Digital innovations

Florian Wiesböck & Thomas Hess

Electronic Markets
The International Journal on Networked
Business

ISSN 1019-6781

Electron Markets
DOI 10.1007/s12525-019-00364-9

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 Author's personal copy
Electronic Markets
https://doi.org/10.1007/s12525-019-00364-9

FUNDAMENTALS

Digital innovations
Embedding in organizations

Florian Wiesböck 1 & Thomas Hess 1

Received: 19 July 2018 / Accepted: 5 August 2019

# Institute of Applied Informatics at University of Leipzig 2019

Abstract
In the digital era, organizations can use digital technologies to develop new digital products and services, business processes, or
business models. These so-called digital innovations pose a serious challenge for both theory and practice. Accordingly, the last
years have brought forward a multitude of research in this area. With this article we want to link existing research streams on
digital innovations and, thus, pave the way for future research in this area. Therefore, we consolidate prevailing work on digital
innovations into a technology-driven “linking” framework on digital innovations and their embedding in organizations.
According to our framework, the realization and embedding of digital innovations into organizations manifests along three
concentric rings: the technology-driven development and the different implementation categories of digital innovations at the
core, the enablers of digital innovations in a second ring, and the governance of digital innovations in a third ring. Based on the
proposed framework we point out promising areas for further research in this field.

Keywords Digital transformation . Digital innovation . Digitalization . Digital business models . Digital products and services .
Digital business processes . Digital management

JEL classification M15 IT Management

Introduction All these issues are being discussed in literature. The con-
ceptual development of digital innovations – which depict an
Organizations use digital technologies for establishing new essential element of an organization’s digital transformation –
products and services, to implement new business processes, has been of special interest to Information Systems (IS) re-
or to operate new business models (Legner et al. 2017; search over the last decade (Kohli and Melville 2018;
Nambisan et al. 2017). They invest in more flexible informa- Nambisan et al. 2017; Vial 2019; Yoo et al. 2012). In addition,
tion technology (IT) landscapes or in new forms of organiza- there is a growing amount of studies on the enabling factors of
tional structures that allow them to harvest the benefits offered digital innovations including newly emerging capabilities (Li
from digital technologies. And they think about the establish- et al. 2018), cultural change (Hartl and Hess 2017), new forms
ment of appropriate governance structures that allow them to of organizational structures such as digital infrastructures
strategically approach their digital transformation. (Henfridsson and Bygstad 2013) or digital platforms (Gawer
and Cusumano 2014; Karimi et al. 2009; Yoo et al. 2012), but
also new ways of cooperation (e.g. co-design, co-creation, co-
Responsible Editor: Rainer Alt production) (Mauerhoefer et al. 2017; Nambisan et al. 2017).
A further research stream investigates the governance of dig-
* Florian Wiesböck ital innovations in organizations (Bharadwaj et al. 2013; Hess
[email protected] and Barthel 2017; Kohli and Melville 2018; Nambisan et al.
2017).
Thomas Hess
Also in practice we see the growing evidence for the many
[email protected]
challenges associated with digital innovations and, thus, the
1
Institute for Information Systems and New Media, LMU Munich, value of a structured approach towards their governance. On
Ludwigstraße 28, 80539 Munich, Germany the one hand, in the context of digital innovations
 Author's personal copy
F. Wiesböck, T. Hess

organizations have to deal with volatile markets, disruptive After that, we introduce a fourth research stream that elabo-
technologies, and accelerating innovation cycles (Chan et al. rates on the important role of a dedicated digital transforma-
2018; Karimi and Walter 2015). On the other hand, organiza- tion governance (DTG) approach in order to strategically ad-
tions that want to develop digital innovations need to establish dress digital innovations and their embedding in organiza-
dedicated digital units that oftentimes employ cross-functional tions. Finally, we develop a technology-driven three-ring
teams (Fuchs et al. 2019). Moreover, many organizations framework of digital innovations and their embedding in or-
struggle with the realization that in the context of digital in- ganizations that integrates the prevailing research streams and
novations IT needs to be seen as an innovation enabler and not conclude with promising areas for future research in this field.
as a commodity (Ciriello et al. 2018).
However, the existing research streams on digital innova-
tions are, at best, loosely coupled. Thus, we are in need of a Research stream 1: conceptual development
“linking” framework that brings together prevailing research of digital innovations
in this field. Such a framework helps managers to systemati-
cally approach digital innovations. Oftentimes, managers are A first research stream addresses the conceptual development
confronted with a plethora of challenges associated with the of digital innovations. Following the advent of digital technol-
advent of digital technologies and the resulting development ogies (such as SMAC technologies) (Legner et al. 2017), we
and implementation of digital innovations. Accordingly, a have seen the emergence of a new kind of innovation – digital
framework that structures the many facets of digital innova- innovations – that concerns the development and implemen-
tions offers a valuable benefit to practitioners. Likewise, the- tation of innovative artefacts and related solutions that are
ory will profit from such a framework since it allows the based on the innovative (re)use of digital components
classification of existing and future research in this field. (Fichman et al. 2014; Yoo et al. 2010). Prior research has
Digital innovations can act as the core of such a “linking” argued that the characteristic element of digital innovations
framework since they depict a central element of digital trans- is the use of innovative digital technologies in novel ways
formation and represent the domain where the use of digital (Kohli and Melville 2018; Nambisan et al. 2017). Thus, digital
technologies manifests within organizations (Kohli and innovation is defined “as the creation of (and consequent
Melville 2018; Nambisan et al. 2017). In addition, we know change in) market offerings, business processes, or models
that the realization and the embedding of digital innovations that result from the use of digital technology” (Nambisan
will not happen automatically but requires a deliberate ap- et al. 2017, p. 224).
proach that allows them to translate digital technologies into
digital innovations (Chan et al. 2018; Dinter and Krämer Conceptualization
2018; Kohli and Melville 2018; Nambisan et al. 2017;
Wiesböck 2018; Yoo et al. 2012). We argue that digital inno- Digital innovations can be conceptualized as a combination of
vations can only manifest if organizations know how to realize two digital artefacts (Wiesböck 2018; Yoo et al. 2010): an
digital innovations in the first place, and if they know how to innovative digital solution (Aral and Weill 2007) and
manage and prepare for the realization and embedding of dig- (indispensable) a complementary digital business concept
ital innovations in the second place. With this article, we want (Westermann et al. 2011), both driven by the opportunities
to describe digital innovations along these three rings (i.e., the of new digital technologies (“technology-push”) and the needs
development and implementation of digital innovations, the and requirements in the domain of application (“technology-
preparation of the organization, and the governance of digital pull”). Both digital artifacts need to be heavily integrated and
innovations). can only act in harmony. Traditionally, new business require-
Existing research on digital innovations can be structured ments (e.g., the willingness to introduce a new sales concept)
along four main research streams. A first research stream con- depict the impetus for digital innovations. Such new business
cerns the conceptual development of digital innovations. requirements are being implemented through the development
Accordingly, we start with a discussion of existing conceptu- of a digital solution (in our example: a new sales database). In
alizations of digital innovations and consolidate prevailing this case, new business requirements initiate the search for
theories into a technology-centered conceptual model of dig- novel technological opportunities based on digital technolo-
ital innovations. Then, we present a second research stream gies (“technology-pull”). However, as a consequence of the
that further distinguishes the different categories of digital increasing prevalence of digital technologies, the impetus for
innovations: digital product and service innovations, digital digital innovations often also comes from the emergence of a
process innovations, and digital business model innovations. new digital technology which induces novel business oppor-
Subsequently, we present a third research stream that argues tunities (“technology-push”). Figure 1 consolidates this view
how organizations can prepare their organizations for digital on digital innovations into a technology-push-pull model of
innovations through the realization of four specific enablers. digital innovations.
 Author's personal copy
Digital innovations

systems in board meetings and to work with complex simula-

New business
tions. Other prominent examples are social media technolo-
requirements
gies. Besides changes in corporate communication, they facil-
itated the emergence of a new generation of media companies
such as Facebook or Twitter.
In the end, the development of digital innovations is char-
Innovative acterized by a recursive interdependence between the in-
digital volved digital artefacts. In case of the social media example,
business concepts the appearance of a new digital technology (social media tech-
nologies) led to the development of new digital solutions (so-

Requirements
cial media networks) which triggered the development of new
Options

Digital
Innovations digital business concepts (social media marketing concepts).
However, the emergence of a new digital business concept
Innovative (social media marketing) may then trigger follow-up develop-
digital ments of additional digital solutions (e.g., big data analytics
solutions applications) which, then again, lead to the development of
additional complementing digital business concepts (e.g.,
data-driven customer segmentation). Ultimately, these
follow-up recursive circles can lead to the replacement of al-
ready existing solutions and concepts (in our example: mar-
Novel digital keting concepts that are based on big data analytics replace
technologies existing offline marketing approaches). Such an argumenta-
tion is in line with structuration theory in IS research because
Fig. 1 Technology-push-pull model of digital innovations (Based on the emergence of new structures (here: digital solutions or
Wiesböck 2018) digital business concepts, respectively) triggers change pro-
cesses within existing structures (Jones and Karsten 2008;
Development process Orlikowski and Robey 1991).

From an IS development perspective, the development of dig-

ital innovations follows a logical evolutionary path (Kohli and Research stream 2: categories of digital
Melville 2018; Wiesböck 2018). Based on abstract digital innovations
technologies, organizations develop specific innovative digi-
tal solutions. Innovative digital solutions, then again, trigger A second stream of research further differentiates digital inno-
the development of innovative digital business concepts. vations. Similar to traditional innovation taxonomies, digital
While the transition from an abstract digital technology to a innovations can be distinguished into three different catego-
concrete digital solution characterizes an organization’s digi- ries (Fig. 2). Firstly, organizations can take a market perspec-
talization, the transition from digital solutions to digital busi- tive and use digital technologies to develop new digital prod-
ness concepts is also referred to as an organization’s digital ucts and services (Lyytinen et al. 2016). Secondly, organiza-
transformation and captures the organizational change in- tions can take a production view and pursue digital business
duced by digital technologies (Fichman et al. 2014; Legner processes (Nambisan et al. 2017). Lastly, the emergence of
et al. 2017; Wiesböck 2018). Oftentimes, the transition from digital products and services and digital business processes
digital solutions to digital business concepts is not a singular, inevitably leads to novel forms of digital business models
linear event but happens iteratively (Orlikowski 1992). (Nambisan et al. 2017). Additionally, the different categories
One example that stands testament for this evolutionary are interrelated (Fichman et al. 2014). For instance, new
path of digital innovations has been the realization of the first
enterprise resource planning (ERP) systems, driven mainly by Digital
the emergence of relational database systems. The appearance Innovations

of ERP systems led to the development of new business pro-

cesses handling the core resources of organizations. In a sim-
ilar spirit, organizations nowadays are changing their manage- Digital Digital Digital
ment IS based on in-memory databases and new technologies Product & Service Process Business Model
Innovations Innovations Innovations
for the human-machine-interaction (e.g., user experience de-
sign). Ultimately, this allows organizations to integrate such Fig. 2 Categorization of digital innovations
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F. Wiesböck, T. Hess

digital products and services may demand or enable new dig- regard to privacy and data security sentiments
ital business processes that, together, allow the introduction of (Spiekermann et al. 2015). Another essential characteristic
new digital business models. of digital product and service innovations is that they typi-
cally trigger follow-up innovations (Fichman et al. 2014) –
Digital product and service innovations either in the form of complementary services (e.g., mobile
application stores add to the value of smartphones) or in the
Digital product and service innovations depict the first cate- form of complementary products (e.g., smart home applica-
gory of digital innovations (Nambisan et al. 2017). They refer tions such as Amazon’s Echo trigger the development of
to new products or services that result from the innovative use compatible household appliances). What is more, digital
of digital technologies (Fichman et al. 2014; Lyytinen et al. platforms and electronic markets play an important role in
2016). This includes the use of digital technologies to either the context of digital product and service innovations
create fundamentally new digital products and services or en- (Ciriello et al. 2018; Yoo et al. 2012). For instance, media
hance existing products and services through the addition or companies can resort to content platforms to produce, pro-
integration of digital components (Fichman et al. 2014; mote, or distribute content (Alt 2018; Karimi and Walter
Lyytinen et al. 2016). Typical examples for the former case 2015; Koch and Bierbamer 2016). Finally, the advent of
are smartphones or content streaming services. Examples for digital technologies has led to an increasing convergence of
latter case are the integration of smartphones in cars (e.g., products and services. For instance, smartphones reach their
Apple CarPlay) or voice control services for all kinds of elec- e n d - u s e r s w i t h m an y p r e- i ns t a l l ed a p p l i c at i on s .
tronic devices (e.g., remote controls for smart TVs). Both Consequently, firms have to rethink their bundling strategies
kinds of digital product and service innovations offer signifi- and offer specific digital product and service bundles (Nylén
cant value potentials for organizations. and Holmström 2015).
The last years have brought forward plenty valuable stud-
ies on digital products and services in the digital age (Kohli
and Melville 2018; Lyytinen et al. 2016). Therefore, we al- Digital process innovations
ready know a lot about their idiosyncrasies. To begin with,
digital products and services are easy to copy and therefore, Besides the emergence of digital products and services, the
similar to all kinds of digital intellectual property, hard to advent of digital technologies has significantly changed orga-
protect against piracy (Sundararajan 2004). Consequently, nizational functioning. Accordingly, the second category of
organizations need to develop dedicated digital rights man- digital innovations – digital process innovations – captures
agement (DRM) strategies to protect their digital rights. the innovative use of digital technologies to enhance existing
Furthermore, digital product and service innovations depend or create new business processes (Fichman et al. 2014;
strongly on novel customer preferences and behaviors Nambisan et al. 2017).
(Lyytinen et al. 2016). As a consequence, organizations have In general, organizations pursue digital process innovations
to come up with new strategies to meet these groups’ specific to optimize their operational and administrative processes.
demands (Nambisan et al. 2017). This requires a strong in- Digital business processes allow for improved service quality
tegration of customers and suppliers in the innovation pro- (e.g., by offering digital communication channels) and extend-
cess (Koch and Bierbamer 2016; Lau et al. 2010) or the ed production possibilities (e.g., 3D printing) at reduced oper-
embedding of digital technologies in customer relationship ative or administrative costs. Against this backdrop, organiza-
management (CRM) practices (e.g., in the form of social tions can use digital technologies for the automation of their
media technologies) which, ultimately, leads to the digitali- business processes (Venkatraman 1994). The financial ser-
zation of the customer interface (Choudhury and Harrigan vices industry, for instance, has started to use robotic process
2014; Hadaya and Cassivi 2009). Apart from this, digital automation (RPA) technologies to automate contract manage-
tools and architectures foster increasing levels of product ment or claim management processes. Furthermore, digital
and service modularity and personalization (Fichman et al. technologies can be used to implement chat bots for marketing
2014; Yoo et al. 2012) which surely offers additional benefits and sales or customer service purposes (e.g., the booking of
to the end customers but in the end also induces increasing flights via the Facebook messenger) as well as paperless con-
levels of complexity (Nambisan et al. 2017). Moreover, dig- tract management systems or digital inter- and intra-
ital products and services make increasing amounts of cus- organizational collaboration tools (Alt and Zimmermann
tomer data available and accessible (Yoo et al. 2012) which 2018; Nambisan et al. 2017). Additionally, digital business
allows the emergence of data-driven innovations (Akter and processes are a basic requirement for the delivery of digital
Wamba 2016; Dinter and Krämer 2018; Willing et al. 2017). services. For instance, media companies need to provide
However, organizations also have to consider data transpar- Internet-based contract management and payment processes
ency issues both in their market offerings as well as with if they want to offer music or video streaming services.
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Digital innovations

Digital business model innovations Research stream 3: enablers of digital

innovations
Lastly, on a more fundamental level, organizations need to
recognize the opportunities offered from digital technolo- Digital innovations induce significant changes in an organiza-
gies to adapt and extend their business model portfolios tion’s products and services, business processes, or business
(i.e., finding new (additional) ways to create and appro- models. This so-called digital transformation can only mani-
priate value based on digital technologies). In general, fest if organizations are adequately prepared. Accordingly, a
digital technologies have the potential to substantially dis- third group of studies focuses on the enablers of digital inno-
rupt existing revenue and business models – as we have vations. This research stream investigates, inter alia, the con-
seen with the media industry, for instance (Hess and tribution of organizational capabilities (Alt and Zimmermann
Constantiou 2018). Against this backdrop, organizations 2014; Levallet and Chan 2018; Nwankpa and Datta 2017;
need to look for novel combinations of digital products or Stoeckli et al. 2018) and the relevance of digital resources
services, new ways of production, and novel forms of (Nambisan 2013; Nwankpa and Datta 2017; Wiesböck
digital revenue creation or business models (Hess et al. 2019; Yoo et al. 2010) such as digital infrastructures
2016). (Bañares and Altmann 2018; Blaschke et al. 2016;
Existing research has argued that digital business model Henfridsson and Bygstad 2013) or digital platforms and eco-
innovations can refer to the transformation of either certain systems (Karimi and Walter 2015; Lyytinen et al. 2016; Parker
elements or the entire business model based on digital tech- et al. 2017) as a basis for digital innovations.
nologies (Veit et al. 2014). The former case is usually driven The realization of four enablers on the organizational level
by the emergence of new sales channels and revenue models. seems to be of particular importance (Hess and Barthel 2017).
Organizations can use digital technologies to establish new The (re)combination of digital technologies leads to the devel-
forms of digital (typically online-based) sales channels and opment of digital solutions and, subsequently, triggers the
revenue models. For instance, content platforms can monetize development of digital business concepts (Fig. 1). For a digital
their online content based on freemium models (e.g., Spotify) innovation to manifest and create value, such digital solutions
(Wagner et al. 2014). Typically, digital sales channels and and digital business concepts need to be embedded into an
revenue models demand that firms adapt their existing busi- organization. This embedding relates to the integration of dig-
ness models around these new channels and models. For in- ital solutions and digital business concepts into both existing
stance, car rental companies (e.g., Sixt) or (direct) insurance IT structures (Bygstad 2017; Hansen and Sia 2015; Tilson
provides (e.g., HUK24) now offer their services on online et al. 2010) and existing organizational structures (Hess et al.
platforms and car sharing providers (e.g., BWM’s and 2016). The former is generally represented through an orga-
Daimler’s Share Now) use digital technologies to charge their nization’s IT application portfolio, the latter typically involves
customers based on actual usage. While in both cases the core three essential elements: organizational culture (Hartl and
business model – individual mobility and risk insurance, re- Hess 2017), organizational structures (Matt et al. 2015), and
spectively – remains the same, the underlying sales channels organizational capabilities (Grant 1996). Figure 3 illustrates
and revenue models, and subsequently also the facilitating these four enablers of digital innovations.
business processes, differ from the pre-digital business
approaches.
Besides digital sales channels or revenue models, orga- Enabling organizational IT application portfolios
nizations can also leverage digital technologies to extend
ex ante analogue business models into the digital domain, To begin with, organizations have to prepare their IS land-
as we have seen with the establishment of eCommerce scapes in order to accommodate digital innovations. Both an
platforms or digital media services (Berger 2018; Hess organization’s IT application portfolio, its IT systems, and its
et al. 2016), or to initiate entirely new, purely digital busi- general IS infrastructure need to be able to accommodate the
ness models. This manifests, for example, in the emer- changes triggered by digital technologies. Generally, digital
gence of platform-based business models such as elec- technologies induce IS infrastructures (oftentimes also re-
tronic market platforms (e.g., ebay), electronic mobility ferred to as “digital infrastructures”) that allow the efficient
platforms (e.g., UBER), or online video-on-demand plat- replication of data and processes without a centralized data-
forms (e.g. YouTube) (Koch and Bierbamer 2016; base or application logic and, thus, pave the way for genera-
Lyytinen et al. 2016; Willing et al. 2017). Typically, such tive innovation (Bygstad 2017) or decentralized blockchain-
digital business models go hand in hand with digital rev- based electronic marketplaces (Alt 2018; Subramanian 2018).
enue models (Berger 2018) and follow the general princi- Accordingly, organizations need to establish IS infrastructures
ples of electronic markets and platform businesses (Gawer that offer adequate levels of centralization and flexibility and
and Cusumano 2014). provide the necessary interfaces.
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F. Wiesböck, T. Hess

Fig. 3 Enablers of digital

Enabling
innovations (Based on Hess and
Organizational
Barthel 2017)
Structures

Enabling
Enabling
Organizational Digital Organizational
IT Application Innovations Capabilities
Portfolios

Enabling
Organizational
Culture

Enabling organizational structures or at least be able to manage the interface to external providers
that can supply the respective innovation approaches.
Secondly, organizations need to establish organizational struc-
tures that enable digital innovations. For one thing, the com-
Enabling organizational culture
mercialization of digital products and services, and likewise
the execution of digital business models, demands intensive
Thirdly, organizations need to adapt their organizational cul-
market coordination because digital markets are usually sub-
ture in order to accommodate digital innovations (Hartl and
ject to heavy interdependencies (two-sided markets) and tur-
Hess 2017). An organization’s culture determines how em-
bulent market environments (Lyytinen et al. 2016). One im-
ployees accept the many changes induced by digital technol-
portant approach that allows organizations to deal with such
ogies on organizational functioning in general and how inno-
turbulent markets is the concept of organizational agility
vation project teams pursue the development of digital inno-
(Tallon and Pinsonneault 2011). In the context of digital tech-
vations in particular. Furthermore, culture is responsible for an
nologies, agility allows organizations to mitigate rigidities, to
organization’s general attitude towards digital technologies,
develop and leverage the necessary technological and innova-
its risk seeking (or risk adverse) behavior towards new busi-
tion capabilities, and to balance the tension of organizational
ness opportunities, or how it values innovative ideas from the
ambidexterity (Chan et al. 2018; Ravichandran 2018).
in- and outside. Apart from this, the advancing democratiza-
Without sufficient levels of agility, organizations will not be
tion of digital innovation processes induces innovation envi-
able to adequately exploit the benefits offered from digital
ronments in which project teams typically represent dynamic,
technologies.
oftentimes random combinations of actors with various differ-
For another thing, the integration of digital technologies
ent goals and motives that do not necessarily align with an
into organizational structures can lead to “a shift from
organization’s actual interests (Nambisan et al. 2017).
decentralized resources and activities towards more
networked and centralized platforms” (Alt and Zimmermann
2018, p. 1). For instance, the media industry profits from Enabling organizational capabilities
shared standards and electronic platforms for collaboration,
promotion, or distribution purposes that often go in hand with Finally, organizations need to develop the necessary organiza-
modularized media content based on semantic web technolo- tional capabilities to realize and embed digital innovations (Li
gies (Hess and Constantiou 2018). At the same time, however, et al. 2018; Stoeckli et al. 2018; Wiesböck 2018). Initially,
the integration of digital technologies into organizational organizations need sufficient levels of IT capabilities that al-
structures may also induce a move towards decentralization low them to handle digital technologies as the basis for digital
(Alt 2018). So far, electronic markets typically gravitated to- innovations (Nwankpa and Datta 2017). In addition, organi-
wards centralization. With the advent of digital technologies zations need dedicated digital capabilities (Li et al. 2018;
such as open data, blockchain, or distributed ledgers technol- Wiesböck 2018). Such digital capabilities allow organizations
ogies, this trend is expected to change. Internal and external to use digital resources for innovation purposes (Chan et al.
innovation platforms offer a promising way to meet these 2018; Lyytinen et al. 2016; Nwankpa and Datta 2017;
requirements (Koch and Bierbamer 2016). Organizations need Wiesböck 2019). To develop these capabilities, organizations
to be able to realize and operate such platforms and embed can resort to different means. They can either try to build up
them into their existing structures and innovation processes – the necessary capabilities organically (e.g., through trainings,
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Digital innovations

job rotations or webinars) or acquire them inorganically (e.g., ways. A first approach is to allocate the tasks relating to an
through M&A activities or outsourcing). organization’s digital transformation efforts to its IT depart-
ment. Organizations that follow this approach typically make
the Chief Information Officer (CIO) responsible for their dig-
Research stream 4: governance of digital ital transformation. Traditionally, the IT department presents
innovations the locus of IT-based innovation activities and has always
been the center of IT-related decision rights. This IT internal
A fourth research stream concerns the governance of digital solution has the advantage that it does not demand far-
innovations. Past research in this area has investigated the reaching structural changes and is especially reasonable if
design and setup of organizational governance structures the focus is more on an organizational level and less on prod-
(Alt 2018; Hess and Constantiou 2018; Nambisan et al. uct and service or business model innovations (Hess et al.
2017) or the development and implementation of IT and dig- 2016). However, IT departments oftentimes lack the necessary
ital transformation strategies (Bharadwaj et al. 2013; Chanias customer or market orientation.
et al. 2019; Matt et al. 2015; Yeow et al. 2017). Additionally, A second approach is to establish deliberate executive de-
this stream also investigates how organizations can manage partments and assign them with the task to coordinate an orga-
the diffusion trajectory and adoption of digital innovations nization’s digital transformation. As the head of such executive
(Pousttchi and Dehnert 2018; Repschlaeger et al. 2013) or departments firms usually appoint a Head of Digital
how organizations should effectively and efficiently govern Transformation or even decide to establish a new C-Level po-
digital innovation projects (Hess and Barthel 2017). sition: the Chief Digital Officer (CDO) (Singh and Hess 2017).
In order to “make ready” for digital innovations, organiza- First studies on this new management position have shown that
tions need to cultivate a dedicated digital transformation gov- the successful implementation of a CDO strongly depends on
ernance (DTG) approach that allows them to realize and de- the support of other C-Level managers, in particular the CEO.
ploy the four enablers illustrated in the previous section (Fig. Moreover, the coordination between CDO and CIO needs to be
3) and, thus, aids them in the successful development and arranged efficiently and bordering responsibilities and authori-
implementation of digital innovations and in their embedding ties need to be clearly defined. This second approach depicts a
in organizations. Organizations can design their DTG and, very comprehensive, company-spanning approach and, thus,
thus, approach the governance of digital innovations, either meets the requirement that digital transformation affects many
in the form of dedicated structures (e.g., management roles or different parts of organizations, often at the same time (Matt
digital business units), dedicated processes (e.g., for formulat- et al. 2015). Nevertheless, such executive departments are not
ing a digital transformation strategy or the execution of digital endowed with individual budget or profit and loss (P&L) re-
transformation projects), or dedicated relational mechanisms sponsibilities related to their digital transformation activities.
(Bharadwaj et al. 2013; Chanias et al. 2019; Hess et al. 2016; A third approach is to strictly separate an organization’s
Jewer and McKay 2012; Van Grembergen and De Haes digital business activities from the core business and establish
2009). Figure 4 illustrates these three perspectives on an or- a dedicated digital business unit (DBU). Typically, a Head of
ganization’s governance of digital innovations. Digital Business is in charge of such DBUs and endowed with
the necessary budget and P&L responsibility to run the DBU.
This approach is usually sensible if firms can offer digital
Digital transformation governance structures products and services, leverage digital business processes or,
more comprehensively, run digital business models distinctly
DTG structures describe how organizations can adjust their from their core business. One large advantage of this approach
organizational structures according to their digital transforma- is that DBUs are typically responsible for their own P&L and
tion efforts and, thus, prepare their organizations for digital operate close to the market. Yet, due to their isolated nature
innovations. Generally, they can be designed in three different DBUs oftentimes face the challenge that they may fail to as-
DTG sume a company-spanning view on digital transformation. In
Relational practice, we can also observe combinations of the three ap-
Mechanisms
proaches depicted above. The travel and tourism company
TUI Group has given its digital activities into the care of a
CDO who is at the same time the Head of the IT (i.e., a
Digital combination of the first and second approach). And with the
Transformation appointment of a Head of Digital Business who also holds the
Governance
DTG (DTG) DTG office of the CDO, the home appliances manufacturer BSH
Processes Structures Group follows a combination of the second and third
Fig. 4 Perspectives on the governance of digital innovations approach.
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F. Wiesböck, T. Hess

Digital transformation governance processes In the context of an organization’s digital innovation initia-
tives, relational mechanisms can manifest in new forms of
With regard to dedicated DTG processes, organizations need intrafirm or cross-unit collaboration (Bala et al. 2017;
to develop and implement a company-spanning digital trans- Chanias 2017; Islam et al. 2017; Saldanha et al. 2017), busi-
formation strategy that defines all tasks and activities related ness and IT co-location and cross-functional trainings (Jewer
to an organization’s overall digital transformation and that, and McKay 2012; Van Grembergen and De Haes 2009), new
thus, also covers its digital innovation initiatives (Bharadwaj forms of digital leadership (Bennis 2013; Hansen et al. 2011),
et al. 2013; Chanias 2017; Matt et al. 2015). Digital transfor- or new forms of customer involvement (Hadaya and Cassivi
mation strategies enable organizations to coordinate and pri- 2009; Koch and Bierbamer 2016). Past research has shown
oritize their digital innovation efforts across different organi- the importance of relational mechanisms in the context of the
zational functions. However, it is crucial for organizations to tasks and activities related to digital innovation such as
align their digital transformation strategies with other organi- outsourcing to specialized service providers or the alignment
zational or functional strategies such as IT or general business of IT and business departments (Cao et al. 2013; Luo et al.
strategies (Bharadwaj et al. 2013; Hess et al. 2016). Besides, 2016; Oshri et al. 2015). In practice, the establishment of
the development and realization of digital transformation strat- specialized digital innovation boutiques offers proof for the
egies depends strongly on the interplay of an organization’s former. Especially large-sized organizations with innovation-
centralized (i.e., management driven top-down) and hindering legacy IT systems oftentimes transfer single phases
decentralized (i.e., emerging bottom-up) digital transforma- (for instance, the identification of promising innovative digital
tion activities (Chanias 2017; Chanias et al. 2019; Yeow technologies or the technological product development) or the
et al. 2017). entire wingspan of their digital innovation development pro-
In general, a digital transformation strategy has three di- cess to such specialized digital innovation boutiques.
mensions (Matt et al. 2015). Firstly, it describes the necessary
changes in an organization’s value creation and governance
structures that result from the use of digital technologies and Conclusion
the resulting digital innovations. Secondly, it defines the rules
for an organization’s attitude towards and use of digital tech- With this article we structured the existing research streams on
nologies. Thirdly, it reflects an organization’s financial back- digital innovations as a basis for future research in this area.
ground. In practice, we have seen different manifestations of First, building up on already existing conceptualizations, we
digital transformation strategies in the media industry, for in- introduced a technology-push-pull model of digital innova-
stance, where media companies have implemented different tions (Fig. 1) and distinguished the three different categories
forms of digital transformation strategies depending on their of digital innovations (Fig. 2). Subsequently, we argued how
specific business models and subindustry backgrounds (Hess organizations can prepare their organizations for digital inno-
et al. 2016). vations through the realization of four specific enablers
(Fig. 3). Finally, we elaborated on the important role of a
dedicated DTG that allows organizations to govern the em-
Digital transformation governance relational bedding of digital innovations into their organizations (Fig. 4).
mechanisms In our views, the four research streams are strongly inter-
related and, thus, can be combined into a “linking” frame-
Relational mechanisms complement an organization’s DTG work. The development of digital innovations (research
structures and processes. Relational mechanisms come into stream 1) manifests in the implementation of three different
play whenever the realization and implementation of formal categories of digital innovations (research stream 2). These
governance structures demands internal or external social in- categories can only be realized under the presence of the re-
teraction and relationships between actors (Luo et al. 2016). spective organizational and IS-based enablers for digital inno-
Relational mechanisms act as a connecting piece that facili- vations (research stream 3). Both the realization and the de-
tates active participation and information exchange among the ployment of the enablers of digital innovation requires a ded-
different internal and external parties involved in innovation icated governance approach (research stream 4).
activities that demand the alignment of IT and business de- Figure 5 shows this integrated view on the four research
partments – which is the case in the context of digital innova- streams in the form of a “linking” framework. Based on the
tions (Cao et al. 2013; Jewer and McKay 2012). This makes framework the embedding of digital innovations into organi-
them an important element of an organization’s DTG (Chanias zations manifests along three concentric rings: the technology-
2017). In the end, it is relational mechanisms that de facto driven development and implementation of digital innova-
allow organizations to organize their internal and external dig- tions at the core, the enablers of digital innovations in a second
ital innovation efforts. ring, and the governance of digital innovations in a third ring.
 Author's personal copy
Digital innovations

Fig. 5 The three-ring framework

of embedding digital innovations Governing
in organizations Digital • DTG structures
Innovations • DTG processes
• DTG relational mechanisms

Enabling
Digital • Enabling organizational structures
Innovations • Enabling organizational capabilities
• Enabling organizational culture
• Enabling organizational IT application
portfolios

Developing • Technology-driven development

and • Digital solutions
Implementing • Digital business concepts
Digital • Implementation categories
Innovations • Digital product innovations
• Digital process innovations
• Digital business model
innovations

Digital Technologies

Our proposed framework (Fig. 5) can also be used to struc- of newly emerging digital technologies on all categories of
ture future research in this area. Our review of the existing digital innovations. For instance, artificial intelligence tech-
literature on digital innovations showed that while there al- nologies induce digital product and service innovations in
ready exists a large body of knowledge on the development the automotive industry (e.g., driverless cars) or digital pro-
and the different implementation categories of digital innova- cess innovations in the insurance industry (e.g., automated
tions (ring 1), the four enablers of digital innovations (ring 2) claim processing). Likewise, we expect an increase in the
and the governance of digital innovations (ring 3) present interdependencies between the different categories. For the
rather young academic research fields. Thus, owing to the future, we believe this trend to continue and, thus, encourage
different development stages of the individual research future research on the influence of emerging digital technol-
streams, we suggest the following future research agenda. ogies on the different implementation categories of digital
The innermost-ring of our framework (Fig. 5) on the con- innovations.
ceptual development and implementation categories of digi- The second ring of our framework (Fig. 5) offers a second
tal innovations presents a first avenue for future research. avenue for future research. Research on the enablers of digital
However, the prevailing literature already offers a rather innovations (research stream 3) represents a rather young ac-
comprehensive picture in this area. In our view, the existing ademic field. The prevailing findings and solutions regarding
conceptualizations (research stream 1) sufficiently explain the embedding of digital solutions and digital business con-
and address the idiosyncrasies of digital innovations de- cepts into their organizational IT application portfolios and
tached from different technology-subclasses or innovation organizational structures, respectively, mirror the early stage
categories. Therefore, this stream is especially well-suited of this research stream. The same holds true for research on
for future empirical studies that validate the prevailing theo- digital capabilities and digital culture. Accordingly, we en-
retical and anecdotal evidence. Moreover, we acknowledge courage future research to further investigate the four enablers
the relevance of the technological foundations of digital in- of digital innovations. Among other things, both theory and
novations as means to create value on electronic markets and practice would benefit from additional insights on the embed-
digital platforms and, thus, encourage future research on the ding of digital infrastructures into existing IS landscapes or on
role and significance of digital platforms for digital innova- the optimal integration of novel and existing organizational
tions. Furthermore, existing research on the different imple- structures in the context of digital innovations. Moreover,
mentation categories of digital innovations (research stream the questions which digital capabilities enable firms to suc-
2) also seems rather well-developed. Nevertheless, the ongo- cessfully pursue digital innovations and how organizations
ing technological progress in combination with the increas- can build up these digital capabilities are still unanswered.
ing penetration of digital technologies and changing con- Finally, future research in this area could contribute to theory
sumer demands and production possibilities triggers new and practice by creating insights on digital change and digital
manifestations in each category. Today, we see the influence culture.
 Author's personal copy
F. Wiesböck, T. Hess

Finally, future research on the governance of digital inno- Bygstad, B. (2017). Generative innovation: a comparison of lightweight
and heavyweight IT. Journal of Information Technology, 32(2),
vations (research stream 4) offers a third promising avenue for
180–193.
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Chan, C. M., Teoh, S. Y., Yeow, A., & Pan, G. (2018). Agility in
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responding to disruptive digital innovation: case study of an SME.
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how organizations can successfully manage DTG processes. Chanias, S. (2017). Mastering digital transformation: the path of a finan-
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presented at the 25th European conference on information
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Systemes, Guimaraes, Portugal.
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28(1), 17–33.
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