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By 2019, Germany-based Kärcher, “the world’s leading provider of cleaning technology,” had turned its professional cleaning devices into IoT products. The data generated by these IoT-connected cleaning devices formed a key ingredient in the company’s ongoing strategic shift in its B2B business: Kärcher was transforming from a seller of cleaning devices to a provider of consulting services in order to help professional cleaning companies improve their cleaning processes. Based on interviews with seven IT- and non-IT executives, the case illustrates how the company learned to generate value from IoT products. And it demonstrates how a family-owned company transformed its organization in order to be able to more effectively develop and provide IoT products, while adding roles, developing technology platforms, and changing organizational structures and ways of working.
The use of digital, IT-based components in physical products is becoming increasingly relevant in practice. Surprisingly, the strategic impact of these "digitized products" has not received a lot of attention in IS research so far. Extant papers on the topic rely on ambiguous terminology (e.g., "smart products", "cyber-physical systems", "digital product-service systems") and underlying concepts differ widely. Based on an extensive literature review, this article provides an overview of the different terms and identifies five conceptual elements that form the building blocks of digitized products in research: "hybridity" (i.e., the combination of digital and physical components), connectivity, smartness, digitized product-service bundles (servitization of digitized products), and digitized product ecosystems. The implication for practitioners is that each element comes with different managerial challenges that companies need to address when incorporating the respective element in their products. The research implication is that each conceptual element is supported by different theoretical streams.
Digital technologies are moving into physical products. Smart cars, connected lightbulbs and data-generating tennis rackets are examples of previously “pure” physical products that turned into “digitized products”. Digitizing products offers many use cases for consumers that will hopefully persuade them to buy these products. Yet, as revenues from selling digitized products will remain small in the near future, digitized product manufacturers have to look for other sources of benefits. Producer-side use cases describe how manufacturers can benefit internally from the digitized products they produce. Our article identifies three categories of such use cases: product-, service-, and process-related ones.
The digital economy poses existential threats to — and game-changing opportunities for — companies that were successful in the pre-digital economy. What will distinguish those companies that successfully transform from those that become historical footnotes? This is the question a group of six researchers and consultants from Boston Consulting Group set out to examine. The team conducted in-depth interviews with senior executives at twenty-seven companies in different industries to explore the strategies and organizational initiatives they relied on to seize the opportunities associated with new, readily accessible digital technologies. This paper summarizes findings from this research and offers recommendations to business leaders responsible for digital business success.
Most digital innovations fail when they transition from the exploring to the scaling stage. We describe how freeyou, the digital innovation spinoff of a major German insurer, successfully scaled online-only car insurance, focusing particularly on how it managed the IT-related challenges. The stark differences between the stages required very different approaches to application development, IT organization and data analytics. Based on freeyou’s experience, we provide recommendations for successful transitioning from exploring to scaling.
As "the most international company on earth", DHL Express promised to deliver packages between almost any pair of countries within a defined time-frame. To fulfill this promise, the company had introduced a set of global business and technology standards. While standardization had many advantages (improving service for multinational customers, faster response to changes in import/export regulations, sharing of best practices etc.), it created impediments to local innovation and responsiveness in DHL Express' network of 220 countries/territories. Reconciling standardization-innovation tradeoffs is a critical management issue for global companies in the digital economy.
This case describes one large, successful company's approach to the tradeoff of standardization versus innovation.
Started as a mono-line focused purely on savings, in late 2012 ING Direct Spain was becoming a full-service bank. To this end, the bank had substantially increased its product- and channel-portfolio. ING Direct Spain originally provided "simple", "good value for money" products in an "easy to deal with" way at low cost supported by a direct model. But with the growth in its product portfolio during the previous decade and the ambitious goal of becoming a full-service bank, an increase in complexity seemed inevitable. Like many businesses in the global, digital economy, ING Direct Spain found it needed to decide which complexity created value for its customers and which one not. It also learned that IT can contribute to complexity and/or help manage complexity.
This case offers a close look at challenges of growing a company by increasing product complexity to provide comprehensive yet simple services.
Executive education in IS is under the scrutiny of many institution for the potential to bring in financial revenues. However teaching executives can be a very challenging task because of the previous experiences, variation in their previous education, and multiplicity of motivations for pursuing a continuous education. The panel aims at sharing successful experiences and highlighting challenges of dealing with executive audiences. The panel will present the results of a large survey among executive students and identify the three most significant elements emerged from the survey: the importance of theory that is actionable, the importance of varied pedagogical tools and practices, and the importance of relevance beyond practical tools. Based on a survey that will be distributed to the audience at the beginning of the panel, the audience will be actively engaged in sharing their experiences on the three topics aiming at capitalize and sum up the collective knowledge of the room.
By integrating its previously separate insurance, banking and investment products around customer life events (e.g., buying a car, getting married or buying a house), USAA is able to deliver a superior customer experience. To achieve the integration, USAA had to re-architect its business by redesigning structures, roles, incentives, processes and IT systems. The USAA case provides four principles for architecting a business to provide superior customer experience, which will become increasingly important in the digital economy.
The modern industrial corporation encompasses a myriad of different software applications, each of which must work in concert to deliver functionality to end-users. However, the increasingly complex and dynamic nature of competition in today’s product-markets dictates that this software portfolio be continually evolved and adapted, in order to meet new business challenges. This ability – to rapidly update, improve, remove, replace, and reimagine the software applications that underpin a firm’s competitive position – is at the heart of what has been called IT agility. Unfortunately, little work has examined the antecedents of IT agility, with respect to the choices a firm makes when designing its “Software Portfolio Architecture.”
We address this gap in the literature by exploring the relationship between software portfolio architecture and IT agility at the level of the individual applications in the architecture. In particular, we draw from modular systems theory to develop a series of hypotheses about how different types of coupling impact the ability to update, remove or replace the software applications in a firm’s portfolio. We test our hypotheses using longitudinal data from a large financial services firm, comprising over 1,000 applications and over 3,000 dependencies between them. Our methods allow us to disentangle the effects of different types and levels of coupling.
Our analysis reveals that applications with higher levels of coupling cost more to update, are harder to remove, and are harder to replace, than those with lower coupling. The measures of coupling that best explain differences in IT agility include all indirect dependencies between software applications (i.e., they include coupling and dependency relationships that are not easily visible to the system architect). Our results reveal the critical importance of software portfolio design decisions, in developing a portfolio of applications that can evolve and adapt over time.