Digital Innovation and Institutional Entrepreneurship

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Chief Digital Officer Perspectives of their Emerging Role*. Table 2. The CDO's Perspective: Five Dimensions Characterizing the “Digital” Logic of Action.
* Forthcoming at Journal of Information Technology

Digital Innovation and Institutional Entrepreneurship: Chief Digital Officer Perspectives of their Emerging Role* Table 2. The CDO’s Perspective: Five Dimensions Characterizing the “Digital” Logic of Action Dimension

Definition

Key findings

Focus of management control

Key concerns and structures that direct the execution of values and beliefs.

Initiating new projects triggered by and rooted in digital technologies is the primary goal in the “digital” frame. New initiatives are the core concern of the CDO and the projects span various departments and areas of the organization. Accompanying the focus on newness, there is a balancing act and it is necessary to synch with existing IT projects.

Value orientation

Core outcomes and standards that guide the accomplishment of goals.

Generating revenue streams through the deployment of digital technologies is the source of immediate and sustained goal. Each strategic step needs to contribute and be aligned with the overall goal to generate revenue. The CDO aims at displaying the value of digital technologies as a platform for revenue streams in different departments in the organization.

Goal achievement

The means to accomplish goals by adopting certain approaches and techniques.

The basic working modes include heavy experimentation with digital content, service or device layers of digital technologies. The projects are smaller scale, short iteration cycles. Also, the digital script suggests that the organization rely on existing digital platforms and equally regards own and externally controlled digital resources.

Reference field

The field of practice in which the logic is rooted.

The startup field is closely related to a domain that is supportive of newness, latest technological developments, lean and fast scaling. However, in some cases the organization is mature and needs to develop solid foundations for collaborating with startups instead of imitating their working mode.

Location in value chain

Assumptions about the appropriate function and role of an organization with respect to the functions and roles of partnering organizations.

The location in the value chain is following the principle of being close to the customer and developing a direct digitally supported relation with the customer. Customer facing also implies a mindset adopting the “outside-in” perspective on the organization.

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* Forthcoming at Journal of Information Technology

Table 4. The CDO’s Characterization of “IT” versus “Digital” Logics Dimension Focus of management control Value orientation Goal achievement Reference industry Location in value chain

IT logic

Digital logic

Operational integration Cost saving Risk aversion Industrial organization Operations

New initiatives Revenue enhancing Heavy experimentation IT industry, digital disruptors and start ups Customer facing

(1) Focus of Management Control – One commonality across all CDOs is that they emphasized, in some form or another, how they dealt with an uncertain, changing domain rather than a well-known or wellunderstood domain. CDOs started new projects and coordinated these initiatives in a strategic manner, and communicated the need for organizations to be open to and incorporate open-ended innovation: “We need to create a clear, unambiguous digital strategy that supports the digital growth agenda that everybody in the organization can understand...I believe everything has to drive value and every single, even down to a release, every single released code I will do, whether original website or a piece of software, we have to measure the values they create and hold people accountable on it (CDO, Manufacturing 4).” Even though the focus on setting up new projects predominated the interviews, CDOs made it a part of their mission to develop connecting links between ongoing projects and new digital initiatives. As described by the CDO of RetailOrg 1, her goal was to establish a center which leads strategy: “[The CEO] didn't even know what was the title that he wanted, but he knew he had a problem with developing a digital strategy for his organization. He had tried, but it wasn't successful, and he needed somebody at the group executive committee level to build a strategy for the group and work with everybody in the organization to do this (CDO, RetailOrg 1).” Every CDO that we interviewed emphasized the strategic relevance of their activity. They often contrasted this with operationally focused IT departments. CDOs indicated that the IT logic involved operational

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* Forthcoming at Journal of Information Technology integration – often associated with the classic tasks of the IT professional around system implementation and support. They characterized CIO behavior as structured by established patterns of activity, wellestablished through norms of the IT profession. One of these norms involves the responsibilities of the IT professional in the organization, which is focused on optimization of the ongoing business tasks and integration of systems. CDOs pointed out that there was typically a well-established way of designing, implementing and monitoring these initiatives, which accounted for this difference in focus for CIOs and the IT function: “I see information technology largely as an infrastructure topic because you always have your IT teams and your IT groups that are very focused on the infrastructure to facilitate the technology (CDO, HealthRelated).” (2) Value Orientation - Describes where the essential contribution of the CDO’s team lies. According to CDOs, their organizations primarily focused on new revenue streams – increasing the “top line” performance of a company. This was their primary function in the organization and the vocabulary that they adopted accordingly was one of business models: “How much are they challenging our business model, our revenue models, our go to market? I think these are most of the discussions I am having at the moment. That's why I also think that the scope of digital transformation overall and then also my role is much more on the business side than on the IT side (CDO, FinancialServ 4).” Value orientation is tightly linked to role centrality which triggers organizational actors to evoke a certain schema when taking responsibility in their roles. For example, CDOs often started projects thinking in terms of their direct impact – using available data to justify their assumptions and further motivate the strategic relevance of the project: “I report to the public affairs person and to the head of development because I also thought it was very important when I took the CDO role to have a foothold in the revenue generating arm for the University (CDO, HighEd 1).” Page 3 of 8

* Forthcoming at Journal of Information Technology While CDOs identified with the strong emphasis on increasing revenues, they described CIOs as traditionally more focused on internal systems and technology – focused on the efficient streamlining of business processes. The CDO of a large retail chain firm explained how the IT department is organized to reduce costs and keep them low, and in many organizations the IT organization is treated as a cost center: “You have to understand the entire idea of bringing products to market, deliveries, supply chains, customer service, marketing, sales, customer onboarding, all that kinds of stuff. CIO doesn't really have that horizontal view, right? The CIO is really set up to manage information systems and keep everything running (CDO, RetailOrg 1).” (3) Goal Achievement – CDOs indicated that the process through which they achieved their innovative goals involved experimentation as a central feature. Experimentation aimed to break down tasks in smaller units and run pilot projects and test those pilots, learn from them, and iterate before committing to a major roll out. The CDO of a media organization described this experimental mode of goal achievement: “In addition, what I've done here that is really cool is that as we have a lot of new technology… The learning process on this new era is endless. So what I have done also in our lab is everything that is new, we have there… the whole team gets in there. They explain how it works and try to create solutions for our clients who use the new technology. So instead of saying, "Well there is a google glass that I don't know how to use," we get it there and we say, "Use it. Try to imagine how we can make it… understand how it works, and create solutions based on the experience (CDO, MediaAdvert 10).” Applications developed through this approach often run as beta versions for extended periods of time with the expectation that elements of the application (such as interfaces) will change frequently. A manufacturing CDO points out how they needed to create open-ended applications structured in a way that tolerates risk using the example of social media applications: “Social media is a very tricky one because they have their own language, their own platforms […] they're also extremely sensitive from a corporate communication standpoint because things can go very Page 4 of 8

* Forthcoming at Journal of Information Technology wrong. From that thing we made sure that we build a system that essentially gave us more freedom and freedom to experiment in those areas that are less dangerous. We are isolated and I told my counterpart from a communication standpoint that it's not that everything is at the same level of risk (CDO, Manufacturing 3).” One of the CDOs described this working mode as “running beta version”: “I take almost everything as a beta, let's get up and running within three months. Only through that process do you determine what works and what doesn't (CDO, HighEd 2).” Often professional experiences of CDOs had their roots in startups or highly dynamic environments: “It's mainly empowering people. Making them feel like they can do new things. That's exciting for the museum. Giving them permission to try things. To fail. To do more things. Those are all things that require a lot of effort (CDO, ArtRelated 1).” The respondents characterized CIOs, on the other hand, in terms of operational integration that is more riskaverse and less entrepreneurial than CDOs. “Again, if I want to compete with the external entrepreneurial startup incubator ecosystem, I've got to be playing by the same set of rules. One of those rules is how do I optimize my supply chain to be using the latest and greatest version of the innovation […] However the integration is a part of the CIOs responsibility (CDO, SoftwareCom 1).” (4) The Reference Field – To guide their logics of action CDOs used the field of technology startups and digital giants such as Google, Amazon, and Facebook. CDOs universally took these organizations as a reference point, and they strongly identified with them, their activities were guided by principles such as: fast execution, digital in the heart of the strategy, scaling initiatives iteratively, avoiding much bureaucracy, etc. The CDO wanted to “go down to New York City and Silicon Valley and bring back the best technology that [can be found] to help advance our digital. We were one of the first to use Heart Beat, which is real

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* Forthcoming at Journal of Information Technology time monitoring (CDO, HighEd 1).” Another CDO, in a media company described their working mode by comparing it to startups: “We are trying to discover every day, what is it that has to be done. So imagine the start-ups. The way they work is they understand that what the consumers or the people need, and when they see this, they see an opportunity and they develop something to fulfill this need. That's exactly what we do (CDO, MediaAdvert 10).” In established organizations, this startup mentality can manifest through relationships with startups. For example, the CDO of a healthcare organization highlighted that their goal is not to join the “Googles and Watsons of the world”, because that is not their key competence, but rather, to partner with them. Such CDOs were more selective about developing internal digital capabilities and instead build relationships with appropriate external providers: “The reason is if we're going to bring those advanced analytics and digital capabilities in house, it would be very difficult to stay competitive. Whereas if we're partnering with the Googles of this world or the Watson IBMs of this world, they have to be the best because otherwise they'll lose their customers. Our strategy is […] to really partner with the best people in smart ways. That will be our approach to capabilities (CDO, HealthRelated).” In stark contrast to this startup mentality, CDOs typically characterized their IT unit as core to ongoing operations. As such, IT units needed to focus on a rigorous process of systematic evaluation and methodological implementation to ensure strong implementation outcomes. This typically required longer planning horizons: “The traditional IT organization in our structure was absolutely not able to take some projects and deliver in a very fast-pace, with some small budget, on-time and agile and do it and redo it and so on… the entire structure is totally opposed to being agile (CDO, Manufacturing 2).” (5) Position in the Value Chain – According to CDOs, digital was about customer facing processes and set emphasis on the end customer as both the receiver of digital services or products and the source for Page 6 of 8

* Forthcoming at Journal of Information Technology further insights. It was crucial to become the first contact point and platform between relevant customers and business partners: “Compared to the previous business model - there is a very different approach to accessibility of our programs…if you're a university student or a company, you would have to sign up with our organization and pay before you saw any types of opportunities or talent. The difference now is - it is very much like a social network. You can almost compare to LinkedIn where all of our opportunities and all of our people are now openly available to see for anyone, anywhere. Instead of paying before you see opportunities, and the value part is you would see this right away (CDO, ForStudents).” Even when CDOs led internal initiatives, they translated their goals to reflect the “outside-in view” of the organization. For example, when organizing digital competencies in the organization, teams were assembled in a way to generate immediate impact for external customers. There was less fear attached to the exposure of the organization on digital platforms, not backing off from directly reaching out to the customer through digital channels, etc. The goal is to “get something into the hands of consumers as early as possible and start learning [together with the customer] (CDO, MediaPub 2).” Here, CDOs often used examples to describe how their responsibility differed from that of an IT department. Especially describing an image where IT was the back office, while digital worried more about the front end: “If you're like most financial service companies the number one impediment to being able to execute in digital would be that your core systems, your operating systems, your processing systems, your financial systems don't play well with the web. They're not API enabled. You can't build digital front ends that communicate easily with them, right? I think a lot of larger companies they build these digital front ends and they fake it in the back end (CDO, FinancialServ 3).” CDOs depict the IT unit in terms of the back-end – far from the customer: “[the CIO is] generally focus[ing] on internal technology. The robustness of our email systems, our data storage, etc (CDO, Manufacturing 1).” In addition, the CDO of another manufacturing organization described the complexity of the IT mission:

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* Forthcoming at Journal of Information Technology “IT is running all the hosting activities, because they run the whole thing for the whole services, all the cloud services, internal services, accounting … they also run hosting for our sites (CDO, Manufacturing 3).” In sum both digital and IT areas of an organization look to innovate with digital technologies, but do so according to much different logics. It is not always clear which unit has jurisdiction and in what way over a particular initiative, nor is it clear how historical decisions around architecture, infrastructure, and technology roadmaps play out in the enactment of the CDO role.

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