part played by digital technologies in internal and external MNC boundary-spanning. In the succeeding sections, we elaborate some theoretical issues that could guide this empirical work. We discuss the current state of the boundary-spanning literature in light of the emerging effects of digitalisation on boundary-spanners and explore how the boundary-spanning activities of representation and information processing are being affected.

198  Henrik Dellestrand et al. Internal to the focal boundary

Boundary

Step 2: Facilitating internal collaboration

External to the focal boundary

Step 1: Understanding the environment

Intraorganizational actor

Boundary-spanner

Information or communication flows

Interorganizational actor

Figure 19.1 A common view of boundary-spanners. Source: Authors’ own visualisation.

19.2.1 The consequences of digitalisation for boundary-spanners Organisations that rely heavily on digital technologies are argued to be actor-oriented. The term ‘actor-oriented firm’ connotes self-organising and shared resources (Snow et al. 2017), which have implications for boundaryspanners who, typically, have considerable discretion and autonomy. Consequently, there would seem to be a tension between highly autonomous boundary-spanners and commonly available digital resources. While the promises of digital organisation and the digital economy more generally, are plentiful, we reveal a darker side to boundary-spanning in the postdigitalisation context. Although digitalisation promises greatly increased productivity, it also risks information overload (Wang et al. 2020), decontextualisation of knowledge across geographically dispersed networks (van den Hooff and Kotlarsky 2016) and loss of autonomy for employees using digital tools, which, in turn, might affect information quality (McNally 2010). First, information overload might imply that the boundary-spanner gains access to larger amounts of information from a wider range of sources. However, it might be problematic and might result in short-term and armslength relationships with different units, rather than the long-term, deep relationships that, traditionally, are typical of boundary-spanning work in MNCs. This might increase the efficiency of representation, but it will also reduce its effectiveness since different kinds of relationships can be expected to yield very different kinds of insights into other units. Second,

Boundary-spanners in post-digitalised MNCs  199 the decontextualisation of information might be particularly problematic since the information made available using digital means may be difficult to interpret accurately outside of the local subsidiary context. Third, the loss of autonomy that employees can experience when using digital tools to communicate with distant colleagues has been shown to affect information quality. This is likely to affect the amount of information provided and its accuracy if the reporting party believes it is unimportant or is likely not to be challenged. 19.2.2 Representation and digitalisation Representation is an important boundary-spanning activity and refers to the bridging achieved between separated units. Representation eases the relations between headquarters and subsidiary, for example, to enable internal control and coordination of activities between headquarters and subsidiary or between two subsidiaries. Coordination between MNC headquarters and subsidiaries is an ongoing issue for large organisations and allows the monitoring of operational activities and synergies among subsidiaries. It tends to be initiated and managed by the MNC headquarters, which can lead to involvement in delicate operational activities at different MNC units. This requires substantial knowledge of the units involved to avoid monitoring the wrong activity or issue damaging instructions for collaborations between units. Involvement of the headquarters in operational activities of subsidiaries for the wrong reasons can be detrimental to the firm (Ciabuschi et al. 2011). Responsibility for spanning the boundaries between units that are part of large corporations is generally the province of managers with experience of working in both the headquarters and subunits, or on the activities being controlled or coordinated. This tends to involve tacit knowledge, which is gained through personal experience and long or intense immersion in a particular environment. This experience can facilitate boundary-spanning by providing knowledge about both the organisation’s activities and its employees and ‘how it works.’ Therefore, it requires an understanding of the corporate cultures in both the headquarters and the focal subunit, which may vary as the result of their unique history. Digitalisation is likely to make this type of hands-on experience required for boundary-spanning less dominant since communication will be increasingly digitally enabled as opposed to physical co-location and frequent visits. The shift to digital means of communication and coordination provides boundary-spanners with new ways to become familiar with the organisation but, at the same time, deprives them of their reliance on hands-on experience. Whether this shift from physical presence to digital overview will be a net gain for the boundary-spanning activity of representation is an empirical question and requires more investigation. However, based on what we know about the more general impact of digitalisation, we can discuss some potential consequences.

200  Henrik Dellestrand et al. 19.2.3 Information processing and digitalisation Boundary-spanning roles related to information processing involve information filtering and facilitating. They involve technical personnel searching for innovative ideas or insights from individuals internal or external to the MNC (Dahlander et  al. 2016). The boundary-spanner must help colleagues to understand the value of the knowledge held by some other intra-organisational unit, such as a sister subsidiary (Roberts and Beamish 2017). By devoting time and resources to interacting with individuals outside the focal team or unit, boundary-spanners select information perceived as important, for example, to advance a current project. Information processing allows information that might become a novel idea, to flow through the MNC’s distributed knowledge system (cf. Aldrich and Herker 1977). Digital solutions could help boundary-spanners in MNCs to engage in more information processing as the availability of information increases (van den Hooff and Kotlarsky 2016). However, there is a trade-off related to easier access to more information, which can be compared to the trade-off between short-term and long-term business relationships related to the boundary-spanning activity of representation. Since the aim of boundary-spanners engaged in information processing is to link who knows what with what needs to be known and when, digitalisation can disrupt the identification of information relevant to the boundary-spanner’s own context. Therefore, this trade-off can be understood as a compromise between the breadth and the depth of information processing. In a digitally optimised workplace, it can be assumed that boundary- spanners will have more information at their disposal but will be less aware of its original context. This puzzle is not exclusive to boundary-spanners and could present unique opportunities or challenges. Several scholars (e.g., Levina and Vaast 2006) have referred to the informalisation of the boundary-spanning role. With the availability of enterprise-wide systems and other digital interfaces, it seems possible that the activity of information processing will make formal boundary-spanners redundant since more employees will be able to search for information independently without the help of a formally appointed knowledge authority. However, a formal position has been identified as one of the most defining enablers of boundary-spanning (e.g., Tushman and Scanlan 1981). So what does this leave for information processing? Issues, such as information overload, might be dependent, in part, on personal characteristics and savoir faire (Snow et al. 2017; Wang et al. 2020). Some individuals may be more inclined to handle higher cognitive loads or may be better at selecting which information to focus on. Boundary-spanners are not superhuman, but a crucial part of the role is information filtering to prevent information overload for teams, units or the organisation.

Boundary-spanners in post-digitalised MNCs  201

19.3 Discussion The objective of this chapter was to try to integrate the phenomenon of digitalisation with our current understanding of boundary-spanning and to theorise about the potential implications of digitalisation on the boundaryspanning roles of representation and information processing. Our aim, also, was to suggest directions for future research on the contribution made by boundary-spanners to knowledge integration in MNCs. Digitalisation is increasing the information processing opportunities for boundary-spanners, but this increased breadth of information, potentially, comes at the cost of information depth. Similarly, related to the representation activity, opportunities to develop many short-term business relationships are increasing, but probably at the expense of long-term relationships. We have shown that digitalisation fundamentally alters the foundations of both representation and information processing as the focus of boundary-spanning moves away from a greater concern with socialisation as a means of representation and information processing to a purer form of information transacting. Extrapolating from this discussion, we assume that boundary-spanning through digital means could make cultural boundaries, which, traditionally, can be problematic to traverse, loom larger, but might make other types of boundaries, such as hierarchical boundaries, easier to negotiate. 19.3.1 Theoretical implications Digitalisation is making more information available to boundary-spanners, yet it is also increasing access to the wrong kind of information, to decontextualised and possibly biased information, which might reduce boundaryspanning effectiveness in MNCs. Moreover, information overload is likely to have different effects on representation compared to information processing. Information overload: Specifically, information overload suggests that the sheer volume of the information available about different MNC subunits might reduce attention to often critical tacit knowledge. Focusing on easily available information incentivises short-term instrumental interactions with other units and risks making the long-term relationships, previously central to boundary-spanning, less appealing. For boundary-spanners enacting information processing roles, the depth of knowledge and information has tended to be central; however, in the post-digitalised organisation, the breadth of information occupies centre stage. Information overload could be considered as taking the form of a smorgasbord of information compared to the value of a single main dish of more granular knowledge. The sheer increase in information availability does not mean better utilisation of knowledge; rather, it might be a distraction (O’Reilly III 1980). Decontextualisation: In light of the representation activity of boundaryspanners, more, but less contextualised, information could be a potentially

202  Henrik Dellestrand et al. dangerous mix since it would invite greater headquarter involvement in subsidiaries, while, simultaneously, giving rise to fewer capable boundaryspanners. As the information that flows to the headquarters from its subsidiaries becomes detached from its local context (operational or cultural), the ability of the headquarters to interpret and act on this information correctly can be expected to decrease. This could have several consequences for the ability of the headquarters to coordinate its subsidiaries; decontextualisation of knowledge allows for greater comparison and contrasting of subsidiary activities and, crucially, outcomes. This might increase productivity as context is de-emphasised and the subsidiaries are forced to take account of the higher quality or lower costs of other subsidiary units. However, it risks the problem of comparing apples to pears or even to oranges. In practice, learning about subsidiary activities out of context may lead to damaging headquarter coordination and an assumption that the production processes that work in Japan, for example, will work equally well in Sweden. Information and knowledge taken out of its original context is problematic, also, for the boundary-spanner’s information processing activity, since knowledge stemming from a context different from that of the boundary-spanner risks unsuccessful implementation. Familiarity with contextual contingencies is crucial for identifying, for example, the value that a sister subsidiary unit could offer for the boundary-spanner’s own innovation projects. Demotivation to contribute: In the boundary-spanning activity of representation, demotivation risks populating information systems with inaccurate information as the subsidiaries share only the information they are forced to share. This results in the headquarters obtaining the information it requested (assuming nobody cheated), but that information only, which can provide false security related to knowing what is going on. Demotivation in relation to boundary-spanners’ information processing activities materialises as an underutilisation of information systems. That is, resources have been spent on implementing expensive digital solutions for coordinating information and codifying best practice, but these systems remain mostly unused. The existence of a digital information system can create the illusion of information availability, but might lack any useful information content. 19.3.2 Future research Here, we suggest some suggestions for future research on the impact of digitalisation on boundary-spanners in MNCs. These three broad research themes refer back to our discussion of information overload, decontextualisation and demotivation. Too much information: To further investigate the influence of information overload on representation in boundary-spanning, and where new ways of representation are enabled while old ways are made more difficult, we propose the following research questions: does digitalisation cause a shift from long-term to short-term relationships between boundaryspanners and the MNC units they span? If so, how does this affect (1) the

Boundary-spanners in post-digitalised MNCs  203 kind of boundary-spanning activity performed and (2) the effectiveness of boundary-spanning to bridge inherent divides among MNC units? Research on information processing could investigate how boundary-spanners cope with increased information availability and what kinds of information trigger the attention of boundary-spanners. Losing context: The problem related to the decontextualisation of knowledge for the boundary-spanning role of representation suggests the need for more research into how the ability of the MNC headquarters to coordinate subsidiaries is affected by the decontextualisation of the knowledge provided by boundary-spanners. For boundary-spanners searching for information, the issue of decontextualised knowledge and information suggests critical questions, such as how do boundary-spanners orient themselves in the search for information in an increasingly decontextualised work environment? Running out of motivation: Demotivation in relation to representation boundary-spanning suggests the need for deeper investigation of how digitalisation can detect weaknesses in the knowledge gained from information systems and how this might impact the ability of the headquarters to coordinate and control its subsidiaries. The effect of demotivation on boundaryspanners’ information processing activity leads to questions about how they share knowledge and ideas using digital solutions and how they actively exploit the knowledge contributed by others. 19.3.3 Managerial implications Our investigation has some implications for managers. For example, by increasing the breadth of the available knowledge, digital solutions might be more useful as complements rather than replacements for traditional boundary-spanning. In our view, digitalisation is unlikely to completely replace face-to-face interaction to reconcile language and cultural boundaries in headquarters–subsidiary relationships. That is, information quality (whether related to its focus or an accurate contextual understanding) may prove more important than the quantity of information. Also, since headquarters rely on this information to coordinate their subsidiaries, less, but more accurate and contextualised, information might be preferable to more, but lower-quality, information. The Covid-19 pandemic has shown that digitalised communication has allowed the relocation of work from the office to the home; however, there is evidence suggesting that, although many individuals have become marginally more productive when working from home, they have also experienced stress due to the lack of face-to-face interaction.

19.4 Takeaway In many ways, digital technologies have increased representation and the sharing of information among MNC units. However, they are hampering boundary-spanners’ activities that rely on face-to-face interaction.

204 Henrik Dellestrand et al. It can be difficult to make sense of vast amounts of – particularly decontextualised – information communicated digitally. Ultimately, digital information repositories and reporting systems could reduce employees’ motivation to share. In our view, digital technologies need to be combined with, rather than replacing, traditional management tools. Our analysis of how digitalisation might affect boundary-spanning in MNCs has opened up numerous avenues for future research into how information overload, decontextualisation of knowledge and demotivation of employees to share information using digital technologies might affect both representation and information boundary-spanning activities in MNCs.

Note 1 Here, we understand knowledge as including “the exercise of judgment and the capacity to make interpretations. This means that we can hardly talk about knowledge as codified and stored in databases. This is then better seen as information, not knowledge” (Alvesson 2004: 43).

References Aldrich, H.E. and Herker, D. 1977. Boundary spanning roles and organization structure. The Academy of Management Review 2(2): 217–230. Alvesson, M. 2004. Knowledge Work and Knowledge-Intensive Firms. Oxford: Oxford University Press. Ciabuschi, F., Forsgren, M. and Martín, O. 2011. Rationality versus ignorance: The role of MNE headquarters in subsidiaries’ innovation processes. Journal of International Business Studies 42(7): 958–970. Dahlander, L., O’Mahony, S. and Gann, D.M. 2016. One foot in, one foot out: How does individuals’ external search breadth affect innovation outcomes? Strategic Management Journal 37(2): 280–302. Dhanaraj, C. and Parkhe, A. 2006. Orchestrating innovation networks. Academy of Management Review 31(3): 659–669. Janowicz-Panjaitan, M. and Noorderhaven, N.G. 2008. Formal and informal interorganizational learning within strategic alliances. Research Policy 37(8): 1337–1355. Khanagha, S., Volberda, H. and Oshri, I. 2014. Business model renewal and ambidexterity: Structural alteration and strategy formation process during transition to a cloud business model. R&D Management 44(3): 322–340. Klueter, T. and Monteiro, F. 2017. How does performance feedback affect boundary spanning in multinational corporations? Insights from technology scouts. Journal of Management Studies 54(4): 483–510. Kärreman, D. 2010. The power of knowledge: Learning from ‘learning by knowledge-intensive firms’. Journal of Management Studies 47(7): 1405–1416. Levina, N. and Vaast, E. 2006. Turning a community into a market: A practice perspective on information technology use in boundary spanning. Journal of Management Information Systems 22(4): 13–37. McNally, M. 2010. Enterprise content management systems and the application of Taylorism and Fordism to intellectual labour. Ephemera 10(3/4): 357–373.

Boundary-spanners in post-digitalised MNCs

205

Monteiro, F. and Birkinshaw, J. 2017. The external knowledge sourcing process in multinational corporations. Strategic Management Journal 38(2): 342–362. O’Reilly III, C.A. 1980. Individuals and information overload in organizations: Is more necessarily better? Academy of Management Journal 23(4): 684–696. Roberts, M.J.D. and Beamish, P.W. 2017. The scaffolding activities of international returnee executives: A learning based perspective of global boundary spanning. Journal of Management Studies 54(4): 511–539. Schotter, A.P.J., Mudambi, R., Doz, Y.L. and Gaur, A. 2017. Boundary spanning in global organizations. Journal of Management Studies 54(4): 403–421. Snow, C.C., Fjeldstad, Ø.D. and Langer, A.M. 2017. Designing the digital organization. Journal of Organization Design 6(7): 1–13. Sturgeon, T.J. 2021. Upgrading strategies for the digital economy. Global Strategy Journal 11(1): 34–57. Thompson, J.D. 1967. Organizations in Action: Social Science Bases of Administrative Theory. New York: Transaction Publishers. Tushman, M.L. and Katz, R. 1980. External communication and project performance: An investigation into the role of gatekeepers. Management Science 26(11): 1071–1085. Tushman, M.L. and Scanlan, T.J. 1981. Characteristics and external orientations of boundary spanning individuals. Academy of Management Journal 24(1): 83–98. van den Hooff, B. and Kotlarsky, J. 2016. Managing dispersed and dynamic expertise in fluid organizational forms. In Treem, J.W. and Leonardi, P.M. (Eds.), Expertise, Communication, and Organizing. Oxford: Oxford University Press: 232–250. Wang, B., Liu, Y. and Parker, S.K. 2020. How does the use of information communication technology affect individuals? A work design perspective. Academy of Management Annals 14(2): 695–725. Zander, U. 2011. Game-park capitalism, globalization, and multinational companies: An overview and research agenda. Thunderbird International Business Review 53(3): 279–298.

20 The effect of digital transformation on subsidiary influence in the multinational enterprise Noushan Memar, Ulf Andersson, Peter Dahlin and Peter Ekman Digital transformation requires strategic changes to the organisation (Roger 2016) and demands innovative business models to increase organisational performance and extend the firm’s networks (Warner and Wäger 2019). In the context of international business (IB), in general, multinational enterprises (MNEs) increase organisational performance by globalisation. In this setting, the international involvement of MNEs enhances the opportunities provided by digitalisation; however, different digitalisation strategies affect MNEs in different ways and impact the influence of its subsidiaries. The globalisation business model of the MNEs has resulted in fine-sliced MNE value chain activities (Contractor et al. 2010) where the core activities are disaggregated and optimised, resulting in dispersed technological capabilities, processes and competencies across all functions and locations. Disaggregation of core activities increases innovation and competitiveness by exploitation of the entire global value-creating networks and resources (Contractor et  al. 2010) where the MNE Headquarters (HQ) orchestrates resources and implements financial and investment controls, while the subsidiaries perform the innovation activity (e.g., Ambos and Schlegelmilch 2007). In practice, globalisation has led to changes in subsidiaries’ activities, relationships and subsidiaries’ influence in the MNE (Gillmore, Andersson and Ekman 2020). Furthermore, the disaggregation of global value chains affects subsidiary flexibility (Ambos, Andersson and Birkinshaw 2010). Digital transformation research shows that organisational strategy increases the need for entrepreneurialism, in order to cope with the threats associated to disaggregation and disintermediation of existing value chains (Warner and Wäger 2019). Similarly, in IB research, innovation activity and implementation of successful initiatives require a business model where subsidiary managers are encouraged to engage in entrepreneurial behaviour (O’Brien et al. 2019), exploit core value-adding activities and facilitate collaboration with firms both internal and external to the MNE (Ekman et al. 2020). Entrepreneurial behaviour by a subsidiary manager increases the dependence of other MNE units on that particular subsidiary, and subsequent competence building enhances the subsidiary’s role and influence over the MNE’s strategising (Andersson, Forsgren and Holm 2001, 2015; Gillmore, DOI: 10.4324/9781003111245-20

Digital transformation in MNEs  207 Andersson and Memar 2018). In addition, external and internal collaboration enhances subsidiary embeddedness and allows subsidiary managers to influence the MNE strategy and performance. Several studies show that the subsidiary’s innovation capability (and, thus, its influence within the MNE) is strongly associated with its embeddedness, especially its embeddedness in external business networks. However, the subsidiary’s internal embeddedness and how this affects subsidiary’s influence in the MNE’s strategic decision-making have received less research attention (Garcia-Pont, Canales and Noboa 2009). This chapter tries to fill this gap in the context of MNE digitalisation. We discuss two digital technology dimensions and two dimensions of subsidiary internal embeddedness. First, we consider MNE digitalisation in relation to high-tech or high-touch interaction capabilities (Ekman et al. 2021). Second, we discuss subsidiary internal embeddedness in terms of (1) the subsidiary’s internal production network and (2) subsidiary managers’ interpersonal relationships. High-tech and high-touch interaction capabilities refer to the relationship between digital technologies and the firm’s internal production network and the link between the interpersonal relationships of subsidiary managers and the relational dimension of internal embeddedness (see Tate et al. 2013). We suggest that all these aspects constitute important components of the strategic change related to digital transformation in firms (Warner and Wäger 2019). The following text theorises about the positive effect of embeddedness on subsidiary influence in an MNE that is undergoing digital transformation. It emphasises on interpersonal relationships that allow subsidiary managers to leverage their entrepreneurial behaviour. The aim is to show how the subsidiary’s role in the MNE’s internal production network and subsidiary managers’ interpersonal relationships affect the influence that subsidiaries have on the MNE’s (strategic) decisions in the context of digital transformation. Section 20.1 discusses how organisations develop their IT portfolios and drive firm digitalisation. Section 20.2 addresses the concept of embeddedness from a subsidiary perspective and the possibilities for its internal production network to influence the MNE’s decisions. Section 20.3 investigates the interpersonal relationships of subsidiary managers that might counterbalance the MNE’s structural constraints and increase the subsidiary’s influence in the MNE’s strategic decision-making. Since this dynamic is affected by digitalisation, we propose a framework for understanding the level of subsidiary influence in the MNE. Section 20.4 discusses some of the implications of the proposed framework, and then Section 20.5 presents the chapter’s takeaway.

20.1 The high-tech and high-touch dimensions of digitalisation Ekman et al. (2020) investigate MNE’s external embeddedness (i.e., its business relationships with customers and suppliers). However, their findings are

208  Noushan Memar et al. relevant, also, for MNE’s internal embeddedness. They argue that firms develop their information technology (IT) portfolios to improve their interaction capabilities, that is, the ability to manage different forms of exchanges. These can include traditional business exchanges of products, services and money and softer forms of exchanges such as social interactions and information diffusion. Depending on the types of relationships, the firm will be required to possess a certain level of high-tech and high-touch interaction capabilities. The firm that develops high-tech interaction capabilities: prioritizes activities and decisions at the organizational level rather than in response to the preferences of the individuals involved. This interaction capability is optimized for structured, routine interactions and representative of settings where uncertainty is low and each possible outcome has a codified response action, making them amenable to digitalization and automation. (Ekman et al. 2021: 18) Thus, high-tech interaction capabilities can be expected to drive all the MNE subsidiaries in a similar direction, making their business activities similar worldwide. In contrast, an MNE digitalisation strategy emphasising high-touch interaction capabilities will focus on supporting interpersonal interactions both within and outside the organisation. The notion of high touch is related to trust, which is vital for the formation of relationships, not only with customers and suppliers but also with the MNE HQ and other of its subsidiaries (Gillmore et al. 2020). High-touch capabilities support subsidiary managers’ interpersonal links with executives at the HQ and with managers in other subsidiaries. The effects of high-tech and high-touch interaction capabilities will differ depending on the dimension of internal embeddedness. This chapter discusses two forms of internal embeddedness and its relation to the MNE’s digitalisation strategy.

20.2 Subsidiary internal embeddedness Internal and external embeddedness build on different foundations. External embeddedness is promoted by and builds on economic transactions, which, over time, create complex dynamics in terms of ownership of independent companies (supplier or buyer) where knowledge for the mutual benefit of leveraging the relationship is shared. External embeddedness is a part of a market or relationship governance form, whereas internal embeddedness is related to hierarchical governance and includes the intraorganisational relationships between sister units. These relations tend to be predesigned; for example, one of the partners is responsible for a specific

Digital transformation in MNEs  209 task whose outcome is used by the other partner in its activities. In the MNE business model, the HQ assigns the portfolio of each subsidiary and these activity portfolios play a crucial role in the embeddedness of its subsidiaries. The higher the number of activities performed by the subsidiary that are utilised by the other subsidiaries, the stronger the focal subsidiary’s internal embeddedness. However, it is clear that the HQ predesigned activity portfolio limits the flexibility of its subsidiaries. This rigidity can be increased further by digital transformation (Ekman et al. 2020). In this study, we study the subsidiary internal embeddedness while acknowledging the interplay between external and internal embeddedness. We argue that internal embeddedness has both structural and relational components. Its structural component depends on the subsidiary’s position in the MNE, and the activities assigned by the HQ or assumed by the subsidiary. The relational component refers to the subsidiary managers’ interpersonal network. In line with the MNE business model, we assume that subsidiaries try to influence the MNE’s strategy. 20.2.1 Structural dimension of internal embeddedness The structural dimension of internal embeddedness is the subsidiary’s internal production network, which is a measure of its position within the MNE, its internal bargaining power (Andersson et al. 2001) and its relations with the other MNE subsidiaries and the HQ. MNE subsidiaries tend to be of three types:



The position of the subsidiary within the MNE influences the HQ delegation of value-adding activities, during implementation of a digital transformation strategy. The assigned activities affect the flow of technologies and products among MNE units. In other words, the assigned activity portfolio can increase or reduce the subsidiary’s degree of embeddedness in the MNE. The subsidiary’s activity portfolio can include innovation activity, manufacturing, sales and administrative support and other activities, which may increase the subsidiary’s importance and influence within the MNE. Some activities are considered more important. For instance, marketing,

210  Noushan Memar et al. sales, and R&D are important for innovation and subsidiary influence in the MNE (Dellestrand 2011). We can expect, also, that subsidiaries involved in the full range of business activity, that is, R&D, procurement, manufacturing, marketing, sales and aftersales service, will have more influence over the MNE strategy compared to subsidiaries responsible for fewer activities. Based on the above reasoning, we suggest that the importance, scope and nature of the subsidiary’s activity portfolio in relation to the other subsidiaries and the HQ affect the subsidiary’s internal embeddedness and its influence within the MNE. A production network which includes only a few activities will reduce the possibility of subsidiary influencing the MNE strategy. Thus, the influence within the MNE increases with the degree of integration of the subsidiary with other subsidiaries and the number of activities assigned to it. Figure 20.1 depicts the relationship between the range of subsidiary activities and the degree of its influence within the MNE. The subsidiary’s activity portfolio and its influence within the MNE follow an inverted U-shape and increase with the range of activities in parallel with subsidiary integration and independence in the MNE. Thus, a dependent specialised subsidiary (i.e., a subsidiary that is mainly a supplier of commodities) will have limited influence in the MNE and will be less likely to engage in entrepreneurial behaviour. The degree of influence in the MNE increases with the range of activities and degree of integration. For example, a subsidiary with a centre-ofexcellence status is likely to have the greatest influence on MNE strategy within a given area. These specialised subsidiaries are more likely to be Subsidiary’s influence within the MNE Dependent specialized subsidiary

Full-fledged subsidiary

Isolated subsidiary

The extent of the subsidiary’s activity portfolio

Figure 20.1 The relationship between the subsidiary’s activity portfolio and its influence within the MNE.

Digital transformation in MNEs  211 entrepreneurial due to their central position in the MNE – and their wider network – and their dependence on the resources and activities of other subsidiaries. The downward slope of the curve includes isolated subsidiaries, which are independent of, autonomous and alienated from the MNE network. While their decentralised governance could be considered a benefit, they run the risk of sell off or closing down by the MNE. Isolated subsidiaries are specialised but have little overlapping knowledge with other MNE units (Monteiro et al. 2008), which reduces both their possibility to be entrepreneurial and their influence in the MNE. 20.2.2 Relational dimensions of internal embeddedness The relational dimension of internal embeddedness is based on the subsidiary managers’ interpersonal network. This dimension of embeddedness has been examined in terms of subsidiary managers’ activities (O’Brien et  al. 2019) and middle managers’ socialisation (Rouleau and Balogun 2011) and in relation to social exchanges, knowledge transfer and interpersonal trust (Lai et  al. 2014). Informal relational attributes are advantageous in terms of the activities assigned to the subsidiary (Gillmore et al. 2020). However, the informal mechanism of the MNE strategy has received less attention compared to the formal control and coordination of the MNE in influencing the HQ strategy related to the delegation of value-adding activities to a subsidiary. Informal relations, such as social interactions among the managers of different subsidiaries, promote knowledge sharing and learning within the MNE (Noorderhaven and Harzing 2009). Interactions among subsidiary managers diffuse knowledge about employees and innovation opportunities and promote collaboration and integration in the MNE. The interpersonal networks of subsidiary managers affect the MNE’s ‘strategic navigation’ (Tasheva and Nielsen 2020). Subsidiary managers’ informal personal interactions with MNE (Garcia-Pont et  al. 2009) involve exchanges of information and knowledge beyond subsidiary boundaries and contribute to their informal networks that enable internal embeddedness in the MNE. Subsidiary managers’ informal interpersonal networks affect the level of entrepreneurialism in the subsidiary (O’Brien et  al. 2019); they identify opportunities and challenge the MNE’s assignment of responsibilities and activities. The interpersonal networks of subsidiary managers can influence how information flows through the MNE and the position of the subsidiary vis-à-vis other subsidiaries. Most individuals prefer to interact with individuals they know and trust (Powell 1990). From a social network perspective, the number of links among subsidiary managers in the MNE network is related to influence. Thus, a favourable position of the subsidiary managers can be defined by the number of links they have with other managers.

212  Noushan Memar et al. However, some finer structural measures put greater emphasis on links to the ‘right’ people and the ‘right’ resources or a bridging or brokerage network position.

20.3 Internal embeddedness in the context of digital transformation The two dimensions of internal embeddedness provide different opportunities for entrepreneurial behaviour and benefit from different forms of digitalisation. The internal production network defines how much influence the subsidiary has in the MNE. The internal production network is related directly to the subsidiary’s activity portfolio, which, in turn, is related to different forms of dependencies. In some cases, MNE digital transformation allows the implementation of digital systems such as Enterprise Resource Planning (ERP) and standardised global IT platforms (Ekman et al. 2020). By enabling efficient information exchange and reducing uncertainty, their implementation, primarily, increases the MNE’s ‘high-tech’ capability. Their adoption in the internal production network increases information transparency and connectivity, which increases HQ control and subsidiary interdependence and, intuitively, reduces the subsidiary’s ability to influence the MNE. The relational dimension of internal embeddedness, based on the interpersonal networks of subsidiary managers, can increase the influence of the individual subsidiary due to status and access. Digital transformation in MNEs to enhance ‘high-touch’ capabilities, for example, implementation of collaboration platforms, video communication and internal social media, can enable and boost relational embeddedness. This type of digitalisation can facilitate interpersonal networking across the MNE which can increase subsidiary influence in the HQ. The structural and relational dimensions of internal embeddedness may be counterbalancing. The subsidiary manager could be considered a middle manager (Rouleau and Balogun 2011), who negotiates (upwards) with the HQ, collaborates with other subsidiaries and external partners (sideways) and manages the subsidiary operations (downwards). In this case, while digitalisation is focused on high-tech interaction capabilities, this can limit managers’ entrepreneurial activities, whereas solutions focused on hightouch interaction (e.g., communication systems to support interpersonal interactions) would support managers’ personal networks. The subsidiary manager’s interpersonal network plays an enabling role, and high-touch interactions increase the possibility to influence the MNE. Figure 20.2 depicts this updated influence based on digital transformation and its effect on internal embeddedness. Subsidiary influence, based on the assigned portfolio of activities, is the baseline. The two grey curves show

Digital transformation in MNEs  213 Subsidiary’s influence within the MNE

High touch digital transformation

Full-fledged subsidiary

Dependent specialized subsidiary

Isolated subsidiary

High tech digital transformation The extent of the portfolio activities of a subsidiary

Figure 20.2 The impact of digital transformation on subsidiary influence through internal embeddedness.

how the influence shifts with digitally transformed internal embeddedness. The subsidiary manager’s interpersonal network is the relational dimension of internal embeddedness, shown by the upper grey curve, which increases the subsidiary’s influence within the MNE. The grey area above the black curve is the manoeuvring space created by relational embeddedness and boosted by high-touch digital transformation. The lower grey curve represents reduced subsidiary influence stemming from high-tech digital transformation, where digital control of some activities reduces the subsidiary’s influence in the MNE. Figure 20.2 shows that the structural and relational dimensions of internal embeddedness can be counterforces in relation to subsidiary influence. Figure 20.2 has implications for our three subsidiary types. Digital transformation may reduce the influence of a dependent specialised subsidiary based on relational embeddedness, when compared to a full-fledged subsidiary. The uncertainty related to the lack of integration and low baseline influence of the isolated subsidiary may be mitigated by its specialist knowledge. Although all three types of subsidiaries, to different degrees, have the potential to increase their influence through relational embeddedness, this can be enhanced by technologies that support personal relations. Subsidiaries whose influence depends on their structural embeddedness as gatekeepers, for example, might experience reduced influence if technology takes over some of their responsibilities and control.

214  Noushan Memar et al.

20.4 Added complexity for the subsidiary manager We have discussed how subsidiaries are affected by digital transformation of MNEs. Digital transformation enables innovative business models, whose implementation might be difficult for subsidiary managers (Hess et al. 2016). Internal embeddedness is important, with or without digitalisation, but digital transformation adds complexity to subsidiary managers’ activities and roles. Digital transformation strategy forces managers to exploit existing capabilities and develop new capabilities in order to remain relevant in the organisation and the market (Warner and Wäger 2019). The MNE business model means that subsidiary managers must compete to get more resources for their subsidiaries, which, in turn, requires them to have some influence on the MNE’s strategic decisions. We discussed internal embeddedness in relation to subsidiary’s influence in the MNE, and we argue that subsidiary managers should leverage their interpersonal relationships to increase their influence over digital transformation in the MNE. The digital transformation strategy chosen matters for the MNE. Subsidiary managers need to assess the organisational position and current activity portfolio of their subsidiary and ensure that their activity portfolio and capabilities are in alignment with the MNE’s high-tech interaction capabilities. Finally, subsidiaries that fail to keep up with high-tech interaction capabilities of the MNE during the digital transformation strategy will need to rely on their managers’ interpersonal networks, which is a risky strategy. Subsidiary managers’ interpersonal networks require repeated interactions with both HQ and sister subsidiaries. If the number of social exchanges is reduced, it then reduces the strength and value of the network. High-touch interaction capabilities will be lost if the subsidiary manager moves to another position or retires. Managers of isolated subsidiaries lack knowledge about the MNE’s operations, which makes it more difficult for them to have any influence over the HQ strategy. Digital transformation in MNES emphasises the importance of the dimensions and dynamics of internal embeddedness and their dual effects on subsidiaries.

20.5 Takeaway Digitalisation can transform MNEs. Subsidiary influence in the MNE depends on two dimensions of internal embeddedness, which are affected in different ways by digital transformation. Structural embeddedness, based on the portfolio of activities assigned to the subsidiary, can be weakened by high-tech digital transformation, which can shift control and information from the subsidiary to an information system. Relational embeddedness, based on subsidiary managers’ interpersonal networks, can be strengthened by high-touch digitalisation, which enhances the opportunities to connect with others in the MNE. Consequently, while digital transformation offers opportunities for MNEs and reduces the impact

Digital transformation in MNEs 215 of geographical distance, it can also change the fundamental balance of power and autonomy, including functional and decision-making independence, within the MNE, between the subsidiary and the MNE, and between different subsidiaries; the possibility of such a pitfall or imbalance to exist must be considered by both the HQ and subsidiary managers as it can warrant both negative and positive effects on the performance of both the MNE and the subsidiaries.

Acknowledgement The authors gratefully acknowledge the financing of this project by, in parts, Eskilstuna Municipality through the project Sörmlandskontraktet, the Swedish Research School of Management and IT, and Handelsbankens forskningsstiftelser, project P20-0154.

References Ambos, B. and Schlegelmilch, B. 2007. Innovation and control in the multinational firm: A comparison of political and contingency approaches. Strategic Management Journal 28(5): 473–486. Ambos, T. C., Andersson, U. and Birkinshaw, J. 2010. What are the consequences of initiative-taking in multinational subsidiaries? Journal of International Business Studies 41(7): 1099–1118. Andersson, U., Forsgren, M. and Holm, U. 2001. Subsidiary embeddedness and competence development in MNCs: A multi-level analysis. Organization Studies 22(6): 1013–1034. Andersson, U., Forsgren, M. and Holm, U. 2015. Balancing subsidiary influence in the federative MNC: A business network view. In Forsgren, M., Holm, U. and Johanson, U. (Eds.), Knowledge, Networks and Power: The Uppsala School of International Business. London: Palgrave Macmillan: 393–420. Contractor, F.J., Kumar, V., Kundu, S.K. and Pedersen, T. 2010. Reconceptualizing the firm in a world of outsourcing and offshoring: The organizational and geographical relocation of high‐value company functions. Journal of Management Studies 47(8): 1417–1433. Dellestrand, H. 2011. Subsidiary embeddedness as a determinant of divisional headquarters involvement in innovation transfer processes. Journal of International Management 17(3): 229–242. Ekman, P., Thilenius, P., Thompson, S. and Whitaker, J. 2020. Digital transformation of global business processes: The role of dual embeddedness. Business Process Management Journal 26(2): 570–592. Ekman, P., Dahlin, P., Erixon, C. and Thompson, S. 2021. Exploring “high tech” and “high touch” interaction capabilities: Aligning the IT portfolio with customer and supplier relationships. Information Technology & People 34(2): 862–886. Garcia‐Pont, C.J., Canales, I. and Noboa, F. 2009. Subsidiary strategy: The embeddedness component. Journal of Management Studies 46(2): 182–214. Gillmore, E., Andersson, U. and Memar, N. 2018. How subsidiaries influence innovation in the MNE value chain. Transnational Corporations 25(1): 73–100.

216 Noushan Memar et al. Gillmore, E., Andersson, U. and Ekman, P. 2020. The enduring effects of relational attributes on subsidiary evolution after mandate loss. Global Strategy Journal, in press, https://doi.org/10.1002/gsj.1391. Hess, T., Matt, C., Benlian, C. and Wiesböck, F. 2016. Options for formulating a digital transformation strategy. MIS Quarterly Executive 15(2): 123–139. Lai, C., Singh, B., Alshwer, A.A. and Shaffer, M.A. 2014. Building and leveraging interpersonal trust within and across MNE subsidiaries: A social exchange perspective. Journal of International Management 20(3): 312–326. Monteiro, L.F., Arvidsson, N. and Birkinshaw, J. 2008. Knowledge flows within multinational corporations: Explaining subsidiary isolation and its performance implications. Organization Science 19(1): 90–107. Nell, P.C., Ambos, B. and Schlegelmilch, B.B. 2011. The MNC as an externally embedded organization: An investigation of embeddedness overlap in local subsidiary networks. Journal of World Business 46(4): 497–505. Noorderhaven, N. and Harzing, A.-W. 2009. Knowledge-sharing and social interaction within MNEs. Journal of International Business Studies 40(5): 719–741. O’Brien, D., Scott, P.S., Andersson, U., Ambos, T. and Fu, N. 2019. The microfoundations of subsidiary initiatives: How subsidiary manager activities unlock entrepreneurship. Global Strategy Journal 9(1): 66–91. Powell, W. W. 1990. Neither market nor hierarchy: Network forms of organization. Research in organization behavior 12: 295–336. Rogers, D.L. 2016. The Digital Transformation Playbook: Rethink Your Business for the Digital Age. New York: Columbia University Press. Rouleau, L. and Balogun, J. 2011. Middle managers, strategic sensemaking, and discursive competence. Journal of Management Studies 48(5): 953–983. Tasheva, S. and Nielsen, B.B. 2020. The role of global dynamic managerial capability in the pursuit of international strategy and superior performance. Journal of International Business Studies. https://doi.org/10.1057/s41267-020-00336-8. Tate, W.L., Lisa, M., Ellram, L.M. and Gölgeci, I. 2013. Diffusion of environmental business practices: A network approach. Journal of Purchasing and Supply Management 19(4): 264–275. Warner, K.S.R. and Wäger, M. 2019. Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal. Long Range Planning 52(3): 326–349. Yamin, M. and Andersson, U. 2011. Subsidiary importance in the MNC: What role does internal embeddedness play? International Business Review 20(2): 151–162.

21 Understanding information system outsourcing in the digital transformation era The business-relationship triad view Cecilia Erixon and Peter Thilenius Digital transformation has brought about a number of challenges for information system (IS) outsourcing. IS outsourcing occurs when a firm allocates the management of their IS, consisting of information technology (IT)-based processes, services and so on, to an external actor – an IS provider. Firms have come to realise, due to their digital transformation or their starting to digitally transform, that ISs are enablers of change and that IS outsourcing is more integrated with the business strategy than ever before (Dibbern and Hirschheim 2020). Thus, IS outsourcing cannot be managed or studied separate from the firm’s business context. The business context of firms today means using various IT and IS for the exchange taking place in the business relationships with customers and suppliers. Furthermore, as firms outsource the management of these information technologies and systems to IS providers, they are passing over some of the actual control of the exchange that takes place in their business relationships. In essence, the business relationship between the firm and one of its customers includes a third party. When addressing IS outsourcing in the context of a business relationship with a certain customer, the setting should consist not only of the firm and its customer but also involve a third actor, that is, the IS provider. Against this backdrop, this chapter offers a complementary view on how to approach and analyse IS outsourcing and focuses on one of a firm’s counterparts – the customer. The view offered emphasises the context of business by introducing the business-relationship triad view on IS outsourcing. As indicated above, a firm’s outsourcing of IS can, in this day and age, almost be seen as the ‘new normal’ (Karimi-Alaghehband and Rivard 2020). But even though we now find IS outsourcing to be the ‘new normal’, both firms and researchers still struggle with understanding how to manage this outsourcing situation successfully. Throughout the years, researchers have strived to address the challenges that come with managing IS outsourcing, often starting from the strategic perspective of a single firm. In other words, the crucial managerial question has been outlined as the conglomerate strategic decisions based on (1) whether to outsource or not; (2) what to outsource; DOI: 10.4324/9781003111245-21

218  Cecilia Erixon and Peter Thilenius and (3) to whom to outsource, that is, selecting the ‘right’ outsourcing partner. The scenery for these strategic decisions is the strengthening of the single firm’s strategic position vis-à-vis its competitors; that is, the objective is to find the path to competitive advantage. In line with strategic management thinking, the relationship with the outsourcing partner is understood from the contractual agreement perspective, where the protection of the outsourcing firm’s competitive advantage is the key issue. To overcome potential failures of the outsourcing arrangements, companies have focused on tightening their contracts and their service-level agreements (SLA), where certain aspects of the service are specified, such as quality, responsibility and so on. However, this strategy has not been effective; instead, the main success factor for IS outsourcing is strongly correlated to the relationship between the IS provider and its customer and not tight contracts and SLAs (Wolverton et al. 2020). In the digitalised business setting, IT capability cannot simply be outsourced to a partner and protected through contractual arrangements. Rather, IT capability and associated activities outsourced to and performed by the IS provider are incorporated in the firm’s business relationships with customers and, hence, inseparable. This calls for a view on IS outsourcing that recognises the digitalised business relationship between the firm and its customer as including the IS provider as a third actor. It is in business relationships with other actors, such as customers, that IS is, to varying extent, incorporated and used. Studies have shown that the management of the IS that is part of digitalised business relationships becomes highly important to consider together with the management of the digitalised business relationship (Ekman et al. 2020). Therefore, in contrast to the view of the firm’s outsourcing partnership with an IS provider as a problem of contractual arrangements, this chapter presents an alternative analytical view. The business-relationship triad, founded in the business relationship perspective (Vedel, Holma and Havila 2016), allows for a deeper understanding of the business situation that outsourcing entails for the digitised relationship of the outsourcing firm, the firm’s customers and the IS provider. Vedel, Holma and Havila (2016) hold that from a managerial perspective there are far too few examples of guidance that deal with analysing business relationships in their context, and they stress that it is of great importance for managerial practice to get help in doing these analyses. In this chapter, we address this research gap by discussing how IS outsourcing forms different business-relationship triads and how the three involved actors – customer, supplier and IS provider – are associated and connected. This setting allows for a deeper understanding of strategic decision-making and thereby allows for generating managerial implications. Thus, the objective of this chapter is to provide the analytical framework of the business-relationship triad and place the challenges of the strategic decisions relating to IS outsourcing in a new light. In the next sections, we overview the accepted view of IS outsourcing, followed by a discussion on IS outsourcing in different business-relationship triads. We conclude the chapter by

Information system outsourcing  219 summarising the research and the managerial implications of the proposed framework.

21.1 IS outsourcing and digitalisation in business relationships Modern IS outsourcing is often traced back to when Kodak agreed in 1989 to outsource its data centre business to IBM (Könning, Westner and Strahringer 2019). Compared with other forms of outsourcing, such as accounting or cleaning services, IS outsourcing is more complex since IS is integrated in and impacts and shapes most organisational processes in one way or another (Kern and Willcocks 2002). To make matters more complex, IS is not homogenous in its character but comprises a variety of IT (information technology) activities where the IT capabilities also progress at a dizzying pace. This complexity makes IS outsourcing full of uncertainty when making any IS sourcing decision (Willcocks and Lacity 2009). IS outsourcing can be defined as the process in which one focal firm entrusts the facility of IT-enabled business processes, practices and other services to an external actor (Han and Mithas 2013; Kern and Willcocks 2002). These ISbased business activities can be both intra- and inter-organisational in their character depending on what services the IS is utilised for. When focusing on interorganisational ISs, there are several different ISs that bind a firm with other actors such as its customer or suppliers, and thus the ISs are part of the business relationships (Ekman et al. 2020). Some business relationships, for example, have connected the two actors’ enterprise systems and even automated some of the exchanges that take place in the business relationship; this type of business relationship can be seen as a highly digitalised business relationship while others use emails for communication, which is another way of digitalising the exchange taking place in the business relationships. From the early beginnings, IS outsourcing was seen as a cost-cutting tool but has changed to become an integral part of the firm’s overall IT/IS strategy. For many years, businesses as well as research have sought to address the challenges of IS outsourcing management at different firm levels and tried to identify ways for achieving success in IS outsourcing (Lacity et al. 2010; Liang et al. 2016). When IS outsourcing is incorporated into a coherent system of different processes around the IS and business processes outsourced to the IS provider, it is necessary to build reliable interactions and successful relationships between the outsourcing firm and the IS provider (Bharadwaj, Saxena, and Halemane 2010; Kern and Willcocks 2002). Thus, research in IS outsourcing has shown that good relationships significantly contribute to the success of IS outsourcing (Qi and Chau 2012). In addition, according to Claybaugh and Srite (2009), unsuccessful relationships raise the cost of outsourcing by 70% compared with successful relationships. With that in mind, the importance of understanding the relationship becomes obvious. The research in IS outsourcing have up until today has mostly focused on the IS provider and the outsourcing firm’s relationship involving just the

220  Cecilia Erixon and Peter Thilenius two parties. By adding an actor and viewing business relationships with a network approach, like research on for example supply chain management, the triad can be used as the unit of analysis. As a result, a more holistic view on IS outsourcing would also be to consider the outsourcing firm’s relationships that use some of the ISs when trying to understand the phenomenon of IS outsourcing. By also considering the business relationship, where the IS is employed for exchanges, and thus taking a business-relationship triad standpoint, we will achieve increased understanding of the IS outsourcing in its context.

21.2 IS outsourcing as business-relationship triads Business relationships have been extensively studied in a vast variety of settings. Nevertheless, most studies view the relationship as a dyad (Holma 2010). The business relationship is thereby commonly approached as a dyad, that is, the relationship involves two parties – a seller and a buyer. This, however, means constraining the analytical frame to comprise just two actors in the ongoing reciprocal exchange, forfeiting the opportunity to gain a full understanding of situations with additional actors involved in the exchange, as in the case of IS outsourcing to an IS provider. Furthermore, the dyad view of business relationships often bases its reasoning in what Bagozzi (1975) denotes restricted exchange, leading to a basic assumption of maintaining equality and mutuality between the actors. This assumption can be questioned in the setting of IS outsourcing, where the exchange between the three actors bears a different character and could include less benevolent and even harmful effects. The outlined setting of digitalised business relationships involving the outsourcing of IS to a third actor thus calls for additional views. There are examples of circumstances where a business relationship, due to the character of the business, involves additional parties. One example is international business-relationship triads where an intermediary, in the form of a local representative in a foreign market, is part of the social interaction necessary for various business undertakings (Havila, Johanson and Thilenius 2004), and one more recent example is viewing transport service as triads to understand the conditions for change at the micro level (Andersson et al. 2019). The outsourcing of IS to an IS provider can, from a simplistic technical viewpoint, be seen as only a transfer of locus for the activities the IS involves, but de facto means that parts of the exchange of the business relationship is carried out through the third party, outside the dyad. Thus, parts of the exchange of the business relationship are not restricted to the firm– customer dyad due to outsourcing to the IS provider. The exchange of the business relationship that is carried out through the means of information technologies is executed through and contingent on the different systems in possession of the IS provider. This inevitably includes the IS provider as a third actor in the business relationship through complex exchange (Bagozzi

Information system outsourcing  221 1975). IS outsourcing to a third party hence makes the understanding of the patterns of complex exchange among the three actors crucial for the management of the business. The three actors’ relationships or triads can on a general level be defined as follows: “When relationships between three directly or indirectly associated actors are connected, the structure constitutes an inter-organizational triad” (Vedel, Holma and Havila 2016, p. 142). The framework, by Vedel, Holma and Havila (2016), provides a guide for studying triads, and they suggest areas such as business relationships, supply chain, marketing channels, logistics and service management. Similarly, business-relationship triads (Havila, Johanson and Thilenius 2004) are formed by the inclusion of providers of IS for information processing in the business relationship. Information processing in business relationships involves all aspects of ongoing exchange related to economic, social, technological and informational requirements. The common view of business relationships is constituted by two actors interacting through various activities to exchange resources. The ongoing exchange forms the business relationship atmosphere commonly explained through concepts such as trust, commitment, adaptations, cooperation and mutuality. As indicated above, inclusion of a third actor in a business-relationship triad increases the complexity in the exchange among the actors, and the effects on the atmosphere are uncertain. In essence, in the accepted view the developed long-term oriented relationship’s atmosphere forms the setting for future interactions and exchange of the two actors; including a third forms a different context for its development. In the case of IS outsourcing, the firm and its customer are complemented by a third actor in the form of the IS provider of the outsourced IS, thereby forming a business-relationship triad.

21.3 IS outsourcing business-relationship triad framework Vedel, Holma and Havila (2016) found that there is a lack of clarity in the use of the concept of triads. To address this, they developed a framework that categorises triads into four different types on the basis of internal cohesiveness and ability to act as an entity. To be able to use this framework, the actors need to be directly or indirectly associated and the relationships need to be connected; these two are mandatory while the added features of degree of cohesiveness and their ability to act as an entity are not. The degree of internal cohesiveness in triads can be defined as either high or low. Triads have a high degree of internal cohesiveness where the actors are directly linked and the ties between the actors are strong. Low cohesiveness is caused by one or a combination of the following: (1) an open triad, (2) weak ties within the triad or (3) an open triad with weak ties. The degree of cohesiveness is used in the framework to distinguish between triads depending on the extent to which they act as a unit towards their environment. Triads where the cohesiveness is low can also function as units. This means that closure is neither a necessary nor a sufficient condition for a triad to

222  Cecilia Erixon and Peter Thilenius function as a unit. When a triad acts as an entity, it means that it functions as a single unit in its interaction with its surrounding and the actors constituting the triad do not act independently of one another. The framework still does not support a refined analysis of variation within each category, but four different types in the framework can be outlined. The group-like triad is closed, and ties must be strong, and hence there is high cohesiveness. There are strong ties and direct connections between all three actors; they usually have direct connections with one another and also have meetings together. In the set of connected actors the cohesion ability is low, the ties between the three actors are weak and all three actors are not necessarily directly linked to one another. Thus, the actors do not or only rarely meet one another. The group-like triad and the set of connected actors do not act as a unit of business outside the triad. In the third and fourth types of triad, the actors act as a unified entity but act in different ways within that entity. The coalition has a high degree of cohesion and relations are direct. In a coalition, a power-balancing strategy involves formal and direct associations among all actors that have been directly linked. Actors in a coalition are directly linked or associated, and the structure is characterised by closure and cohesion. A high degree of cohesion is due to closed and strong bounds. The hub-driven strategic network has low cohesion, and all partners in a hub-driven strategic network do not need to be directly linked to one another, and the exchanges can be managed separately by the hub firm. The ties in hub-driven strategic networks can be strong, but there is no closing of the triad. In other words, both coalition and hub-driven strategic networks act as an entity but in different ways. If it is an open triad then the ties do not need to be weak. An open triad can be of a highly specialised structure, which basically consists of close and committed ties, which is sometimes the case in long-term supplier–distributor–customer relationships. When applying the triad framework (see Figure 21.1) to IS outsourcing, different managerial implications can be made following the four types of business-relationship triads. 21.3.1 Group-like IS outsourcing business-relationship triad A group-like business-relationship triad is characterised by being closed; that is, all the three actors have ties and the ties among them are strong. The cohesiveness is thereby high in the triad. The strong ties and direct connections between all three actors imply that the firm, its customer and the IS provider have direct connections with one another and also have meetings together. In the IS outsourcing situation, this means that the outsourcing concerns ISs that are engaged in day-to-day interaction and close reciprocal exchange among all the three actors. The complexity of the exchange pattern in the group-like business-relationship triad is high and most likely intense, and the ISs used are central to the operations. Nevertheless, the three actors are acting independently in the business-relationship triad, which provides

Information system outsourcing  223 Degree of internal cohesiveness High degree Indicated by closure and strong ties

No

Act as an entity

Yes

Low degree Indicated by non-closure and/or weak ties

Group-like triad  IS employed in day-to-day interaction  Reciprocal exchanges between all three actors  Intense interaction  The IS used is central for business  All three actors act independently

Set-of-connected-actors  The three actors are not necessarily directly linked  Limited exchange between the customer and the IS-provider  All three actors rearly or never meet  Exchanges between actors are managed separately

Coalition  All three actors have direct and extensive exchange  The triad acts as an entity to its surrounding  High degree of trust and interdependence  Difficult to replace one of the actors  High investments forming strong commitment

Hub-driven-strategic-network  No necessary direct interaction  Exchanges between actors can be managed separately  All actors might meet  Interaction with the IS-provider indirectly impacts the interaction with the customer and vice versa

Figure 21.1 Four types of IS outsourcing business-relationship triad (inspired by Vedel, Holma and Havila 2016: 144).

an opening for adverse effects to emerge due to the connection effects of the exchanges not being firmly based in equality and mutuality. This implies a difficult and hard-to-predict situation for managing IS outsourcing. 21.3.2 Set-of-connected-actors IS outsourcing business-relationship triad In a set-of-connected-actors business-relationship triad, the cohesion among the actors is low as the ties are weak and all the three actors are not necessarily directly linked to one another. The exchange is carried out between the firm and the customer and between the firm and the IS provider but not necessarily between the IS provider and the customer. Thus, the actors either do not meet at all or only rarely meet; hence, the possibility for sharing opinions on the functionality of the ISs used is less. In some IS outsourcing situations that might not be a problem, and, thus, the business exchanges can be managed separately. But in other cases, the non-existing exchanges with all actors in the set-of-connected-actors business-relationship triad may hinder the possibility to enhance the digitalisation in exchange with the customer.

224  Cecilia Erixon and Peter Thilenius 21.3.3 Coalition IS outsourcing business-relationship triad In a coalition business-relationship triad, the exchanges are direct, the ties are strong, and the cohesiveness is high. The direct exchanges means that the firm, the customer and the IS provider have strong links with one another, through meetings and other cooperation opportunities. The stronger ties indicate that there are more intense exchanges going on in the triad. This business-relationship triad is closed in its character, and the IS used is of significance to the business of the firm and its customer. To its surroundings, the triad acts as an entity, which indicates a high degree of trust and dependence in the triad to be able to be so united. The dependence on one another, with strong ties in this triad, also indicates that it might be difficult from a managerial point of view, for example to change one of the actors, either it be the customer or the IS provider, since there have usually been a lot of investments, in both time and money, in coalition business-relationship triads. 21.3.4 Hub-driven strategic network IS outsourcing businessrelationship triad In a hub-driven-strategic-network business-relationship triad, the partners do not need to be directly linked to one another, making it possible to manage the exchanges in the triad more separately. The triad has low cohesion, and the ties might be strong in the triad but the triad is not closed. The indirect connection but no closure indicates that the three actors – firm, customer and IS provider – might meet at times but there is no necessity to do so, and in some cases they may never meet, since the firm can manage the business totally separately. However, the exchanges with the IS provider indirectly impact the exchanges with the customer and vice versa, so even though these can be managed separately it is of importance for the managers to understand their impact on one another.

21.4 Concluding remarks and managerial implications As addressed in this chapter, almost every firm today has in some way digitalised one or several of their business relationships using different information systems (ISs) to support different business exchanges. Some of the firms are right now in the process of digital transformation. In the process of digitalisation or digital transformation, most companies let a third party, the IS provider, manage the ISs, thus handing over the controlling of some of the exchanges to someone else. Since the IS provider is directly or indirectly part of the firm’s business relationships where the ISs they manage are used, the business-relationship triad view presented in this chapter puts forward and helps illustrate their inseparability even when a firm manages the business relationships separately. Thus, when applying the business-relationship

Information system outsourcing  225 triad view to IS outsourcing, it becomes evident how closely knit the IS provider is with the firm’s business and how dependent the firm and its customer are on the outsourcing partner. In the era of digital transformation, IS takes a more active role than a being a passive object that can be managed apart from a firm’s business. This suggests that the view presented might be one crucial component in understanding IS outsourcing. To further the research, an empirical study of several business-relationship triads consisting of an outsourcing firm, its customer (or supplier) and its IS provider could provide more evidence. The evidence could enable the contribution of knowledge to research on both the growing business-relationship triad and IS outsourcing. This could expand the knowledge concerning how intertwined the IS provider really is in a firm’s business relationships. IS outsourcing research could also benefit from the triad view on IS outsourcing in the multisourcing area and, also, as stressed by Könning, Westner and Strahringer (2019), from a relationship characteristic standpoint, to understand the drivers for innovation in IS outsourcing. A business-relationship triad view on multisourcing might let the IS providers see the impacts they have on one another in new ways, allowing for new strategies. Managers who employ the business-relationship triad view on their business can perhaps better identify how the IS provider influences their other business relationships. But they can also gain insights into how to manage this in a more conjoined manner and not as separated business relationships. The presented view, founded in Vedel, Holma and Havila (2016), could be a tool for the manager to identify the IS provider’s direct or indirect involvement in other business relationships. In the digital transformation era, it is of importance for managers to view IS outsourcing to a third party as not separated but as an integral part of their business relationships with customers and suppliers who in some sense can be the key for the success of their transformation.

21.5 Takeaways Digital transformation poses new managerial challenges for IS outsourcing. To understand the impact of IS providers in business relationships, a tool to further understand different forms of triads that can be manifested in a firm and its business relationships is needed. By managing IS outsourcing through a business-relationship triad lens, the firm’s IS strategy and IS outsourcing decisions will be more contextually adapted, providing the ground for stronger competitive positions, not only for the outsourcing firm but also for the whole IS outsourcing business-relationship triad. This chapter stresses that in the setting of IS outsourcing, it is important to understand that (1) the IS provider is recognised as a third actor in the firm’s business relationships with its customer and (2) the degree of internal cohesiveness and acting as an entity of the digitalised business-relationship triad forms the base for an analytical frame, where (3) different types of business-relationship

226 Cecilia Erixon and Peter Thilenius triads – (a) Group-like, (b) Set of connected actors, (c) Coalition and (d) Hubdriven strategic network (see Figure 21.1) – impose different managerial challenges for the firm.

Acknowledgement The work in this chapter was partly financed by Eskilstuna Municipality though the project Sörmlandskontraktet.

References Andersson, D., Dubois, A., Eriksson, V., Hulthén, K. and Holma, A. 2019. The transport service triad: A key unit of analysis. Journal of Business and Industrial Marketing 34(1): 253–266. Bagozzi, R. 1975. Marketing as exchange. Journal of Marketing 39(4): 32–39. Bharadwaj, S., Saxena, K. and Halemane, M. 2010. Building a successful relationship in business process outsourcing: An exploratory study. European Journal of Information Systems 19(2): 168–180. Claybaugh, C.C. and Srite, M. 2009. Factors contributing to the information technology vendor-client relationship. Journal of Information Technology Theory and Application 10(2): 19–38. Dibbern, J. and Hirschheim, R. 2020. Introduction: Riding the waves of outsourcing change in the era of digital transformation. In Hirschheim, R., Armin, H. and Dibbern, J. (Eds.), Information System Outsourcing: The Era of Digital Transformation, Cham: Springer, 1–20. Ekman, P., Dahlin, P., Erixon, C. and Thompson, S. 2020. Exploring ‘high tech’ and ‘high touch’ interaction capabilities: Aligning the IT portfolio with customer and supplier relationships. Information Technology and People 33. ahead-of-print, https://doi.org/10.1108/ITP-09-2017-0317. Han, K. and Mithas, S. 2013. Information technology outsourcing and non-IT operating costs: An empirical investigation. MIS Quarterly 37(1): 315–331. Havila, V., Johanson, J. and Thilenius, P. 2004. International business‐relationship triads. International Marketing Review 21(2): 172–186. Holma, A. 2010. Relationship development in business triads – Case studies in corporate travel management. Journal of Business Market Management 4(2): 73–90. Karimi-Alaghehband, F. and Rivard, S. 2020. IT outsourcing success: A dynamic capability based model. Journal of Strategic Information Systems 29(1). https:// doi.org/10.1016/j.jsis.2020.101599. Kern, T. and Willcocks, L. 2002. Exploring relationships in information technology outsourcing: The interaction approach. European Journal of Information Systems 11(1): 3–19. Könning, M., Westner, M. and Strahringer, S. 2019. A systematic review of recent developments in IT outsourcing Research. Information Systems Management 36(1): 78–96. Lacity, M., Khan, S., Yan, A. and Willcocks, L. 2010. A review of the IT outsourcing empirical literature and future research directions. Journal of Information Technology 25(4): 395–433.

Information system outsourcing

227

Liang, H., Wang, J., Xue, Y. and Cui, X. 2016. IT outsourcing research from 1992 to 2013: A literature review based on main path analysis. Information & Management 53(2): 227–251. Qi, C. and Chau, P. 2012. Relationship, contract and IT outsourcing success: Evidence from two descriptive case studies. Decision Support Systems 53(4): 859–869. Vedel, M., Holma, A. and Havila, V. 2016. Conceptualizing inter-organizational triads. Industrial Marketing Management 57: 139–147. Willcocks, L. and Lacity, M. 2009. Outsourcing practice: The search for flexibility and control. In Willcocks, L. and Lacity, M. (Eds.), The Practice of Outsourcing. Houndmills: Palgrave Macmillan, 3–34. Wolverton, C. C., Hirschheim, R., Black, W.C. and Burleson, J. 2020. Outsourcing success in the eye of the beholder: Examining the impact of expectation confirmation theory on IT outsourcing. Information & Management 57(6). https://doi. org/10.1016/j.im.2019.103236.

22 Transforming the management/ profession divide The use of the red–green matrix in Swedish schools Anton Borell, Johan Klaassen, Roland Almqvist and Jan Löwstedt In many ways, the emergence of data processing and complex simulation tools has made organisational life easier. Information technology (IT) infrastructures have helped organisations bridge both physical and intraorganisational boundaries between functions with different interests, enabling new forms of coordination (cf. Kellogg et al. 2017). Digital technology offers organisations opportunities for both automation and ‘informating’ capabilities (Zuboff 1988). Thus, digital technology is supporting the standardisation of work while also enabling efficient information streams to measure performance. The importance of IT for establishing management and control structures in organisations should not be underestimated. The development of digital technologies has been intertwined with increased external influence over organisations, coordinated previously by professional principles. The drive for greater systematisation and rationalisation means that today’s professionals are expected to comply with formal rules and established written procedures rather than relying on their discretional judgements (Meyer and Rowan 1977; Evetts 2011). The increased demands imposed by external rules apply to public services such as education (Noordegraaf 2016). Digital technology has promoted the establishment of administrative infrastructures in schools to both standardise certain activities and allow the generation of performance information. However, it has been shown that although management initiatives in profession-driven organisations may be effective for changing administrative practices, different professional practices (Börjeson and Löwstedt 2017) may be more or less susceptible to external influence. Research on professional organisations (such as schools) suggests different possibilities to align different interests. On the one hand, it has been shown that these organisations are characterised by a strong divide between managerial and professional interests, which suggests that the alignment of these different worldviews will be difficult (e.g., Brignall and Modell 2000; Börjeson and Löwstedt 2017; Klaassen and Löwstedt 2020). On the other hand, some studies show how professionals are bridging between these worlds by applying ‘hybrid’ managerial and professional thinking, which DOI: 10.4324/9781003111245-22

The management/profession divide  229 allows them to move skilfully between these two spheres (Llewellyn 2001; Noordegraaf 2007). In relation to the exploitation of digital technology in schools, it is of interest, therefore, to identify the technology that, potentially, could influence both the administrative and professional spheres. This chapter discusses such a technology which spans across professional and managerial interests. It studies the application of an administrative tool in three Swedish elementary schools to explore the influence of a management technology on professional work. The red–green (RG) matrix was introduced to influence professional work by standardising organisational procedures. However, we show that in an elementary school context, achieving alignment between professional and managerial interests failed. Not only did the technology work to maintain the boundaries between these two views, it also worked to reinforce them through various modes of use that served the profession. This chapter shows that, unless underlying conflicts of interests are addressed, institutional interests may persist, or even be reinforced, with the introduction of a mediating technology based in managerial intentions. The chapter is organised as follows. It starts by conceptualising professional and managerial thinking as two forms of institutional logics (Section 22.1). Section 22.2 describes the case background and discusses the observations in the studied schools. Sections 22.3 and 22.4 provide concluding remarks and overall reflections on the digital transformation to management and information technology, and Section 22.5 provides key takeaways.

22.1 Using information technology to bridge two perspectives Since our aim is to examine a case of managerial intervention in professional work, we draw on two institutional logics (Friedland and Alford 1991; Thornton et al. 2012) in order to address the different interests affecting the reasoning within these groups. This perspective allows us to conceptualise people’s reasonings and actions as embedded in stabilised norms. First, we consider the professional logic, which is based on the idea that actors should be allowed to make discretionary judgements based on their access to expert knowledge (Abbott 1988). According to this logic, people decide about their courses of action based on the needs of individual clients, whose interests are believed to be protected and served by professional experts (Freidson 2001). Second, we consider the managerial logic, which describes actions that are focused on aspects such as efficiency and reporting requirements, which, it is believed, serve the organisation as a whole (Freidson 2001). In this case, expertise is based on organisational knowledge (typically reflected in hierarchical chains of command) rather than the knowledge acquired outside of the organisation through formalised education, for example (Freidson 2001). When these logics compete to guide organisational activity, this can promote conflict, involving each of the actors trying to impose their own logic on the other rather than making efforts to achieve an understanding

230  Anton Borell et al. and a compromise (Friedland and Alford 1991; Thornton et al. 2012). Thus, a logics perspective helps to explain both social actions and the ways that managerial interventions in professional work can trigger conflicts. We focus on a managerial intervention mediated by digital technology, which requires some discussion of the possibilities and limits of technology related to their inherent power to change. People deal with technology in different ways, depending not only on their perception of its physical features but also according to group norms (Leonardi and Barley 2010). In other words, organisational activity includes individuals’ actions, based on intentions embedded in social norms, and also the performances of the technology acting on their behalf, in ways that are enabled and limited by physical shapes and features (Leonardi 2012). In goal-oriented organisational activity, the social and material are often intertwined to a degree that it makes no sense to even keep them analytically separate (cf. Leonardi 2013), although we will do so for one important reason: technologies are easy to fool! Although technologies can handle increasingly advanced tasks, they are still tools that perform according to what they are told. What is important here is that they perform according to the intentionality of people (Leonardi 2012). For actors working across institutional boundaries deemed impermeable, technology, potentially, can provide the means to achieve more or less stable common ground (cf. Star and Griesemer 1989; Leonardi et al. 2019). This view suggests that the actors might not only be adhering to a singular logic; they might be able to become ‘hybridised experts’ and communicate skilfully between two different spheres (Llewellyn 2001; Noordegraaf 2007). The introduction of a common technology should have the potential to bridge the gap between two different institutionalised interests.

22.2 Digitalisation in the Swedish school context In line with developments in other countries and other organisational contexts, the Swedish education system has been subject to increased pressure to adopt a managerial logic (Borell 2019). For instance, education has been subjected to an increased focus on performance measurement, quality assessments and documentation, each of which could be characterised as an attempt to govern schools according to a general management model (Sheridan et al. 2013). Some argue that this trend is challenging traditional professional ideals and is associated with greater administrative burdens and more standardisation of work (Larsson and Löwstedt 2020). Digitalisation is both a consequence and an enabler of these developments. For instance, IT has been touted as a means to improve school achievements. Previous attempts to introduce digital technology in educational practices have seen varied success (cf. Larsson 2004), but have been shown to be related to the imposition of standardised administrative functions such as formative assessments and quality reports (Skolinspektionen 2012). Most Swedish schools use some type of administrative IT system to

The management/profession divide  231 enable communication with various stakeholders (such as parents and governing bodies) and standardise routine activities to make them a part of the organisational IT infrastructure. Over the decades, digitalisation has progressed; its most salient effects have been manifested in administrative work based on the establishment of an organisational IT infrastructure. 22.2.1 The three schools: TechSchool, SubUrb and CityCentre Our analysis focuses on three Swedish elementary schools – TechSchool, CityCentre and SubUrb – all located in Stockholm. Despite this similar geographical location, the schools differ in their ownership and socioeconomic structures. TechSchool is part of a large corporate group; CityCentre and SubUrb are both public schools, located in areas with different socioeconomic conditions. Thus, the analysis is based on data from similar locations, but they span various forms of ownership. Later, we show that, despite these differences, the teachers in these schools use the technologies in fairly similar ways. This adds to the robustness of our findings. The case studies in this chapter are based on interviews and participant observation by two of the authors. They collected the information in parallel, between 2016 and 2019, from TechSchool (one author) and SubUrb and CityCentre (another author). This allowed the collection of data on all the schools while also allowing the authors to make in-depth observations and conduct interviews at each of the schools. 22.2.2 The red–green matrix To exemplify the digital transformations at the three schools, we use the RG matrix. In brief, this allows compiling and reporting of pupil achievements and serves as a way to allow the school to follow the current teaching and resources provided for certain pupils. Assigning a specific colour to individual pupils across subjects highlights their individual achievements in relation to nationally formulated goals. The visualisation uses the colours red and green, hence the name red–green matrix. Green indicates that the pupil is expected to achieve the certain goals related to a specific subject; red indicates that the pupil will fail unless something in the current teaching form changes. The schools also added blue, to signal an understimulated pupil and yellow to indicate a level between red and green. Figure 22.1 provides a fictive example. The rationales for implementing the RG matrix in their school practices varied across schools, but were related, overall, to systematic good quality work and individual adjustments – two of the requirements in the Swedish National School Act (SFS 2010). In relation to systematic good quality work, the RG matrix was intended to foster dialogue about quality among teachers, using the colours to discuss and identify the most effective methods for both individuals and subjects, as well as overall school performance. In relation to individual adjustments, the RG matrix linked school practices

232  Anton Borell et al.

Subject “A”

Subject “B” Subject “C”

Pupil “X”

Red

Green

Green

Pupil “Y”

Green

Green

Red

Pupil “Z”

Yellow

Red

Green

Figure 22.1 Example of an RG matrix. Source: Authors’ reconstruction.

to the failure categories of ‘extra adjustment’, which was a teacher responsibility, and ‘special adjustment’, which required administrative intervention. Thus, the RG matrix could be conceived as a technology aimed at identifying the need for and implementation of extra adjustment and special adjustment measures, in practice, based on the colours assigned and the related responsibilities. Overall, it was clear that the RG matrix had many intended forms of benefits for the schools. It could be used by the teachers for managerial-focused activities (e.g., more frequent reporting, standardised work, improved performance, holding professionals accountable for classroom activities) and also professional objectives (e.g., help for individual clients, knowledge sharing within the professional community, administrative accountability for resources). In this view, the RG matrix served as a potential technology to bridge across perspectives and enable a hybrid teaching practice responding to both professional and managerial logics. In the context of these expectations, we next examine use of the tool in teachers’ everyday work.

22.3 Professional use of the red–green matrix Our observations and our interviews with teachers and other school personnel showed that usage of the RG matrix differed from expectations. It was used only infrequently for managerial goals or to achieve hybridised managerial and professional logics understandings. It was used mostly to enforce professional ideals, which reinforced the professional–managerial boundary. We found that this reinforcement occurred because the matrix worked (i) to seal off communication flows from the managerial level to the teacher level and (ii) to influence managers by requesting for additional resources. These outcomes are discussed below. 22.3.1 Sealing off communication flows from managers to teachers The teachers used the matrix to exclude communication across professional– managerial boundaries in order to signal that the teachers had things under control and did not want any interference from the school administration.

The management/profession divide  233 This represented a failure of the technology to facilitate communication across boundaries and find compromises; it served only to reinforce professional autonomy. Nevertheless, there were variations across schools in relation to similar forms of communication. Teachers at the TechSchool focused on technological design and marked all pupils green while the CityCentre school teachers were more interested in protecting their autonomy and refused to use the matrix. Since both actions were designed to seal off communication flows from the administrative level down to the teacher level, we include both types of actions in this category. 22.3.2 Marking all pupils green Initially, the TechSchool did use the RG matrix. During meetings, teacher teams suggested it could be used to synchronise their knowledge about specific students. This suggests the potential for sharing best practice, in line with the managerial ideal of more efficient daily activities. However, it soon emerged that there was a great deal of scepticism about the tool. This suspicion was manifested by the perception that RG meetings were time-consuming and use of the matrix would involve even more teacher time and more administrative work. A red colour triggered an immediate response, requiring the a teacher analysis process, which resulted in more administrative work and the involvement of additional personnel who might question the teacher’s judgement. The distrust in the matrix was demonstrated, also, by the teachers questioning the effect of the RG matrix on individual pupils. Some teachers believed that students with needs were aware of their shortcomings and needs and marking them red served only to discourage them further. Overall, the RG matrix was associated with distrust. As a result, the teachers began to mark more pupils green to try to avoid most of these problems. A green colour meant less administrative work for the teacher because it did not require additional documentation and planning. It also reduced the need for communication with other organisational members, such as the student health service, and left the teacher free to make their own assessment of individual pupils. Finally, being marked green reduced the problems for the individual student and avoided the potentially negative effect of being reminded about shortcomings. Overall, a green marking served the professional goal of maintaining autonomy and control over the classroom, motivated from the purpose of acting on behalf of their pupils. There was no interest in the managerial logic such as sharing best practice or providing the information required for accountability. 22.3.3 Ignoring the matrix In the CityCentre school, the RG matrix was perceived, also, as imposing greater workload and unnecessary administrative burden. However, in contrast to the TechSchool, the CityCentre teachers referred to already existing

234  Anton Borell et al. practices. They claimed to be documenting their students’ progress (e.g., by predicting their grades), which meant that they saw the matrix as providing few benefits over already established routines. This led to serious conflicts between the school’s managers and its teachers. According to one teacher, the RG matrix was even said to “run over the teacher collective” and was an example of “quadrangular thinking” or a box-ticking mentality. Although expressed differently, teachers at both CityCentre and TechSchool considered the tool to be overly bureaucratic, too time-consuming and as providing few benefits. Rather than marking all their pupils green, CityCentre teachers simply ignored the matrix, which allowed them to maintain their existing routines and did not introduce an additional workload. Thus, all forms of communication were cut, which can be interpreted as a rather obvious way to protect their professional logic. 22.3.4 Using the red–green matrix to strengthen the influence over managers – asking for more resources While in both CityCentre school and TechSchool (non)usage of the matrix was aimed at sealing off communication, the tool was used, also, to obtain more resources. This is in line with a professional logic, since it implies greater power and influence over the managerial level, as opposed to the managers influencing the teachers. This use applies to SubUrb. As a school located in a socioeconomically disadvantaged area, the SubUrb viewed the RG matrix as essential to track pupils’ progress and make corresponding adjustments. This was reinforced by the national school inspectorate, which criticised the school for not catering more to pupils’ individual needs. The school’s principal and managers were keen to implement the RG matrix to provide a systematic way of keeping track of pupils and conducting inspections successfully. In other words, the environmental conditions of the school and the prospect of inspections made the RG matrix a relevant management tool. However, the teachers did not appreciate the requirements imposed by the RG matrix. They saw a red marking of a pupil as increasing the amount documentation and requiring adjustments to their classes, which were seen as problematic for the teachers. Since the school included numerous pupils with particular needs, the teachers felt that the matrix imposed imperatives which were difficult to accommodate in their current teaching formats. They saw a red colour as indicating that the teacher must make adjustments, and this was perceived as impossible within their current class times. An adjustment implied a trade-off with those pupils who could be considered ‘green’, which made the teachers uneasy. The common response among teachers with several pupils who required extra help was to request additional resources. Receiving help from special pedagogues or teacher assistants relieved the teachers of responsibility for prioritising between ‘individuals in need’ and the other pupils in the class.

The management/profession divide  235 The teachers saw the solution to be marking the pupils red, which, according to one teacher, made the problem into a responsibility of the school board rather than that of the individual teacher. The idea was to use the matrix to signal to the managerial level that more resources were needed and that this was the responsibility of the school’s managers and not the individual teachers. In this case, the RG matrix served to enable ‘upward’ communication in the organisational chain, by mobilising more resources ‘downward’ to the classroom level. This effort to obtain more resources produced other tensions. Since the demand for more resources also had budgetary implications, principals and school boards could not simply recruit more staff because this risked failing to achieve financial targets. In turn, since the professionals mostly did not consider this a legitimate reason for not providing more resources, this led to a situation where the differences between managers and professionals intensified. Rather than being bridged, boundaries were reinforced. Thus, SubUrb provides another example of how the RG matrix failed to encourage cross-boundary communication and understandings and, in fact, reinforced established reasoning and thinking.

22.4 Conclusion: technology-enforced differences The solutions offered by the RG matrix were several. It could be used to resolve managerial problems (e.g., increased reporting, standardised work, improved performance, more frequent inspections) and was interrelated with professional ideals (e.g., a focus on helping individual pupils, sharing knowledge within teacher teams, making administrative levels accountable for resources). These uses and the initial aim of the tool was to blur the distinctions between the professional and the managerial logics and, potentially, to reduce the professional–managerial divide. However, we found that its use in practice caused other types of transformations. Our observations on the use of the RG matrix at three different schools showed that it was used based, mainly, on professional interests and included sealing off communication between the managerial and teacher levels and increasing influence over managers. Our findings suggest that, despite the aim of reducing the managerial–professional divide, the RG matrix rather reinforced it. There were transformations, but these were not in line with the original aims envisaged for the matrix. Overall, this case provides important insights into the management– professional divide. The RG matrix was introduced to standardise and formalise dialogue between performance requirements and the pedagogical efforts needed to achieve them. In other words, it was envisaged as providing a potential bridge between the competing interests of the teaching profession and school management. However, the teachers’ use of the RG matrix to pursue their professional interests highlights the fact that the success of a technology depends on the intentions of the user. Technologies

236

Anton Borell et al.

lack human intentionality; although they might enable the professionals to perform complex tasks, they still cannot, on their own, solve organisational problems.

22.5 Takeaway While a technology can provide common ground for individuals with different interests, it requires that these different interests converge about objectives. Use of the RG matrix resulted in increasing the distance between the different interests; each group interacted with the technology rather than with each other, and it worked mostly to serve the interests of the teaching profession. The digital transformation may be providing new possibilities for communication and transparency in organisations, but institutionalised interests are likely to persist, and even to be reinforced, unless the underlying conflicts of interests are addressed.

References Abbott, A. 1988. The System of Professions: An Essay on the Division of Expert Labor. Chicago, IL: University of Chicago Press. Borell, A. 2019. Budgets vs individual needs. Journal of Public Budgeting, Accounting and Financial Management 31(3): 410–430. Börjeson, L. & Löwstedt, J. 2017. Accomplish change or causing hesitance – Developing practices in professional service firms. Scandinavian Journal of Management 33(3): 185–194. Brignall, S. & Modell, S. 2000. An institutional perspective on performance measurement and management in the “new public sector.” Management Accounting Research 11(3): 281–306. Broadbent, J. & Laughlin, R. 1998. Resisting the “new public management”: Absorption and absorbing groups in schools and GP practices in the UK. Accounting, Auditing and Accountability Journal 11(4): 403–435. Clarke, J. & Newman, J. 1997. The Managerial State: Power, Politics and Ideology in the Remaking of Social Welfare. London: Sage. Erixon Arreman, I. & Holm, A. S. 2011. School as “Edu-business”: Four “serious players” in the Swedish upper secondary school market. Education Inquiry 2(4): 637–657. Evetts, J. 2011. A new professionalism? Challenges and opportunities. Current Sociology 59(4): 406–422. Freidson, E. 2001. Professionalism, The Third Logic: On the Practice of Knowledge. Chicago, IL: University of Chicago Press. Friedland, R. & Alford, R. 1991. “Bringing society back in: Symbols, practices and institutional contradictions.” In The New Institutionalism in Organizational Analysis, edited by Powell, W.W. & DiMaggio, P.J., 232–263. Chicago, IL: University of Chicago Press. Kellogg, K.C., Orlikowski, W.J., & Yates, J. 2006. Life in the trading zone: Structuring coordination across boundaries in postbureaucratic organizations. Organization Science 17(1): 22–44.

The management/profession divide

237

Klaassen, J. & Löwstedt, J. 2020. “Digitalization in schools: Four examples of embeddedness.” In Research in Organizational Change and Development (Vol. 28), edited by Noumair, D.A. & Shani, A.B., 103–126. Bingley: Emerald Publishing Limited. Larsson, P. 2004. Förändringens villkor en studie av organisatoriskt lärande och förändring inom skolan. Ekonomiska forskningsinstitutet vid Handelshögskolan i Stockholm: EFI. Larsson, P. & Löwstedt, J. 2020. Distributed school leadership: Making sense of the educational infrastructure. Educational Management Administration & Leadership, https://doi.org/10.1177/1741143220973668. Leonardi, P.M. 2012. “Materiality, sociomateriality, and socio-technical systems: What do these terms mean? How are they different? Do we need them.” In Materiality and organizing: Social Interaction in a Technological World (pp. 25–48), edited by Leonardi, P.M., Nardi, B.A. & Kallinikos, J., 25–48. Oxford: Oxford University Press. Leonardi, P.M. 2013. Theoretical foundations for the study of sociomateriality. Information and Organization 23(2): 59–76. Leonardi, P.M., Bailey, D.E., & Pierce, C.S. 2019. The coevolution of objects and boundaries over time: Materiality, affordances, and boundary salience. Information Systems Research 30(2): 665–686. Leonardi, P.M. & Barley, S.R. 2010. What’s under construction here? Social action, materiality, and power in constructivist studies of technology and organizing. Academy of Management Annal’s 4(1): 1–51. Llewellyn, S. 2001. “Two-way windows”: Clinicians as medical managers. Organization Science 22(4): 593–623. Meyer, J.W. & Rowan, B. 1977. Institutionalized organizations : Formal structure as myth and ceremony. American Journal of Sociology 83(2): 340–363. Noordegraaf, M. 2007. “From ‘Pure’ to ‘Hybrid’ Professionalism: Present-Day Professionalism in Ambiguous Public Domains.” Administration and Society 39(6): 761–785. Noordegraaf, M. 2016. Reconfiguring professional work: Changing forms of professionalism in public services. Administration and Society 48(7): 783–810. SFS 2010. Skollag. (National School Act), Serial No. 800. Stockholm: Department of Education. Sheridan, S., Williams, P., & Sandberg, A. 2013. Systematic quality work in preschool. International Journal of Early Childhood 45(1): 123–150. Skolinspektionen. 2012. Satsningarna på IT används inte i skolornas undervisning [The investments in IT are not used in the schools’ education] (Dnr. 40–2011:2928). Skolinspektionen. Star, S.L. & Griesemer, J.R. 1989. Institutional ecology, translations and boundary objects: Amateurs and professionals in Berkeley’s Museum of Vertebrate Zoology, 1907–39. Social Studies of Science 19(3): 387–420. Thornton, P.H., Ocasio, W., & Lounsbury, M. 2012. The Institutional Logics Perspective: A New Approach to Culture, Structure, and Process. New York: Oxford University Press. Zuboff, S. 1988. In the Age of the Smart Machine. New York: Basic Books.

23 Integrating research in master’s programmes Developing students’ skills to embrace digitally transformed markets Todd Drennan, Cecilia Thilenius Lindh and Emilia Rovira Nordman

The digital transformation of businesses has revolutionised marketing and increased the need for a workforce with digital, analytical and technical skills. In turn, this requires changes to higher education curricula and teaching practices. This chapter discusses how educators have embraced the new digital landscape to create an environment that engages students actively, increases their methodological and analytical capabilities, and challenges them to explore new knowledge. More effective delivery of education can be accomplished by adopting and integrating technology in a blended learning process. This chapter presents an illustrative case of a methodology course at Mälardalen University (in Sweden) with an enrolment of approximately 40 master’s level students per year. The course rests on two ideas. The first is that individuals who have grown up surrounded by and immersed in technologies in their daily activities can be described as ‘digital natives’ (Prensky 2001), implying that they are experienced users of digital technologies and need little extra training in using digital tools in their coursework (Ugur 2020). The second is that the Internet and its accompanying applications (e.g., web-based databases, social media platforms) can be easily utilised to teach students how to collect data for research but that some teaching activities are more effective when conducted face-to-face or ‘In Real Life’ (IRL). Therefore, the course uses a blended learning approach, that is, a mix of face-to-face learning and online learning (Hrastinski 2019; Kireev, Zhundibayeva and Aktanova 2019). By combining digital and IRL meetings, our illustrative case shows how educators can use society’s digital transformation to change their teaching practices and equip students with new skill sets that will prepare them for real-life tasks in modern labour markets.

DOI: 10.4324/9781003111245-23

Integrating research in master’s programmes  239

23.1  The background to digitalisation of higher education Since the 1990s and the beginning of online learning, when the term ‘blended learning’ was first coined (see Hrastinski 2019), the digitalisation of teaching has fundamentally changed higher education. Although not all digital teaching experiences are positive (e.g., they may be hampered by technology malfunctions and potential device distractions), digitalisation has the positive effects of helping students to create and interact with course content, to collaborate and to learn using social media tools (Gikas and Grant 2013). Nevertheless, real-life face-to-face learning activities remain important. Also, providing instructional support via an online medium may take the educator more time than delivering the same information in a face-to-face setting (Senn 2008). In addition to saving the teacher’s time and effort, the personal dimension to the teaching process, afforded by IRL meetings, can promote use of digital tools. Previous research shows that students can benefit from a blended course format that combines online activities with traditional face-to-face teaching (Kemp and Grieve 2014). As long ago as 1997, the idea of integrating new digital technologies into education was making waves, and webpages began to figure in education (Noble 1998). The discussion soon shifted towards the potential of digital technologies to enable deeper learning in an education context (Weigel 2002). In the current times, digital transformation has become so integral to society that its dependency and effects can be seen in the economy (e.g., social media, e-commerce). In the context of education, digital transformation has led to numerous successful projects that have incorporated or utilised digital technologies (Benavides et al. 2020). However, there continue to be calls for more research to provide educators with a better understanding of the cognitive learning outcomes derived from the use of digital tools in education (see Meirovitz and Aran 2020) and the methodological challenges related to digital pedagogy. By investigating how digital technologies can promote academic engagement in exploring new knowledge through ­research-based experiences, this chapter increases our understanding of the consequences of using course formats which mix face-to-face learning with digital means. It describes a blended marketing methodology course that has proven useful for engaging a group of diverse master’s students in research into international purchasing behaviours of ‘online consumers’. We provide an example of how digital technologies improve the quality of master’s courses and research projects by illustrating how students learn by doing research. This chapter also highlights how digital transformation of higher education has facilitated student learning and how courses can be designed to take advantage of digital possibilities to integrate education and research, in a higher education setting.

240  Todd Drennan et al.

23.2  Digitalisation of higher education The integration of digital technologies into everyday life is captured by the term digitalisation (Croon Fors 2012). The adoption of digitalisation has radically transformed how individuals communicate and collaborate. In this process, information technologies (IT) are understood as enabling the digitisation of information to be shared easily among many people (Meyer, Müller and Niemann 2018). Recent research on digital instruction in higher education posits that incorporating technological applications promotes active learning, increases learner engagement and fosters knowledge construction (Meirovitz and Aran 2020; Seifert 2016). The illustrative case in this chapter was designed based on these ideas, particularly the notion of constructive alignment, that is, that higher education should build on activities allowing students to practice what they learn and, thereby, to construct their knowledge (Biggs 1996). Awareness of the purpose of their learning activities allows the students to play an active role in their education and take responsibility for their learning. The teacher’s role is to be an expert in the field and design suitable activities in an environment appropriate to the task, that is, to guide rather than instruct the students (Biggs 2014). In marketing studies, many teaching activities entail collaboration among students to facilitate constructive alignment. Digitalisation provides new and richer means of collaboration in academic institutions. Collaborative courses may combine digital technologies (i.e., learning management systems, online educational materials) and communication channels (i.e., email, social media) with face-to-face approaches that require the consistent physical presence of both educators and students. The master’s degree course ‘Business Research Methods’, a ten-week course, was redesigned in 2015 as part of Mälardalen University’s International Marketing Programme. The course director responsible for the course is an active researcher with vast experience of pedagogical development. Every year, around 40 students from 15 different countries, on average, participate in the course. Many of the Swedish students who enrol on this course have roots in other parts of the world and networks in these other countries. During the course, group discussion forums on social media platforms facilitate discussions among students and between students and educators, to foster knowledge construction and facilitate discovery-based learning. One of the course’s main aims is to facilitate student learning regarding the possibilities offered by digitalisation for marketers. The course director aims to develop students’ practical skills and encourages them to use a combination of IT tools such as databases, learning platforms, instant messaging services, video conferencing and social media channels. The students collaborate in work groups of four people. Each of the groups systematically conducts a set of research-related tasks. They use digital databases to identify research articles to formulate hypotheses linked to their research questions. They share and process the information they find, using digital

Integrating research in master’s programmes  241 discussion forums to create conceptual models. They search digitally to find validated questions to construct the questionnaire. The digitally enabled data collection process is a joint class effort, and the resulting data are used to conduct the final analyses (using appropriate software). The students carry out the practical work; the teacher ensures implementation of good research techniques and achievement of learning objectives. The course relies on the use of digital technologies and builds on the digital transformation of society in the spirit of constructive alignment. Thus, digitalisation increases learning (Meirovitz and Aran 2020; Seifert 2016) and is integral to the course. In the succeeding sections, we discuss how digitalisation enhances learning, in more detail.

23.3  Digitalisation to promote learning In many academic institutions, the impact of digitalisation is exemplified by better access to and greater use of the Internet via laptops and smartphones, to provide quick and easy access to scholarly archives. It also allows faster interpersonal communication (e.g., via email and social media; Seifert 2016). Digital communication enables access to the ‘real world’ (e.g., international target markets) and allows students’ to collect data more rapidly and at a lower cost (Ilieva, Baron and Healey 2002). The cultural diversity of the enrolment in this master’s course has provided the opportunity to investigate international online purchasing behaviour. The study of online consumer behaviour is complex because it covers many different behaviours demonstrated by many different consumers and requires an understanding of how digital environments are organised. A small strand of work examines online consumer behaviour using technology acceptance models or considering potential differences among consumers from different cultures (e.g., Hwang and Jeong 2016; Wang et al. 2019). However, academic studies of international online consumers are scarce (e.g., see Lindh et al. 2020) even though marketing researchers often use online surveys, which are able to reach a wide audience. Their administration is also not constrained by their geographical location (Ilieva et  al. 2002). The topics studied on the master’s course have ranged, over the years, from payment methods and related security issues to the importance of corporate social responsibility. The requirements for successful completion of the course include a certain level of maturity, motivation and commitment to advancing their knowledge by investigating their chosen marketing topic. The master’s track in the Mälardalen University’s international marketing programme provides an environment that facilitates the students’ learning. Most of the students are knowledgeable about marketing and methodological issues, are dedicated and reliable and can conduct an individual research project. An important learning outcome is an increased understanding of the processes involved in conducting quantitative research.

242  Todd Drennan et al.

23.4  Practical course organisation Throughout the course, the students are provided with the required digital solutions. Initial digital interaction begins before the course starts after students have been enrolled; for example, required readings are available on the university’s learning platform. The students then need to search for information on the main theme of online consumers’ international purchasing behaviour. Digitalisation greatly reduces the time required for such search compared to having to locate physical resources and reading full texts. Online scholarly archives can be used to identify appropriate journals and articles, which then can be searched using keywords and other techniques (see Figure 23.1). The relevant peer-reviewed articles are used to develop the students’ research questions, hypotheses and research models. In addition to delivering lectures and organising workshops, educators support the hypotheses development stage by providing the student groups with instruction and practical and theoretical guidance. Digitally enabled communication tools, such as the university’s digital learning platform, benefits both students and educators. There is an allocation of one week for the students to scrutinise the identified peer-reviewed articles once more and compile relevant, validated questionnaire items. In this stage, Internet is paramount since it provides a multitude of relevant information sources. A workshop is organised where the students present and discuss their projects and

Online community discussions

Online questionnaire tool

Online scholarly resources

1) Theme Development

2) Validated Questions

3) Combine and Refine

4) Test, Revise, and Finalize

Online collaboration tools

Figure 23.1  Representation of the effect of digitalisation on the questionnaire construction process.

Integrating research in master’s programmes  243 questionnaire items. There they can receive direct feedback and advice from the educators. In the next step, the questionnaire is tested, refined, revised and finalised, enabled by use of an online questionnaire tool (see Figure 23.1). Both educators and students benefit from online testing of the questionnaire, enabling efficient distribution, adjustment and updating or revision in real-time prior to finalising the survey. Digitalisation allows this testing process to extend beyond the classroom’s confines and allow collaboration and rapid feedback. Previous research highlights digital communication and digital learning platforms’ facility to dissolve the boundaries to time and place and extend the teaching–learning process beyond the classroom through the sharing of content, rapid communication, active learning and collaborative work (Seifert 2016). The students’ participation in this process gives them a better understanding and appreciation of the amount and quality of the work involved in constructing an effective dedicated research questionnaire. Following final changes, the questionnaire is finalised, and students are given a web link to allow its administration. Figure 23.1 depicts the questionnaire construction process and how it is facilitated by digitalisation. Figure 23.1 shows that all the questionnaire construction stages are greatly enhanced by digitalisation. 1. in stage 1, Theme Development, the students expand their own knowledge and awareness by exploring relevant topics using multiple online resources, including online community discussions, online news sources and technological trends, and the discussion around them; 2. in stage 2, Validated Questions, the students develop their research questions and hypotheses, using online scholarly resources to refine them and to identify validated questions and measures; 3. in stage 3, Combine and Refine, construction of the questionnaire is enabled by use of an online questionnaire tool, which expedites construction, and enhanced administrative controls which include settings for quotas or limits, and screening capabilities; 4. in stage 4, Test, Revise and Finalise, online collaboration tools, which increase both efficiency of communication and accuracy throughout the entire process, contribute to streamlining the questionnaire finalisation. A combined lecture and group workshop is held before the students embark on the data collection phase. This activity is designed to reiterate and discuss ethical concerns and procedures, in particular, in the context of using the web link. It is imperative that the educators clearly define and students adhere to ethical guidelines, during and after data collection and distribution of the questionnaire. This will strengthen validity, reliability and good research practice.

244  Todd Drennan et al.

23.5  Digitalisation to facilitate administration of the questionnaire The means used to distribute the questionnaire have been enhanced by use of the Internet and a survey link. The students contact the members of their personal networks, via email and personal messages on social media, to distribute the link to the questionnaire. The students’ involvement in the entire research process, from idea generation to data collection, means they are involved in their own knowledge construction (see Seifert 2016), which increases their enthusiasm for and engagement in the project. It has a positive effect on their use of their personal networks to administer the survey more widely. When administering it, they stress the need for honest and accurate responses since this will affect the outcome of the project. Initially, the students use convenience sampling to recruit participants, based on their personal networks. To mitigate the limitations of convenience sampling, the students are instructed then to use the snowball sampling method. They are also advised to request confirmation of completion so that they can report response rates and to allow for targeted follow-ups. The combination of convenience and snowball sampling has proven effective. Given the nature of convenience sampling, responses are sometimes skewed to the age demographic profile matching the student distributing the questionnaire. Educators demonstrate and discuss this limitation and its implications with the students and set quotas to increase data from underrepresented demographics. Setting quotas, routinely monitoring and communicating results, and encouraging students to continue to contact additional respondents represent strategic sampling, the third leg in the sampling tripod. During data collection, educators actively monitor the progress and spread and use the university’s learning platform to communicate with the students. This transparency and communication enable a greater and more heterogeneous data set and a more effective combined data-gathering effort. The sampling method described above allows the students to access large amounts of data that contribute to the knowledge and skills development in the later stages of the course. The data collection method exemplifies how societal digital transformation has positively affected higher education; the students are able to use existing networks of contacts to collect responses via social media platforms and via email.

23.6  Digitalisation related to analysis The online survey tool includes restrictions to ensure the data cannot be filtered to show individual answers to protect respondents’ privacy. Data collection via the questionnaire is limited to two weeks due to the time constraints of the course. The sampling tripod has proven not to be a hindrance, and the survey’s administration has resulted consistently in more than 700

Integrating research in master’s programmes  245 completed questionnaires. After two weeks, the survey is no longer available and the groups meet to analyse the data. While each group formulates its own hypotheses and tests its own constructs, the collaborative environment has been conducive to learning; everyone helps each other understand or clarify interpretation of the data. This collaboration is particularly useful since the international diversity of students in the course means that they have significantly different backgrounds, experience and knowledge. By working collaboratively, these differences become complementary and useful. Since time is a limitation for the students, educators use digital tools (email, social media) to provide support and instruction and answer questions. All these responses are available from any location. The educators’ use of the university’s learning platform increases the students’ independent learning; educators are able to provide links to instructional videos on data analysis. Each group works on the data analysis and tests their hypotheses. It is inevitable that some hypotheses are not supported, which leads to a group discussion. Subsequently, the implications of the results are discussed in the class and the groups are asked to propose potential reasons why some hypotheses are not supported. They discuss the potential for direct and indirect effects of the variables, which suggest further and more complex analysis. Finally, the groups have to produce a written report that discusses the implications of the theory, the research process and their results. The course evaluations show that students appreciate the learning-by-doing elements of the course and find it increases their confidence both generally and in the data derived from their questionnaire, on which their final report is based. In some cases, students and educators have continued their collaboration and co-authored research papers, based on the collected data (e.g., Anastasiadou, Lindh and Vasse 2019; Johnstone and Lindh 2017; Lindh and Lisichkova 2017). A few graduates continue their higher education and enrol for a doctoral degree.

23.7  Concluding remarks The digital transformation has brought about the need for educators to make good use of digital tools for education (see Meirovitz and Aran 2020). Our description of the process and underlying reasoning related to developing an accessible and affordable master’s level methodology course that integrates education and research contributes to the ongoing discussion on how the societal digital transformation is enabling new education activities and teaching models and preparing students for a digitally transformed world. The case in this chapter highlights the importance of a blended learning approach to support complex learning processes. Although contemporary university students can generally be described as digital natives (Prensky 2001), our illustrative case shows that some physical contact and presence on campus is required to support complex tasks such as data collection and

246  Todd Drennan et al. data analysis. Because this support is best provided face-to-face (e.g., educators can show students how to use statistical software programs to analyse their data), course delivery by solely digital means will require more time and more investment. This was demonstrated starkly in the autumn of 2020 when the Covid-19 pandemic meant that all teaching was conducted online via digital meeting software for a period of two weeks. This coincided with the construction of the survey; the time spent on constructing, discussing and checking the survey was almost double that of the time previously allocated. Also, the questionnaire was of lower quality, and the students found it more difficult to recruit respondents. At the same time, the teaching team found it harder to motivate students to focus on data collection. Thus, following this experience in 2020, it is clear that the course model is better suited to a blended teaching approach than to a purely digital approach. We can conclude that the digital transformation has opened up new possibilities for learning but that it is not a replacement for already well-functioning collaborative interaction processes. Societal digital transformation has made digital processes a critical component of most marketing activities and highlights marketers’ need to be digitally competent. Digital marketing manager, social media manager, e-commerce manager and big data analyst will be key job positions in the future (Di Gregorio et al. 2019). As demand for people with digital skills increases, especially in retail, the course used as the case study in this chapter will become even more crucial to prepare students for real-life tasks in a modern job market.

23.8 Takeaway Digital transformation of higher education has facilitated student learning. This chapter describes how a blended learning course can exploit the advantages offered by digitalisation. Higher education teachers often come under pressure to (1) increase the digital aspects of master’s programmes and (2) involve master’s students in research activity. The case in this chapter shows that research ‘practice’, that is, learning based on constructive alignment, can be implemented successfully using digital tools. Digital tools allow students to accomplish more in a shorter time period and enable conducting methodological and analytical practices more robustly. The course examined in this chapter is an example of constructive alignment which, increasingly, higher education institutions are implementing. More work is needed to develop teaching models that prepare marketing students for jobs requiring digital, analytical and technical skills.

Acknowledgement One of the authors acknowledges financial support from the Torsten Söderberg Foundation [Project: ET2/18].

Integrating research in master’s programmes  247

References Anastasiadou, E., Lindh, C. and Vasse, T. 2019. Are consumers international? A study of CSR, cross-border shopping, commitment and purchase intent among online consumers. Journal of Global Marketing 32(4): 239–254. Benavides, L.M.C., Tamayo Arias, J.A., Arango Serna, M.D., Branch Bedoya, J.W. and Burgos, D. 2020. Digital transformation in higher education institutions: A systematic literature review. Sensors 20(11): 3291. Biggs, J. 1996. Enhancing teaching through constructive alignment. Higher Education 32(3): 347–364. Biggs, J. 2014. Constructive alignment in university teaching. HERDSA Review of Higher Education 1(1): 5–22. Croon Fors, A. 2012. The ontology of the subject in digitalization. In R. Luppicini (ed.) Handbook of Research on Technoself: Identity in a Technological Society. Hershey, PA: IGI Global: 45–63. Di Gregorio, A., Maggioni, I., Mauri, C. and Mazzucchelli, A. 2019. Employability skills for future marketing professionals. European Management Journal 37(3): 251–258. Gikas, J. and Grant, M.M. 2013. Mobile computing devices in higher education: Student perspectives on learning with cellphones, smartphones and social media. The Internet and Higher Education 19(1): 18–26. Hrastinski, S. 2019. What do we mean by blended learning? TechTrends 63(5): 564–569. Hwang, Y. and Jeong, J. 2016. Electronic commerce and online consumer behavior research: A literature review. Information Development 32(3): 377–388. Ilieva, J., Baron, S. and Healey, N.M. 2002. Online surveys in marketing research. International Journal of Market Research 44(3): 1–14. Johnstone, L. and Lindh, C. 2017. The sustainability-age dilemma: A theory of (un) planned behaviour via influencers. Journal of Consumer Behaviour 17(1): 127–139. Kemp, N. and Grieve, R. 2014. Face-to-face or face-to-screen? Undergraduates’ opinions and test performance in classroom vs. online learning. Frontiers in Psychology 5(1): 1278–1289. Kireev, B., Zhundibayeva, A. and Aktanova, A. 2019. Distance learning in higher education institutions: Results of an experiment. Journal of Social Studies Education Research 10(3): 387–403. Lindh, C. and Lisichkova, N. 2017. Rationality versus emotionality among online shoppers: The mediating role of experts as enhancing influencer effect on purchasing intent. Journal of Customer Behaviour 16(4): 333–351. Lindh, C., Rovira Nordman, E., Melén, S., Safari, A. and Hadjikhani, A. 2020. Digitalization and international online sales: Antecedents of purchase intent. Journal of International Consumer Marketing 32(3): 1–12. Meirovitz, T. and Aran, S.S. 2020. An investigation of digital thinking skills in EFL digital instruction. Interdisciplinary Journal of e-Skills and Lifelong Learning 16(1): 19–41. Meyer, M., Müller, T. and Niemann, A. 2018. Digitalization in higher education: From the anonymous mass to personalized and individual learning relationships. http://getthefun.de/dokumente/Paper_THM.pdf. Noble, D.F. 1998. Digital diploma mills: The automation of higher education. Science as Culture 7(3): 355–368.

248 Todd Drennan et al. Prensky, M. 2001. Digital natives, digital immigrants Part 1. On the Horizon 9(5): 1–6. Seifert, T. 2016. Involvement, collaboration and engagement: Social networks through a pedagogical lens. Journal of Learning Design 9(2): 31–45. Senn, G.J. 2008. Comparison of face-to-face and hybrid delivery of a course that requires technology skills development. Journal of Information Technology Education 7(1): 267–283. Ugur, N.G. 2020. Digitalization in higher education: A qualitative approach. International Journal of Technology in Education and Science 4(1): 18–25. Wang, Y., Wang, Z., Zhang, D. and Zhang, R. 2019. Discovering cultural differences in online consumer product reviews. Journal of Electronic Commerce Research 20(3): 169–183. Weigel, V.B. 2002. Deep Learning for a Digital Age: Technology’s Untapped Potential to Enrich Higher Education. San Francisco, CA: Jossey-Bass.

Index

Note: Bold page numbers refer to tables and italic page numbers refer to figures. Accenture 178 accountability 4; audience of stakeholders 121; context of external reporting 120–121; criticisms 121–122; lack of 126; traditional accounting 126–127; and transparency, relationship between 121–122 accounting: conceptualising 131–133; profession 131–133; research in 133–135 Acquier, A. 109 Aditro Logistics: internal validation practices 154–155; management adhocracy 155–156; revolutionary reconfiguration of HRM practices 153–154 agile project management 93, 96–97; Making detailed plans only for the next events 96; priorities 96; stages in 97 Aitken-Fischer, M. 141 Aldrich, H. E. 197 Al Eisawi, D. 177 Aman, A. 134, 135 Amazon 23, 59, 114 ambidexterity 139; contextual ambidexterity 139, 145; employee 139; structural ambidexterity 139 ambidextrous leadership 139; employeedriven innovation (EDI) 140–141; exploitation and exploration 140; transformational and transactional leadership 141 Amit, R. 54 Appelbaum, S. H. 100, 101 Apple 30 arcade machines 55–56 Artificial Intelligence (AI) 23, 129, 175, 178; emergence of 34; use of 43

AstraZeneca 36; Bio Venture Hub 115 Atari Inc. 55; arcade machines 56; Atari 7800 56 Baccarini, D. 99 Baccman, C. 4, 81, 83 Backhouse, J. 177 Bagozzi, R. 220 Bain & Company 176, 178 Bayrak, T. 177, 178 Begel, A. 100 Belk, R. 189, 190, 192 Beric, I. 100 big data 1, 14, 38, 44, 153, 177, 178, 246 Birkinshaw, J. 141 Blanchette, S. 134 Blizzard Entertainment 58 Boehm, B. 97 Boston Consulting Group 176, 178 boundary-spanning in MNCs: ‘actororiented firm’ 198; common view of 198; decontextualisation of information 199, 201–202, 203; demotivation to contribute 202, 203; digitalisation 199; digital solutions 200; information overload 198, 201, 202–203; information processing 200; loss of autonomy 199; managerial implications 203; in postdigitalised 5, 197–200; representation 199; responsibility 199; scope of 195–196 Boyle, M. 186; The Way Home: Tales from a Life without Technology 185 Brundtland Report 45 business analytics (BA): analytics at expense of 181–182; definitions

250 Index 176–178; future for 182; origins of 178–179; trends in use of 179 business intelligence (BI): analytics at expense of 181–182; data-driven decision-making 178; definitions 176–178; trends in use of 179 Business Intelligence for Dummies (Scheps) 180 business logic fit: broken value-chain 36–38; non-generic company structure 36; structural efficiency 38 business model innovations 54; complementarity 54; defined 54; digital transformation period 53, 57–58, 60–61; efficiency 54; fight against piracy 57; lock-in 54; novelty 54; post-digital period 53, 58–59, 60–61; pre-digital period 53, 55–56, 60–61; and technological advancements 60–61; in video games industry 54–59 business network theory 41 business process reengineering 1, 33 business-relationship triad framework, IS outsourcing: coalition IS outsourcing 222, 223, 224, 226; group-like triad 222–223, 223, 226; hub-driven strategic network 222, 223, 224, 226; set-of-connected-actors 222, 223, 223, 226 Carlile, P. R. 163 Carr, N. 1, 34 Cascone, K. 186, 187 Chen, H. 177 Chief Analytics Officer (CAO) 182 Chief Information Officer (CIO) 182 classic Taylorism 64; performance of work tasks 65; robotic execution of tasks 65; third-order technologies 66; time-and-motion studies 65; work-design approach 65 Claybaugh, C. C. 219 cloud-based technologies 13, 23, 34, 60–61 coalition business-relationship triad 222, 223, 224 Committee of Sponsoring Organisations of the Treadway Commission (COSO) 159 computer gaming industry 60 Consolidated Framework for Implementation Research (CFIR) 83;

contextual settings 84; implementation process 84; individual characteristics 84; inner settings 83; innovation characteristics 83 Cooper, L. 134 Cooper, R. G. 97 Covid-19 pandemic: data, analytics and AI 175; digitalised communication 203; digital transformation 9; online teaching 246; organisation’s role 18; remote working and distributed operations 9; risk 16–17; trust 17; value 17 Cramer, F. 187, 189, 190, 192 customer relationship management 34 customer self-service 34 cyberspace 180 dashboards 161, 177 decision-support systems (DSS) 177 DeFine Licht, J. 121 Deloitte Global RPA survey 129 digital assistive technology (DAT) 4; adoption and implementation 83–84; challenges to 84–88; complex innovation characteristics 84–85; digital solutions 81; e-health applications 84; in elderly care 83; external policy and incentives 85–86; fear 83; implementation of 83–84; influence on existing work practices 83; in municipal healthcare 81–82; Nordic context (cases) 82; organisational characteristics 86–87; research on 81; role of actor groups 84; Scandinavian or Nordic Model 82; surveillance cameras and e-commerce solutions 82; Technology Acceptance Model 83 digital dilemmas: digital maturity of organisations 14–15; emphasis on sustainability 15; organisational and cultural inhibitors, importance of 15 digital disruption 8, 11, 15 digital gamification: emerging managerial practices 152; gamification 150–151; of HRM function; mastering management practices 156–157; of organisational functions 5 digitalisation 44–45; adoption of 34–35, 46; change, evidence of 2; Covid19 pandemic 2; defined 1, 93; and digitisation, distinguish between

Index  251 1–2; evidence of 2; to facilitate administration of questionnaire 244; future research opportunities 48; of higher education 239; industry (see industry digitalisation); microtransactions 53; to promote learning 241; reasons for lagging behind 34–35; related to analysis 244–245; sales of digital goods 53; step-by-step guide for managers 49–50; subscription services 53; for sustainability 46–48; technological developments 39–41; transparency and accountability 45; waves of 33–35 digitalisation inertia, phenomenon of 33 digital natives 238 digital platforms 10, 23, 29–31, 44, 46, 57, 105, 109, 144, 146, 187 digital product innovation 4; architectural composition 112; boundary-spanning practices 107; cooperation and competition forces 108; core and complementary assets 114; demand-side economies of scope 108–109; design and development 107; digital innovation 107–109; distributed value creation 108; dominant design, concept of 106–107; dual face of 106–109; functional decomposition vs. self-organisation 110–111; horizontal diversification, capability for 114–115; incremental innovation 106; market dynamics 111–112; modular vs. layered 112; open-ended design, capability for 115–116; organising logic 110–111; paradoxical tensions in 109–112, 110; platform-centric ecosystems 109; product-developing organisations 107; product innovation 106–107; self-organising exploration, capability for 113–114; supply-side economies of scale vs. demand-side economies of scope 111–112; variation and uncertainty 108 digital revolution 44, 152, 186 digital servitization 3; customer insights 25; going digital 23; internal and external resistance 25–26; new forms of collaboration 29; the new oil 24; remote monitoring 29; resource integration 30; service ecosystem perspective 3, 26–29; services free of charge 24; strong and weak business

relationships 24, 29–30, 31; transition towards 25–, 29–30, 31 digital Taylorism 69 digital technologies: connecting multiple stakeholders 16; development of 228; driving operational efficiencies 16; emergence of 15; increasing transparency 16; introduction of 17–18; position of worker 66–67; Robot Process Automation 66; role of manager 67–68; third-order automation technology 66; use of 14, 16 digital transformation 2–3; alignment between technology-led pressures 18; beyond digital products and services 15–16; Building Back Better 9; challenges 12–16; Covid-19 pandemic 16–17; definitions 10–11; digital dilemmas 14–15; digital technologies, use of 14; focus 11; innovators dilemma 8; internal embeddedness 212–213; LEOs, challenges 10, 12–14; management and information technology 1–3; McKinsey’s global survey 10; mind-set 11; opportunities 10; organisational change activities 9, 18; post-pandemic world, organisation’s role in 18; practices and business-led pressures 18; product and service delivery, alignment between 14; strategy 11; technology and business model innovation, relationship between 13–14; understanding 10–12 digitisation 8; customer-centric 24; described 44; and digital delivery 16; and digitalisation, distinguish between 1–2, 44 DirectX technology 57 Disney 59 dominant design, concept of 106 eBay 119 e-book 46 electromechanical game machines 55 electronic waste (e-waste) 46 employee-driven innovation (EDI) 4–5; ambidextrous leadership 5, 139, 140–141; exploitation and exploration 139; idea management systems 138; illustrative case 141–142; Information and communication technology

252 Index 138; non-managerial and non-R&D employees 138–139; phenomenon of employee innovation 140; pro-innovation bias 140; traditional innovation literature 139–140 Enterprise Resource Planning (ERP) systems 33, 34 enterprise risk management (ERM) 5; Committee of Sponsoring Organisations of the Treadway Commission 159–160; computational dimension 167–168; decisionsupport technologies 160–161; and digitalisation 159–162; domainspecific knowledge 164; information and knowledge sharing, challenges to 164–167; interpretational dimension 168–169; knowledge integration 165–166; managing boundaries 166–167; political dimension 169–170; quantitative enthusiasm 168; risk-informed decision-making 163, 164; risk management 161–162; risk quantification and control 165; science and values, tension between 162–164; technical and social approaches 165–166; technologies, boundaries and dimensions 162, 162; value-based stages of decision-making 163 Epic’s Fortnite Battle Royale see Fortnite Excel 129 external reporting: accountability 4, 120–122, 126–127; ad hoc organising 119; from historical to forwardlooking 124–125; from holistic to fragmented 123–124; internal collaboration 119; marketing 119; from periodic to continuous 123; quantitative implications 119; social media 122–127; transparency 4, 120–122, 125 eXtreme Programming 93 EY 176, 178 Facebook 33, 119, 123, 192 Feldman, M. S. 122 Fernandez, D. 134, 135 first-order technologies 64 Fitzgerald, B. 98 5G technology 11, 14, 58 Floridi, L. 64, 69 Fortnite 58 freemium 58 free-to-play model 58 Frey, C.B. 130, 132, 135

Galloway, S. 16 gambling industry 55 gaming industry 4, 59–60; digital (see digital gamification); video (see video games industry) Gjellebak, C. 83 Glomsas, H. S. 81 going green phenomenon 45 Google 33, 59, 192; Scholar 133, 133, 178; Stadia 58; Trends 133, 179–180 green lease 47 Gressgard, L. J. 140 grey media 188 group-like business-relationship triad 222–223 A Guide to the Project Management Body of Knowledge (PMBOK Guide) 93; traditional project management 93, 94–95, 96 Hammer, M. 1 Harris, B. 54 Harvard Business Review 1, 34 Havila, V. 218, 221, 225 Hayes, S. 192 HBO 59 Herker, D. 197 higher education: active learning 240; blended learning 239; collaborative courses 240; digital databases 240–241; digitalisation of 240–241; group discussion forums 240; new digital technologies 239; real-life face-to-face learning 239 Hobbs, B. 100 Hodgkinson, I. R 141 Hofmann, P. 134 Holma, A. 218, 221, 225 Holsapple, C. 177 Hoyrup, S. 140 Huang, F. 134 hub-driven-strategic-network businessrelationship triad 222, 223, 224 Humayun, M. 189, 190, 192 hybrid methods 97 hybrid project management: complexity and uncertainty 98, 99; hybrid methods 97; product development performance 98; scaling up 98; use of agile and traditional approaches 97–98 hyper-Taylorism 4; digital Taylorism 69; and its consequences 68–70; sharing economy 63; technology-enhanced Taylorism 69

Index  253 idea management system (IMS) 138; adoption of 145–146; importance of 144–145; integration of 142; use of 143 IEEE Computer 100 immature suppliers 39 Imre, O. 75 Industry 4.0 23 industry digitalisation 3; barriers 35, 35; complex market 38–39; poor business logic fit 35, 36–38; real estate industry 36 industry-wide delayed digitalisation, phenomenon of 33 information and communication technology (ICT) 138 information system (IS) outsourcing 5; business-relationship triad (see business-relationship triad framework, IS outsourcing); complex exchange 220–221; customer, supplier and IS provider 218; degree of internal cohesiveness 221–222; and digitalisation in business relationships 219–220, 226; managerial implications 224–225; restricted exchange 220; service-level agreements 218; strategic decisions 217–218; third actor 217–218, 220–221, 225; three actors’ relationships or triads 221 information technology (IT) 1; cloudhosted services 8; expenditure 34; interaction capabilities 208; managerial logic 229; professional logic 229; transformative effects on industries 33 infrastructure as a service 34 In Real Life (IRL) 238 Instagram 33, 61 institutional theory 41 international business (IB) 206 Internet of Things (IoT) 34, 44, 105 Jandri, P. 192 Jovanovic, P. 100 knowledge management 88, 123, 152, 162–164, 177 Kodak 30, 219 Kokina, J. 134 Konning, M. 225 KPMG 178 Kytomaki, O. 36 Lacity, M. C. 134 LAN (Local Area Network): emergence of 57; shared gaming 57

large established organisations (LEOs) 8, 10, 12–14 Lean Six Sigma 180 Lensges, M. L. 98 Leonardi, P. M. 122 Lindenfalk, B. 75 Lycett, M. 177 Malardalen University 238 management and information technology: framing digitalisation 5–6; managerial and organisational challenges 4–5; perspectives on 1–3; transformation of society and markets 3–4 management/profession divide 5; digitalisation in Swedish school context 230–232; professional use of red–green matrix (see red–green (RG) matrix); technology-enforced differences 235–236; using information technology 229–230 managers: digital gamification 152; digital marketing manager 246; e-commerce manager 246; information system outsourcing 224–225; multinational corporation 203; multinational enterprise 214; redgreen matrix 234–235; role in digital technologies 67–68; social media manager 246; step-by-step guide for 49–50; subsidiary 211–212; value creation strategy 50 March, J. G. 122, 140 market complexity: end-user characteristics 39; legacy infrastructure 38; standardised software 38–39 Mashingaidze, K. 177 massive open online courses (MOOCs) 2 master’s programmes 5–6; higher education, digitalisation of (see higher education); learning, digitalisation to promote 241; practical course organisation 242, 242–243; questionnaire construction process 242, 242–243, 244 McKinsey & Co 176, 178 McNeil, S. 54 Microsoft 59, 192; Game Pass in 2017 58, 59; Windows 95 operating system 57; xCloud 58, 59; ZeniMax Media 59 modern project management 4; agile leadership behaviours 101; agile project management 96–97; factors

254 Index favouring different approaches 102, 103; hybrid project management 97–99; level of complexity 99; obstacles to agility 100; plan-andcontrol-driven methods 93, 103; project characteristics 99–100; project scope 100; skills and leadership 100– 101; stakeholders and customers 102, 103; traditional project management 93, 96; transformational leadership style 101 multilevel perspective 41 multinational corporation (MNC): decontextualisation 201–202; demotivation to contribute 202; external and internal boundaries 195, 196–197; future research 202; information filtering 197; information overload 201–203; losing context 203; managerial implications 203; role of boundary-spanners in post-digitalised (see boundaryspanning in MNCs); running out of motivation 203 multinational enterprise (MNEs): complexity for subsidiary manager 214; context of international business 206; embeddedness on subsidiary influence 207; entrepreneurialism 206; Headquarters 206, 208, 209; high-tech and high-touch dimensions of digitalisation 207–208; hightouch digitalisation 214; internal embeddedness, context of digital transformation 212–213, 213; strategy and performance 207; subsidiary internal embeddedness 208–212 Nagappan, N. 100 Negroponte, N. 186 Netflix 53, 59, 61 Netflix-for-gaming 58 Newman, M. 54 new seniors 73; function of spaces 77–78; housing (see senior housing); quality of life and well-being 73, 74; Swedish population 73; technical functions 74 Nintendo 55, 56; The Legend of Zelda 56; Nintendo Entertainment System 56; Super Mario 56; video games consoles 56

de Oliveira, M. A. 101 Olszak, C. M. 177 one-game-systems 56 operators 66 ordinary employees 138 Orlikowski, W. J. 64 Osborne, M. A. 130, 132, 135 Petit, Y. 100 pinball machines 55 platform as a service 34 PMBOK Guide see A Guide to the Project Management Body of Knowledge (PMBOK Guide) post-digital condition 186; adoption of alternative or outdated technologies 188; Apollo 11 186; defined 187; digital and analogue imperfection 187; grey media 188; latest digital devices 187–188; /r/nosurf, post-digital online community 188–192; societal turn 186–187 Poulikakos, A. 131 Power, D. J. 177, 180 The Principles of Hyper-Taylorism in the post-digital era 65 Scientific Management (Taylor) 64–65 Protiviti RPA survey 129 Raisch, S. 141 Ravishankar, M. N. 141 R&D 36, 115 real estate industry: commercial real estate 33–41; complex market (see market complexity); digitalisation and sustainability 40; green leases 40; lower-cost changes 40; poor business logic fit (see business logic fit); technological developments 39–40 Reddit 188 red–green (RG) matrix 229; example of 232, 233; ignoring matrix 233–234; marking all pupils green 233; sealing off communication flows 232–233; using to strengthen influence over managers 234–235 Reengineering Work see Hammer, M. Resource Man 39 The Revenge of Analog (Sax) 187 Riesener, M. 98 /r/nosurf, post-digital online community: analogue/offline devices 190; benefits

Index  255 of digitalisation 192; black-boxing of digital technologies 191; deletion of Reddit account 191; digital disengagement 192; dopamine fasting 189; face-to-face interactions 189; motto stop spending life on the net 188–189; post-digital handwriting 190; promoting neo-luddism 192–193; regaining agency 189; rejection of digital 192; slow technology movement 190–191; use of physical objects 189–190 robotic process automation (RPA) 4; academic community and society 133; accounting profession’s extinction prophecy 4, 129–131, 135; accounting tasks 131–132, 132; conceptualising accounting and accounting profession 131–133; impact of 130; nonstandardised tasks 131; opportunities for 134; perceptions of occupations 130, 130; positive or negative influences 134; related research in accounting 134–135; repetitive tasks 135; semi-standardised tasks 131, 132; standardised tasks 131, 132, 135 robotics 43, 44 Ross, J. 85 Samsung 58 Sax, D.: The Revenge of Analog 187 Scheps, S.: Business Intelligence for Dummies 180 scientific management 180 Scott, S. V. 64 Scrum 93 Sears 55 Sears Tele-Games 55 second-order technologies 64 SEGA 55; Mega Drive console and games 56; Saturn 56; Sega Master System 56 senior housing: co-creation of services 75, 76–77; digital services 74–75, 76; housing environment 73–74; new seniors 73; service delivery 4, 72, 76–77; service innovation 4, 72, 76–77; spaces and places 73–74; value creation 76; and well-being 73–74 service ecosystem perspective 41; benefits of 26; boundary-spanning activities 27; core rigidities 28; defined 27; digital servitization 3, 26–29;

formal and informal constraints 27; incumbent inertia 28; institution, role of 27; long-standing business relationships 28; newer business relationships 28; resource integrations 27–29; service offering 26 Service Games Enterprises see SEGA set-of-connected-actors businessrelationship triad 222, 223, 223 Sklyar, A. 30 smartphones 115 social media 44, 122–127; from historical to forward-looking 124–125; from holistic to fragmented 123–124; from periodic to continuous 123; platforms 33; for transparency and accountability 122–123 software as a service 34 Sommer, A. F. 97, 98 Sony 56, 59; PlayStation 56 space: age optimisation 77–78; co-creation process 75, 76–77, 78, 79; digital services 78, 79; facilities management 78; housing environment 73–74 (see also senior housing); resource integration 79; social interaction 78 Spotify 53, 61 Srite, M. 219 Steam 57 Strahringer, S. 225 streaming games: cloud technology 58 Strengers, Y. 39 subreddits 188 subsidiary internal embeddedness: activity portfolio and its influence 209–211, 210; dependent production subsidiaries 209; informal relations 211; interdependent and integrated subsidiaries 209; internal and external embeddedness 208–209; isolated subsidiaries 209; position of 209; relational dimensions 211–212; structural dimension 209; subsidiary managers 211–212 sustainability 3–4; beneficiaries 48; of business approaches 15; challenges 47; climate change and service exclusion 43; digitalisation for 46–48; electronic waste (e-waste) 46; of environment 15; firm’s core activities 50; levels of 45; of people 15; resource-demanding and time-consuming 47; technological

256 Index development 48; triple-bottom line 43; value co-creation perspective 48; value propositions 47 Swedish National School Act 231 Swedish school context: digitalisation in 230–232; red–green matrix 231–232; TechSchool, SubUrb and CityCentre 231 Syed, R. 129 Taylor, F. W. 64, 65, 66, 69; The Principles of Hyper-Taylorism in the post-digital era 65 Scientific Management 64–65 Taylorism 63; see also classic Taylorism; hyper-Taylorism technological and business model innovations, relationship between 4 Technology Acceptance Model (TAM) 83 Tencent 59 third-order technologies 4; Classic Taylorism 64–66; described 63; post-digital era and algorithms 64; Taylorist logic 64; third-order automation technology 66–67; see also hyper-Taylorism Thoreau, H. D. 185, 186, 193 3D printing 105 traditional project management: PMBOK Guide 93, 94–95, 96 transparency 4, 120–122, 125; and accountability, relationship between 121–122; continuous accounting 125; creation of 120; criticisms 122; fragmented accounts 125; informal and emotional accounts 125; qualities of mobility, stability and combinability 120; raw and refined transparency 121; social media 125

triads, concept of 221 Trieu, V. H. 176 TripAdvisor 119 Turner, R. 97 UK BREEAM (Building Research Establishment Environmental Assessment Method) 37 UK Digital Economy Bill 13 UK General Data Protection Regulation 17 United Nations (UN) 45 US LEED (Leadership in Energy and Environmental Design) 37 Valve 57 Vasarhelyi, M. A. 134 Vedel, M. 218, 221, 225 video games industry 4; digital transformation period 57–58, 60–61; post-digital transformation period 58–59, 60–61; pre-digital period 55–56, 60–61 Wahlstrom, G. 165 The Way Home: Tales from a Life without Technology (Boyle) 185 Web of Science 133 Westner, M. 225 Wickberg, A. 190 Willcocks, L. P. 134 Wired magazine 186 World Commission on Environment and Development 45 World of Warcraft 58 xCloud 58, 59 Zimmermann, A. 141 Zott, C. 54