IN DEGREE PROJECT DESIGN AND PRODUCT REALISATION,SECOND CYCLE, 30 CREDITS

, STOCKHOLM SWEDEN 2018

Supporting Digital Innovation Projects at Manufacturing CompaniesUsing Managerial Controls and Formal Development Processes

SARA JOHANSSON

MALIN KULLSTRÖM

KTH ROYAL INSTITUTE OF TECHNOLOGYSCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT

Supporting Digital Innovation Projects at Manufacturing Companies

Using Managerial Controls and Formal Development Processes

Sara Johansson Malin Kullström

Master of Science Thesis TRITA-ITM 2018:409 KTH Industrial Engineering and Management

Machine Design SE-100 44 STOCKHOLM

Stöttning av digitala innovationsprojekt på tillverkningsföretag

Användning av ledningskontroller och formella utvecklingsprocesser

Sara Johansson Malin Kullström

Examensarbete TRITA-ITM 2018:409 KTH Industriell teknik och management

Maskinkontruktion SE-100 44 STOCKHOLM

Master of Science Thesis TRITA-ITM 2018:409

Supporting Digital Innovation Projects at Manufacturing Companies – Using Managerial Controls and Formal

Development Processes

Sara Johansson

Malin Kullström

Approved

2018-06-08 Examiner

Sofia Ritzén Supervisor

Jennie Björk Commissioner

Anonymous Contact person

Tomas Edström Anna Karlsson

Abstract Digitalization affects all industries, there among the manufacturing industry where the major transformation can be mentioned as the fourth industrial revolution. Manufacturing companies who are experts within their traditional area often perform minor incremental improvements, however, companies embracing digitalization consequently also perform more radical innovations. Incremental and radical innovation require different management, hence, does also digital innovation. The project was carried out at two manufacturing companies, the Pulp Comp and the Tool Comp, who both had expressed initiatives within digital innovation. Thereby, this thesis aims to create an understanding of how to support digital innovation projects at manufacturing companies using managerial controls and formal development processes. By identifying possible influencing factors, such as success factors, obstacles and challenges, the thesis will provide managers with knowledge in how they can support digital innovation projects. To achieve that, 27 semi-structured interviews were conducted with project members and people with a general knowledge within the two companies’ projects. A total of five projects were investigated. A literature study was also performed to create a theoretical framework, that together with the coded data from the interviews were used to make an analysis to answer the two research questions. Additionally, a discussion is presented that concerns for instance, how employees at different positions use different managerial controls and how crucial it can be to balance the use of managerial controls. Finally, a conclusion with general managerial implications is presented regarding how managerial controls, attention and formal development processes can support digital innovation projects at manufacturing companies. Two main results from this study are that it has shown to be necessary to combine different controls to get successful result and the formal development processes might need a more dynamic, iterative and parallel approach. Keywords: Digital Innovation, Digital Innovation Projects, Managerial Controls, Attention, Innovation and Product Development Process

Examensarbete TRITA-ITM 2018:409

Stöttning av digitala innovationsprojekt på tillverkningsföretag – Användning av

ledningskontroller och formella utvecklingsprocesser

Sara Johansson

Malin Kullström

Godkänt

2018-06-08

Examinator

Sofia Ritzén

Handledare

Jennie Björk Uppdragsgivare

Anonyma Kontaktperson

Tomas Edström Anna Karlsson

Sammanfattning Digitaliseringen påverkar alla industrier, däribland tillverkningsindustrin där den stora transformationen kan omnämnas som den fjärde industriella revolutionen. Tillverkningsföretag som är experter inom deras traditionella områden utför ofta inkrementella förbättringar, men företag som anammar digitaliseringen utför även mer radikala innovationer. Inkrementell och radikal innovation behöver olika typer av ledning, därmed även digital innovation Projektet har utförts på två tillverkningsföretag, Pulp Comp (Massaföretaget) och Tool Comp (Verktygsföretaget), som båda har uttryckt initiativ inom digital innovation. Därmed syftar rapporten till att skapa en förståelse för hur digitala innovationsprojekt på tillverkningsföretag kan stöttas genom användandet av ledningskontroller och formella utvecklingsprocesser. Genom att identifiera möjliga påverkande faktorer, så som framgångsfaktorer, hinder och utmaningar, förser uppsatsen ledare med kunskap om hur de kan stötta digitala innovationsprojekt. För att uppnå detta har 27 semistrukturerade intervjuer utförts tillsammans med projektmedlemmar och personer med en generell kunskap om de två företagen och deras projekt. Totalt fem projekt har undersökts. En litteraturstudie har utförts för att skapa ett teoretiskt ramverk, som tillsammans med kodade data från intervjuerna användes för att utföra en analys för att svara på de två forskningsfrågorna. Dessutom presenteras en diskussion som berör bland annat hur anställda på olika positioner använder olika ledningskontroller och hur avgörande det kan vara att balansera användandet av ledningskontroller. Sammanfattningsvis presenteras en slutsats med generella ledningsimplikationer angående hur ledningskontroller, uppmärksamhet och formella utvecklingsprocesser kan stötta digitala innovationsprojekt på tillverkningsföretag. Två huvudsakliga resultat från denna studie är att det har visat sig vara nödvändigt att kombinera olika ledningskontroller för att erhålla ett framgångsrikt resultat, samt att formella utvecklingsprocesser kan behöva ett mer iterativt, dynamiskt och parallellt tillvägagångssätt. Nyckelord: Digital innovation, Digitala innovationsprojekt, Ledningskontroller, Uppmärksamhet, Innovation- och produktutvecklingsprocess

ACKNOWLEDGEMENT

This section aims to acknowledge the people who have supported and/or contributed to this master thesis.

First, we would like to direct a thank you to Jennie Björk who was our academic supervisor at Royal Institute of Technology (KTH). She has with great commitment guided us through the master thesis and provided us with valuable advices and feedback. Further, we would like to direct a thank you to our industrial supervisors, Tomas Edström at the Pulp Comp and Anna Karlsson at the Tool Comp, who have supported us with arrangements regarding working areas and other practicalities, as well as guidance in finding possible respondents and valuable employees for us to meet. Also, we would like to thank employees at the Pulp Comp and the Tool Comp, who have participated with openness and a big interest in interviews, meetings and presentations, or contributed in another way to the proceeding of the master thesis. It would not have been possible to conduct it without your contribution. Finally, this study is used in a conference paper in addition to this thesis. We would like to thank our co-authors Susanne Nilsson, and once again, Jennie Björk and Anna Karlsson, who therefore have contributed in valuable discussions regarding the raised topic. Greetings,

Sara Johansson & Malin Kullström

Stockholm, June 2018

NOMENCLATURE

This section aims to present the abbreviations used in this master thesis, to support the reader.

Abbreviations A Attention C Challenge DIP Digital Innovation Projects DP Decision point IF Influencing Factor MC Managerial Controls

MC – R Managerial Controls – Result Controls MC – A Managerial Controls – Action Controls MC – P Managerial Controls – Personnel Controls MC – C Managerial Controls – Cultural Controls MCS Managerial Control Systems O Obstacle P Process SF Success Factor

TABLE OF CONTENTS ABSTRACT SAMMANFATTNING ACKNOWLEDGEMENT NOMENCLATURE TABLE OF CONTENTS 1 INTRODUCTION 1

1.1 Background 1 1.2 Purpose 2 1.3 Delimitations 2

2 THEORETICAL FRAMEWORK 3 2.1 Digital Innovation 3

2.1.1 The Radicalness of Digital Innovation 5 2.2 Managing Digital Innovation Projects 6 2.3 Managerial Controls 7

2.3.1 Result Controls 9 2.3.2 Action Controls 10 2.3.3 Personnel Controls 11 2.3.4 Cultural Controls 11

2.4 Attention Supporting Digital Innovation Projects 12 2.5 The Support from Innovation and Product Development Processes 13

2.5.1 Strategy Setting 14 2.5.2 Front End of Innovation 15 2.5.3 Product Development 16 2.5.4 Commercialization and Post-launch 17

3 METHOD 18 3.1 Research Design 18 3.2 Literature Study 18 3.3 Data Collection 19

3.3.1 Interview Techniques 20 3.3.2 Sample 21

3.4 Data Analysis 23 3.4.1 Coding Procedure and Inter-rater Reliability 23 3.4.2 Analysis of Formal Process Descriptions 24 3.4.3 Mapping of Results 24

3.5 Validation of Result 25 3.6 Evaluation of Methods 26

4 RESULTS 28 4.1 Formal Development Processes 30 4.2 Digital Innovation Projects at The Pulp Comp 32

4.2.1 Success Factors 32

4.2.2 Obstacles 34 4.2.3 Challenges 36

4.3 Digital Innovation Projects at The Tool Comp 41 4.3.1 Success Factors 42 4.3.2 Obstacles 45 4.3.3 Challenges 47

4.4 Validation at the Pulp Comp 52 4.5 Validation at the Tool Comp 54

5 ANALYSIS 57 5.1 Managerial Controls Supporting Digital Innovation Projects at Manufacturing Companies 57

5.1.1 Using Result Controls to Support Digital Innovation Projects 57 5.1.2 Using Action Controls to Support Digital Innovation Projects 59 5.1.3 Using Personnel Controls to Support Digital Innovation Projects 60 5.1.4 Using Cultural Controls to Support Digital Innovation Projects 61 5.1.5 Using Attention as a Control to Support Digital Innovation Projects 62 5.1.6 Theoretical Implications on Managerial Controls 63

5.2 How Formal Development Processes Can Support Digital Innovation Projects at Manufacturing Companies 63

5.2.1 Using the Strategy Setting to Support Digital Innovation Projects 66 5.2.2 Using the Front End of Innovation to Support Digital Innovation Projects 66 5.2.3 Using the Product Development to Support Digital Innovation Projects 67 5.2.4 Using the Commercialization and Post-Launch to Support Digital Innovation Projects 68 5.2.5 Theoretical Implications on Formal Development Processes 69

6 DISCUSSION 70 7 CONCLUSION 71

7.1 Managerial Implications on Managerial Controls and Attention 71 7.2 Managerial Implications on Formal Development Processes 74

8 FUTURE RESEARCH 77 9 REFERENCES 78 APPENDIX A: INTERVIEW GUIDE PRE-STUDY i APPENDIX B: INTERVIEW GUIDE MAIN STUDY (PROJECT MEMBERS) iii APPENDIX C: INTERVIEW GUIDE MAIN STUDY (GENERAL) vii APPENDIX D: CODING SCHEME xi APPENDIX E: LIST OF MANAGERIAL CONTROLS USED IN THE VALIDATION EXERCISE xv APPENDIX F: DRAWN TIMELINES xvii

APPENDIX G: SUMMARY OF THE IDENTIFIED MANAGERIAL CONTROLS xxi

1

1 INTRODUCTION The section aims to present the background, purpose and limitations for this thesis to give the reader an understanding of this study.

1.1 Background Digitalization is a global transformation that concerns all industries, and is driven by the opportunities that new digital technology provides. In such a changing environment, innovation has been identified as a key for keeping a competitive advantage (Crossan & Apaydin, 2010). The manufacturing industry is affected by the digitalization, and the transformation is referred to as the fourth industrial revolution (Ustundag & Cevikcan, 2018). Manufacturing companies often hold expertise in developing hardware products and have strong product portfolios, however, they allocate most resources on minor improvements of existing products, for their current customers (Nagji & Tuff, 2012). The digital trend forces manufacturing companies to allocate more resources on radical innovation (Nagji & Tuff, 2012), since it enables a firm to respond to radical technological and environmental changes (Benner & Tushman, 2003).

The manufacturing industry is moving towards smart factories (Abrell et al., 2016) and the trends Industry 4.0, Industrial Internet and Internet of Things (Ustundag & Cevikcan, 2018). Since these trends have the power to reshape the industrial environment (Lerch & Gotsch, 2015), it is crucial for all companies to pay attention to the digital trend and plan for their participation to avoid becoming obsolete (Tushman & Anderson, 1986). The increased access to, and commercialization of, new digital technology, provide companies with the opportunity to develop what we call digital innovation. Yoo et al. (2010) define digital innovation as “the carrying out of new combinations of digital and physical components to produce novel products” (pp. 725). Either digital innovation can change the way of working (innovation as a process) or it can enable companies to develop novel products, services and business models (innovation as an outcome), where it provides the opportunity to expand the product portfolio (Tidd, 2001; Abrell et al., 2016; Nylén & Holmström, 2015). This study refers to the latter. Digital innovation has the potential to disrupt manufacturing companies’ product design (Abrell et al., 2016); it requires knowledge within engineering, mechatronics and IT, and additionally, it offers the opportunity for manufacturing companies to embrace the trend of servitization (Lerch & Gotsch, 2015) and create new business model strategies (Abrell et al., 2016; Mezger, 2014). Since incremental and radical innovation require contradictory management (Benner & Tushman, 2003), this confirms that the digital trend forces manufacturing companies, that usually engage to a large extent in incremental innovation, to engage in radical innovation. Lobo and Whyte (2017) note that “establishing processes to maintain stability whilst responding dynamically to uncertain and changing conditions” (pp. 94) is one of the major challenges for companies.

Projects have been identified as being “vehicles for implementing a firm’s strategy for innovation and diversification” (Davies & Brady, 2016, pp. 316), whereby it becomes beneficial to increase the prerequisites for these to succeed. By identifying influencing factors, more specifically success factors, obstacles and challenges, to digital innovation projects, and study how these can either be ensured or be avoided in future projects, it can guide companies in supporting digital innovation projects. The use of managerial controls has been shown as a beneficial way to direct attention, motivate and encourage organizations to meet new objectives (Cardinal, 2001) and, the formal development process has been stressed as critical for innovation (Visser et al., 2010). Thereby, managerial controls and formal development processes are interesting targets to study regarding how to support digital innovation projects.

2

1.2 Purpose The purpose of this thesis is to create an understanding of how manufacturing companies can support digital innovation projects using managerial controls and formal development processes. By identifying possible influencing factors, such as success factors, obstacles and challenges, the thesis contributes with knowledge regarding how to manage digital innovation projects at manufacturing companies.

1.3 Delimitations The master thesis course consists of thirty credits (ECTS) and corresponds to a time limit of twenty weeks. The study has been performed at two large and global manufacturing companies with businesses located in Sweden. It is based on 27 interviews conducted at two internal, and one external, office located in Scandinavia.

3

2 THEORETICAL FRAMEWORK This section aims to present the theory framing the study which will argue for the relevance of the research questions.

The theoretical framework is presented in section 2.1-2.5, it begins with handling Digital Innovation and Managing Digital Innovation Projects, followed by Managerial Controls, Attention Affecting Digital Innovation Projects and finally, The Support from Innovation and Product Development Processes, and is illustrated in Figure 1.

Figure 1. Overview of the theoretical framework.

2.1 Digital Innovation The increased access to, and commercialization of, new digital technologies into the manufacturing industry, provide companies with the opportunity to develop digital innovation (Abrell et al., 2016). Digital innovation can influence companies in two ways (Abrell et al. 2016), which is similar to how Schilling (2017) describes that innovation can. Digital innovation can change the way of working, and the way of developing products and services, i.e. innovation as a process (Abrell et al., 2016). However, when talking about digital innovation in this research it refers to that it can enable development of novel products and services, i.e. innovation as an outcome (Abrell et al., 2016), which in turn provides companies with the opportunity to expand their product portfolio (Abrell et al., 2016; Nylén & Holmström, 2015). Yet, innovation within one of these areas often enable innovation in the other (Schilling, 2017). Yoo et al. (2010) develop Schumpeter’s definition of innovation, and mean that digital innovation is “the carrying out of new combinations of digital and physical components to produce novel products” (pp. 725). However, research often emphasizes the implementation and commercialization as important parts of innovation. Björk and Magnusson (2009) describe innovation as an idea that is developed and implemented, and Grant (2013, a) distinguishes between invention and innovation and means that innovation is the initial commercialization of an invention, which he describes as “the creation of new products or processes through the development of new knowledge or from new combinations of existing knowledge” (pp. 796). Consequently, digital innovation can be referred to as the carrying out of new combinations of digital and physical components to produce and implement novel products.

Within the manufacturing industry, digital innovation can take different forms. Companies can simply embrace an individual new digital technology such as software- or platform development, as indicated in Nylén and Holmström (2015). However, what is often mentioned in research is traditional products with embedded digital technologies, e.g. Abrell et al. (2016) and Lerch &

4

Gotsch (2015), which also can be referred to as ‘smart products’ (Abrell et al., 2016) or ‘Internet of things’ (Westerlund et al., 2014). Abrell et al. (2016) mean that manufacturing companies combine for example sensors, radio frequency identification tags and cloud computing, with non-digital products, to provide the products with new properties. Whereas, Westerlund et al. (2014) describe ‘Internet of things’ as the interconnection of physical world of things and virtual world of internet, i.e. the interconnection of hardware and software. This enables new properties such as identification, communication, sensing and data collection (Westerlund et al., 2014). These innovations contain knowledge within engineering, mechatronics and IT (Lerch & Gotsch, 2015), hence, these can be perceived as complex for manufacturing companies. The complexity can be stressed further, Abrell et al. (2016) mean that digital innovation can disrupt companies’ product design and Yoo et al. (2010) mean that digital innovation can disrupt the existing design hierarchy in products. Yoo et al. (2010) describe digital innovation as a layered modular architecture, where components from heterogenous units with different design hierarchies must be coordinated into a system and where minor changes within one unit might have extensive effects on the design of another.

In addition to the effects digital innovation has on the products, the new properties provided by digital technologies enable manufacturing companies to embrace the trend of servitization (Lerch & Gotsch, 2015). Lerch and Gotsch (2015) state that the trend of digitalization and servizitation coincide, and Parida et al. (2015) state that building digital capabilities synchronizes with adopting a servitization strategy. For manufacturing companies who embrace servitization it means going from only selling a product to providing additional services connected to the product, which in turn means shifting focus from producing products to providing complete solutions (Lerch & Gotsch, 2015). According to Lerch and Gotsch (2015), these intelligent digital solutions will contribute to companies’ competitive advantage by significantly increasing performance and efficiency of products. In turn, this complete solution will require manufacturing companies to develop radically new value creating mechanisms (Lerch & Gotsch, 2015) and initiate extensive business model transformations (Parida et al., 2015), which further will increase the complexity of the outcome (Lerch & Gotsch, 2015). Lerch and Gotsch (2015) even state that some digital products and service systems will have revolutionary effects on the value creation in manufacturing companies. Business model innovation is interpreted as a strategic managerial task to commercialize new technology (Mezger, 2014) and continuous reconfigurations of the business model in the context of digital innovation has been identified as critical (Nylén & Holmström, 2015). In his study of the publishing industry, Mezger (2014) notes that the digital innovation affects not only the core product and services, but also customer preferences, revenue models, processes and value chains. This increases the network around products and services. For example, Westerlund et al. (2014), who study ‘Internet of things’ solutions, mean that a developer community is responsible for the development, while a business ecosystem is responsible for the commercialization, of the innovation.

Since digital innovation has the potential to disrupt companies’ product design (Abrell et al., 2016) and enable companies to adopt both servitization (Lerch & Gotsch, 2015) and business model innovation (Nylén & Holmström, 2015), it provides opportunities outside manufacturing companies’ traditional areas and thereby, also enables radical innovation (Abrell et al., 2016). Nylén and Holmström (2015) discuss the linkage between technological innovation and radical innovation as a way of linking digital innovation and radical innovation, however, they also mention digital, but minor incremental, improvements of existing products and services. As different degrees of innovation, i.e. incremental, radical and disruptive innovation, require diverse processes, activities and management (Tidd, 2001) it is of managerial interest to clarify the radicalness of digital innovation.

5

2.1.1 The Radicalness of Digital Innovation Degrees of innovation is one way of dividing innovation based on its characteristics, where the radicalness increases on a scale from incremental to radical, or even disruptive innovation (Tidd, 2001). In addition to disruptive innovation can highly radical innovations also be referred to as revolutionary, breakthrough or discontinuous innovation (Crossan & Apaydin, 2010). Schilling (2017) describes the distinguishment between incremental and radical innovation as how much “an innovation represents a departure from existing practices” (pp. 48), whereas Dewar and Dutton (1986, pp. 1423) mean that it depends on “the perceived degree of new knowledge embodied in the technology”, i.e. in the innovation. Incremental innovation is characterized by refinements and builds on current capabilities, while radical innovation fundamentally changes the trajectory and requires knowledge and competencies that are new to the company (Crossan & Apaydin, 2010).

On the one hand, following Schilling’s (2017) description, it becomes difficult to determine the radicalness of digital innovation. The increasingly common combination of digital technology and existing products in the manufacturing industry add new properties (Abrell et al., 2016), however, from another perspective the basic functions remain the same and the departure from previous products is low. On the other hand, following Dewar and Dutton’s (1986), as well as Crossan and Apaydin’s (2010), highlighted characteristics it becomes easier to determine. Digital innovation within an industry used to non-digital products will certainly mean major changes for customers, hence, it will also mean major challenges within the manufacturing industry. However, since companies must develop extensive knowledge that is new to the company (Abrell et al., 2016), it will particularly mean changes to them. Consequently, manufacturing companies dealing with digital innovation apparently also deal with radical innovation. Moreover, that digital innovation has a high level of radicalness is further emphasized by Visser et al. (2010) who mean that the degrees also differ in level of uncertainty; incremental innovations are often characterized by low uncertainty while radical innovations are characterized by high uncertainty.

The enabling of new product properties and new business models that digital innovation brings (Abrell et al., 2016) may mean that digital innovation is disruptive. Grant (2013, b) means that an innovation is disruptive if a technology competes with attributes that the existing technology does not have and Chen et al. (2017) say that disruptive innovation changes companies’ business models. However, Schilling (2017) notes that the radicalness can change over time; an innovation can be radical at first but shift to incremental as the knowledge base expands. Referring to digital innovation and the need for new skills (Abrell et al., 2016), digital innovation in manufacturing companies might be radical at first, but will transform into incremental as the knowledge base expands. Usually manufacturing companies allocate most of their resources on minor improvements of existing products, for their current customers (Nagji & Tuff, 2012). Because the innovation processes differ between incremental and radical innovation, and even can be adverse (Veryzer, 1998), manufacturing companies most likely have processes adapted to incremental innovation. Nevertheless, if they neglect the development of digital innovation, they risk losing competitive advantage (Abrell et al., 2016), and moreover, trying to use incremental innovation to cope with discontinuities will probably lead to failure (Tushman & O’Reilly, 1996). Incremental innovation processes are often characterized by optimization, standardization and refinements, while radical innovation processes are characterized by fundamental research, experimenting and prototyping (Visser et al. 2010). Accordingly, for manufacturing companies to reach new objectives of digital innovation, they must adapt structures and processes for development of digital innovation. Since projects are vehicles for the implementation of a company’s strategy (Davies & Brady, 2016), they must initiate and manage digital innovation projects.

6

2.2 Managing Digital Innovation Projects Digital innovation projects differ from traditional innovation projects in several ways, and entails many challenges. First, Holahan et al. (2014) describe that the radicalness of an innovation influence the project innovativeness, a project becomes more innovative with an increasing radicalness. More specifically, the “innovativeness increases as the project moves from low market and technological uncertainty to high market and technological uncertainty” (Holahan et al., 2014, pp. 332). Digital innovation projects face the challenge of being innovative since the radicalness of a digital outcome consequently brings a radicalness for the related project. In addition to that, there are several more challenges that need to be met and managed. Essentially, there are three other challenges noted in research: the uncertainty, the diverse development paces and the technological and organizational complexity. Since these characteristics for sure influence the way these projects must be managed, these will be further reflected on below. Uncertainty The complexity of digital innovation increases the uncertainty of projects as the opportunities are more (Abrell et al., 2016). Also, digital innovations are immature and developers need to experiment with different combinations (Westerlund et al., 2014). Because digital innovation has the potential to disrupt manufacturing companies’ product design, companies compete by developing new digital products and try out new variations based on emerging opportunities (Abrell et al., 2016). Except from uncertainties regarding the product development, Nylén and Holmström (2015) identify two more areas of uncertainty related to digital innovation: the digital environment and the organizational properties. As digital innovation most likely entails servizitation (Lerch & Gotsch, 2015) and business model innovation, uncertainties will arise regarding how to provide and sell the digital innovation (Nylén & Holmström, 2015). Thus, digital innovation projects come with many uncertainties, which Ahmed (1998) notes as a common reason why companies fear innovation. Consequently, companies must overcome this fear to be able to manage digital innovation projects. Diverse Development Paces

Since digital technology develops in a high pace, digital innovation projects need to be prepared to handle processes that are moving faster than traditional development processes (Nylén & Holmström, 2015). Davies and Brady (2016) note that companies use routines to combine internal and external competencies to cope with rapidly changing technologies. Several studies emphasize the difficulty in combining and integrating traditional non-digital products with digital technology just because of the diverse development paces, e.g. Nylén and Holmström (2015) and Abrell et al. (2016); traditional products and services usually have long development time, whereas digital technology needs a significantly shorter time and develops in a higher pace. The challenge brought by digital technologies’ high development pace, is even greater for manufacturing companies that deal with complex products with long life cycles (Abrell et al., 2016) and implies a need to identify long-term directions (Abrell et al., 2016) and to forecast the future (Nyléns & Holmström, 2015). Technological and Organizational Complexity

In addition to the complexity of diverse development paces, the new digital technology puts a demand on new competencies (Nylén & Holmström, 2015). Moreover, the competencies are not within a single area but within several ones that sometimes are not used to cooperate. For example, engineering, mechatronics and IT, as mentioned by Lerch and Gotsch (2015). They also mention manufacturing, electronic equipment providers and customers as parties that are possibly involved (Lerch & Gotsch, 2015). Also, Nylén and Holmström (2015) note that companies that begin to handle digital innovation are entering a new environment, which requires additional new competences to manage it successfully. The demand on new and diverse competencies consequently brings an organizational complexity. However, research has not presented concrete answers yet on where to find, and how to coordinate, new skills for these projects (Nylén and

7

Holmström, 2015). However, Visser et al. (2010) note that working cross-functional can be an effective way to coordinate useful knowledge between different departments in a company, hence, this can be a possible way to coordinate the competencies also in digital innovation projects. Moreover, cross-functional work has been shown to be beneficial to the creation of more customized solutions (Lerch & Gotsch, 2015) as well as to the performance of more radical innovations (Visser et al., 2010). It brings people with diverse backgrounds together (Visser et al. 2010). In addition to internal cross-functional work, Nylén and Holmström (2015) suggest that companies need to run digital innovation projects with a balance between internal and external resources. This is further supported by Brentani and Reid (2012), who mean that such companies have greater opportunity to succeed. According to Dougherty and Hardy (1996), changes in technology are especially challenging for long-stable companies since they must consider a comprehensive change regarding how to organize themselves. It is known for a long time that companies with routine operations see it challenging to handle innovation, however, their structures and strategies enable best practice performance for their existing procedures (Dougherty & Hardy, 1996). Unfortunately, these structures can be "hostile to creativity" (Hlavacek & Thompson, 1973, pp. 363). Dougherty and Hardy (1996) present in their article that one solution can be to let venture units handle new products to avoid being discouraged by structures and strategies, but they also mention that new products need to be connected to the rest of the organization, therefore, handling new products separately is not always a good solution. Organizations must have sustainable product innovation to stay competitive (Dougherty & Hardy, 1996). Sustained product innovation is defined as “the generation of multiple new products” (Dougherty & Hardy, 1996, pp. 1121), where new products are defined as “those (1) intended for customers who are unfamiliar to an organization or (2) that require unfamiliar product or process technologies” (Dougherty & Hardy, 1996, pp. 1121). Project management has been dominated of structure and control in circumstances where goals and objectives have been clear (KapsaliBrowaldh, 2013). However, for projects with fuzzy objectives and complex processes, these techniques have been found lacking (KapsaliBrowaldh, 2013). Therefore, there is a need to find methods that suit more complex projects (KapsaliBrowaldh, 2013), such as digital innovation projects. Much research emphasizes the importance of having dynamic capabilities regarding management of innovation projects for achieving a long-term survival. For example, Tushman and O'Reilly (1996) highlight the importance of having ambidextrous managers and organizations, the ability to handle both incremental and radical innovation, and thereby, stay successful over time. According to Visser et al. (2010), a company should engage in structural ambidexterity if it wants to improve its existing products as well as generate new products. Hence, having dynamic capabilities relates to manufacturing companies initiating digital innovation projects. Dynamic capabilities are influenced using managerial controls (Gschwantner & Heibl, 2016). Consequently, investigating how managerial controls can support digital innovation projects become interesting.

2.3 Managerial Controls Managerial controls or managerial control systems are commonly found in research and according to Merchant and Van der Stede (2012, a) it is a core, and critical, function of management. It can be compared to terms such as management controls and management control systems (Gschwantner & Heibl, 2016; Haustein et al., 2014), organizational controls and organizational control systems (Merchant, 1985) as well as organizational control mechanisms (Ouchi, 1979). Following Merchant (1985), the purpose of having organizational control systems is to “ensure the proper behaviors of the people on whom the organization must rely” (pp. 67). Whereas management controls have been described to “influence employees’ behaviors towards organizational goals” (Lövstål & Jontoft, 2017, pp. 42), and management control systems to “influence the behavior of managers and employees” (Gschwantner & Heibl, 2016, pp. 372).

8

Companies can use a managerial system to instruct, monitor and evaluate people (Ouchi, 1979) and to support organizations in motivating, monitoring, and making decisions (Merchant, 1985). Ouchi (1979) describes organizational controls by stating two questions: (1) “What are the mechanisms through which an organization can be managed so that it moves towards its objectives?” (pp. 833) and (2) “How can the design of these mechanisms be improved, and what are the limits of each basic design?” (pp. 833). Lately, the definition of management control systems has been further developed and thereby, also better adapted to innovation (Lövstål & Jontoft, 2017). Henceforth, this study will refer to these controls using managerial controls and managerial control systems as general terms and follow the definition made by Merchant and Van der Stede (2012, a), who describe it as “all the devices or systems managers use to ensure that the behaviors and decisions of their employees are consistent with the organization’s objectives and strategies” (pp. 6). They further stress the importance of successfully using managerial controls “because it is people in the organization who make things happen” (Merchant & Van der Stede, 2012, a, pp. 9). Allen et al. (2015) note that innovation often is associated with reduced managerial control, however, innovation requires both discipline and creativity (O’Connor & DeMartino, 2006). Furthermore, managerial control has recently been highlighted as an important factor of innovation management (Lövstål & Jontoft, 2017). Lövstål and Jontoft (2017) raise the tension managers meet in providing flexibility at the same time as using managerial controls to steer projects in the right strategic direction. This is in line with why Mundy (2010) emphasizes the necessary balance of managerial control: “a balance between taking actions congruent with the organization’s goals while also giving employees sufficient autonomy to make decisions” (pp. 1). Since digital innovation changes the circumstances of projects and companies, it is interesting how Haustein et al. (2014) describe that a managerial control system should be adapted to the unique circumstances of companies. For example, the most beneficial combination of managerial controls is different for stable manufacturing companies than for highly technological companies in fast growing industries (Ouchi, 1979). More specifically, companies’ external, organizational and innovation related characteristics have been presented as influencing factors for the use of managerial controls (Haustein et al., 2014). For example, companies must consider environmental uncertainty, customer power, business strategy, technological complexity, decentralization, innovation capabilities and venture capital financing, when designing its managerial control system (Haustein et al., 2014). Further, Merchant (1985) highlights the importance in defining a managerial control strategy, by which he means to define what managerial controls to use and how to prioritize them. Accordingly, since the embrace of digital innovation changes the circumstances within most of the influencing areas raised by Haustein et al. (2014) for manufacturing companies, it will certainly also force them to change their use of managerial controls. It can be a valuable tool to comply with the new strategies and objectives that digital innovation brings.

Merchant and Van der Stede (2012, a) highlight three main issues to companies’ demand on managerial controls: “lack of direction, motivational problems, and personal limitations” (pp. 10). In fact, an incorrect use of managerial control can even eradicate an entire organization (Merchant & Van der Stede, 2012, a). For example, too much managerial control has been claimed to inhibit employees’ motivation and their ability to apply knowledge to the need of the organization (Allen et al., 2015), and a company’s fail in balancing their managerial controls can result in slow decision-making and a waste of resources and finally, instability and reduced performance (Mundy, 2010).

The argued importance of having a managerial control strategy adapted to the changed circumstances of digital innovation, as well as the varying effects the use of managerial controls can have on companies, reinforces why managerial controls is an interesting concept to study regarding the support of digital innovation projects. In theory, it stands clear that the use of managerial controls and managerial control systems positively, and negatively, influences the support of projects. However, what still is unknown is how the use of managerial controls can be

9

used at manufacturing companies in practice, to support digital innovation projects in an industry that otherwise develop traditional and more incremental innovation projects. This leads to the first research question, which is presented below.

Research question 1: How can managerial controls support digital innovation projects at manufacturing companies?

In research, managerial controls are often sorted in different categories and several frameworks have been developed (Haustein et al., 2014), for example: markets, bureaucracies and clans controls (Ouchi, 1979); planning, cybernetic, reward and compensation, administrative and cultural controls, (Malmi & Brown, 2008); or results, action, personnel and cultural controls (Merchant & Van der Stede, 2012, b). The latter is used in this study since the terms indicate the object of the controls (Haustein et al., 2014), which focuses on employees’ output, behavior and minds (Alvesson & Kärreman, 2004), and thereby, possibly facilitates the understanding of them and makes it more tangible for practitioners. Additionally, it involves both direct (i.e. results and action controls) and indirect controls (i.e. personnel and cultural controls) (Haustein et al., 2014). It is important to notice though, as argued by Gschwantner and Heibl (2016), that it is rather the usage and combination of these that determine a company's direction, not an individual control. They also conclude that different controls can have contradictory effects but complement each other and thereby, also support ambidexterity in companies (Gschwantner & Heibl, 2016). Yet, it is interesting to study each of these categories and clarify in what way each can be varied and used to benefit digital innovation.

2.3.1 Result Controls Result controls focus on the output. By means of determining expected results (Nilsson, 2015) as well as monitoring and rewarding the output, companies can control the objective completion of an organization (Haustein et al., 2014). For example, by identifying and communicating objectives and visions (Nilsson, 2015), and by using performance measurement and reward structures (Haustein et al., 2014). Result controls serve the employees with clear objectives (Gschwantner & Heibl, 2016) and ensures the achievement of them (Haustein et al., 2014), but unfortunately, result controls can be inappropriate in situations of high uncertainty since it causes difficulties in setting clear objectives (Haustein et al., 2014). Yet, both Gschwantner and Heibl (2016) and Haustein et al. (2014) mean that result controls can be used in an enabling way also in uncertain conditions, by facilitating as support in decision-making. This is done using customer-based and non-financial measures, which Gschwantner and Heibl (2016) mean can support in directing focus on long-term effects as well as it creates transparency regarding organizational objectives and performance. Further, they emphasize the use of result controls to provide clear targets, without determine the way to achieve it (Gschwantner & Heibl, 2016). It has also been raised as a critical control in organizations where the decision-making is decentralized (Merchant & Van der Stede, 2012, b). Nilsson (2015) emphasizes a shared vision as crucial for both exploitation and exploration since it often causes employees to contribute with their knowledge and skills. Further, result controls in a research and development setting have been shown to support both incremental and radical innovation (Haustein et al., 2014), however, result controls have also been quite well criticized in relation to innovation. For example, the performance measurement part of result controls can be compared to cybernetic controls, as it is described by Malmi and Brown (2008), and Gschwantner and Heibl (2016) refer to a study made by Mundy (2010) who claims that an abundance on these can hinder innovation. A company strategy that requires high levels of creativity and innovation will probably have greater beneficial effects from less formal controls, such as cultural controls (Haustein et al., 2014). Gschwantner and Heibl (2016) note that the use of result control must be adapted to context and purpose since it is an effective type of control for short-term, however, it

10

can hamper long-term performance. Accordingly, result controls can be beneficially used in circumstances of digital innovation, however, to avoid the risk of hampering the necessary exploration and long-term performance they must be used with care. The aim of using result controls, as well as examples of common result controls, are summarised in Table 1.

Table 1: Table showing the aim of using result controls, as well as, examples on common result controls.

Result Controls

Aim Ensure the objective completion of an organization

Common Controls Objectives, vision, monitoring of objectives, performance measurement

2.3.2 Action Controls Action controls are used to control the behavior of the employees in order for the company to reach its objectives, which is done by means of procedures, guidelines, rules and restrictions (Haustein et al., 2014), and they are widely used in organizations (Merchant & Van der Stede, 2012, c). However, as mentioned by Merchant and Van der Stede (2012, c) action controls are not always beneficial, only if managers are sure of what actions to use or not, and are able to control that the undesired ones are not used. As they are defined by Malmi and Brown (2008), administrative, and to some extent also planning controls, can be compared to action controls. Planning controls have been argued to provide innovation projects with both stability and direction, and help companies to direct focus on innovation activities (Gschwantner & Heibl, 2016). Especially, they can contribute with efficiency in the realization of occured opportunities (Gschwantner & Heibl, 2016). This is further emphasized by Nilsson (2015) who notes that regulation is beneficial for the implementation of innovation, but worsens the conditions for the emergence of new ideas. However, under uncertain conditions it becomes difficult to predict the best procedure since technical or administrative barriers may occur (Haustein et al., 2014), which complicates the use of action controls in circumstances of digital innovation. Further, research has emphasized the risk of getting caught in routine actions and thereby, create a resistance to change within the company (Haustein et al., 2014). On the one hand, the stability and efficiency created by this type of control have been argued to mainly support exploitation (Gschwantner & Heibl, 2016). On the other hand, Nilsson (2015) notes that radical innovation also can benefit from formal processes, however, in these cases employees have interpreted them as tools rather than restrictions. Moreover, Gschwantner and Heibl (2016) note that also new product development requires a clear process, however, that it can consist of determined milestones but have flexibility in between. They also argue that a combination of interactive processes and target monitoring (i.e. results controls) can be beneficial for explorative development, although, an overemphasis on interactive processes may lead to continuous change and an unstable organization (Gschwantner & Heibl, 2016). In companies with high autonomy and decentralization it becomes even more difficult to use action controls, whereby they often are replaced by controls from the other three categories (Haustein et al., 2014). The aim of using action controls, as well as examples of common action controls, are summarised in Table 2.

11

Table 2: Table showing the aim of using action controls, as well as, examples on common action controls.

Action Controls

Aim Control the behavior of employees to achieve the company’s objectives

Common Controls Procedures, guidelines, rules and restrictions

2.3.3 Personnel Controls Personnel controls are about employees’ job requirements (Haustein et al., 2014). Companies can use their recruitment process, training programs, role descriptions and make sure to have enough resources in order to increase the conditions for employees’ self-control (Haustein et al., 2014). According to Merchant and Van der Stede (2012, c), they help in the creation of an understanding of the company’s direction, but more importantly they make sure that the personnel have the right capabilities and enough resources to succeed. Personnel controls are important, especially under uncertain conditions. Haustein et al. (2014) for instance, note that a well-trained and skilled personnel will be better at identifying the internal effects of an uncertain environment. They further highlight the positive relationship between personnel controls and strategies that require creativity and innovation (Haustein et al., 2014). Nilsson (2015) note that tasks and expertise development, among other aspects, has a positive impact on both experimentation and collaboration in a company. The embrace of new digital technologies will certainly require new knowledge, and thereby also an increased use of personnel controls. Haustein et al. (2014) mean that complex technology will demand an accurate recruitment of new skills as well as an extensive development of existing ones, whereas Nilsson (2015) emphasizes training and job rotation in conditions of high uncertainty. Since decentralization increases the diversity of projects it puts a greater demand on having coordination and integration among the employees (Haustein et al., 2014). The aim of using personnel controls, as well as examples of common personnel controls, are summarised in Table 3.

Table 3: Table showing the aim of using personnel controls, as well as, examples on common personnel controls.

Personnel Controls

Aim Have enough resources to increase the employees’ self-control

Common Controls Resources, skills, training, role descriptions

2.3.4 Cultural Controls Cultural controls aim at achieving group control, as in having shared values and norms (Haustein et al., 2014). Companies can create a good climate by using codes and a mentoring leadership, as well as promoting interaction and communication (Haustein et al., 2014). Even though cultural controls have been emphasized as more efficient for exploration than exploitation (Haustein et al., 2014), Gschwantner and Heibl (2016) emphasize cultural controls as being “important vehicles for translating ambidexterity into superior firm performance” (pp. 390) and they note that cultural controls can be used to create a balance between exploitation and exploration. Gschwantner and Heibl (2016) mean that cultural controls definitely can support creativity and exploration, however, they can contribute in creating shared goals and visions and thereby, also support stability and exploitation in a company. For cultural controls to foster creativity and innovation,

12

companies need to work towards a culture and climate that reduce fear of failure (Gschwantner & Heibl, 2016), as well as competition among the employees (Haustein et al., 2014). According to Haustein et al. (2014) flexible personnel controls can contribute to the creation of cultural controls. Also, cultural controls can be useful for companies that embrace digital innovations since cultural controls have been shown to be crucial for companies undergoing a change (Gschwantner & Heibl, 2016). The aim of using cultural controls, as well as examples of common cultural controls, are summarised in Table 4.

Table 4: Table showing the aim of using cultural controls, as well as, examples on common cultural controls.

Cultural Controls

Aim Achieving group control

Common Controls Climate, codes, interaction, communication and leadership

2.4 Attention Supporting Digital Innovation Projects Although managerial controls can play an important role for the management of digital innovation, Tushman and O'Reilly (1996) show that the development of more radical innovations in stable companies are much in need of promotion internally. Not least since an innovation’s increased radicalness often also leads to an increased resistance in companies if the traditional products still provide income (Rice et al., 2001). Research has concluded that it can be difficult to get support for radical projects in large companies due to their corporate culture that often prioritize innovation projects with low risk, such as incremental innovations (McDermott & O’Connor, 2002). Also, Holahan et al. (2014) note that several studies have shown how the way “ideas originate, move into the firm, and garner support” (pp. 330) is different depending on the level of radicalness. In other words, if digital innovation projects involve an increased radicalness, they must accordingly also increase the focus on promoting it. Moreover, it has been shown that radical innovation projects have a higher demand of attention, advocacy and protection (Holahan et al., 2014), probably to survive the resistance. This relates to the concept of attention that has been diligent researched lately, yet, from diverse perspectives (Ocasio, 2011). Attention influences adaptation in companies (Ocasio, 2011) and can thus help digital innovation projects to garner support. It can also support in the adaptation to the environmental changes, because companies’ attention structures, procedures and communication channels have been shown beneficial for the capability to comply to environmental changes (Ocasio, 1997). This raises an interest of how the attention increases the support of digital innovation projects in companies and thereby, affect their proceeding and success. Hence, also of how companies can use attention in the development process to improve the prerequisites for their digital innovation projects to succeed.

What further strengthens the interest of attention in this study is that it has been described in a way that relates to managerial controls - Ocasio (2011) notes for instance attention as a “source of control of individuals and subunits in organizations” (pp. 1286). More specifically, attention is strongly connected to decision-making and decision-makers (Ocasio, 1997), similar to managerial controls as they are defined by Merchant (1985) and Merchant and Van der Stede (2012, a) for instance. In his study, Ocasio (1997) intends to study how firms distribute and regulate the attention and he refers to organization attention by which he means “the socially structured pattern of attention by decision-makers within an organization” (pp. 188). Also, attention has been shown to control perception and action to desired activities (Ocasio, 1997). Further, studying the attention directed to digital innovation projects can provide information about how well companies’ strategy pervades the company. Not least emphasized by Ocasio (1997) who links corporate strategy to

13

organizational attention and thereby also links corporate strategy to the size of focus directed on, among others, specific projects. Another characteristic of attention that justifies the relevance of studying it, is that attention can be used top-down, but more importantly also bottom-up in an organization (Ocasio, 2011). More specifically, in addition to managerial controls, attention can be used by management to direct attention to activities that are in line with the strategy, but it can also be used by project members to motivate their ideas to other levels or functions in the organization (Ocasio, 2011), and thereby, increase a project’s adaptation in a company (Ocasio, 2011). The aim of directing attention, and related factors, are summarised in Table 5.

Table 5: Table showing the aim of directing attention, as well as, related factors.

Attention

Aim Increase adaptation and support of projects in companies

Related factors Attention, advocacy and protection

Finally, the four managerial controls presented in section 2.3.1 - 2.3.4, namely result controls, action controls, personnel controls and cultural controls, together with the use of attention as presented in section 2.4, covers a broad perspective of controls and will therefore be used when answering research question one – result controls, action controls, personnel controls and cultural controls will be used to cover the managerial perspective as the name indicates, whereas, attention will contribute with covering the employee perspective, more specifically, relate to how employees can possibly influence the support of these projects since attention is closely related to how management uses managerial controls.

2.5 The Support from Innovation and Product Development Processes

Innovation must be emphasized in all parts of a company (Ahmed, 1998) and for that has the process for development of new products been stressed as critical (Visser et al., 2010). Visser et al. (2010) note that structural mechanisms, processes and formalized procedures are positively associated with innovation performance. In fact, Ahmed (1998) even states that unsuccessful processes and structures can be major hinders for innovation since they influence the climate in companies. The innovation and product development process is an action control, since it is a process that manufacturing companies use to a large extent to control their projects. Holahan et al. (2014) note that research has shown how best practice processes for incremental innovation actually can be harmful to radical innovation. Also, Veryzer (1998) means that the development process for highly radical innovation benefits from being “more exploratory and less customer driven” (pp. 318) than the one for incremental innovation, as well as he highlights a possible necessity in having a more informal process for radical innovations. As argued by Holahan et al. (2014), despite the widespread knowledge of that incremental and radical innovation might need contradictory processes and project management the processes usually do not reflect upon this complexity. Managerial controls and the innovation and product development process must be put in relation to each other, not least due to what Holahan et al. (2014) claim, that companies’ product development capabilities depend on the integration and harmonization of many influencing factors. Hence, a study of the innovation and product development process becomes interesting

14

for manufacturing companies to enhance their capability to run digital innovation projects and undergo the necessary changes. The fundamental intention of having an innovation and product development process, is to process ideas and transform them into successful commercializations. Nilsson (2015) uses the description of an innovation process as, “the development and implementation of new ideas by people who over time engage in transactions with others within an institutional context” (pp. 15) whereas Brentani and Reid (2012) describe the new product development process as an information processing activity, since it translates information about markets, technologies, competitors and resources into design and strategies. On the one hand, Veryzer (1998) means that it has evolved from a stepwise process to an overlapping process with the activities sometimes sequential and sometimes in parallel, while Holahan et al. (2014) on the other hand, note that even though the process is complex and iterative it is often arranged as rather linear. Research have suggested a variety of activities and phases that should be in the process, for example: “strategy planning, concept generation, pre-technical evaluation, technical development and commercialization” (Veryzer, 1998, pp. 308); strategy setting, idea generation and screening, development, commercialization and post launch (Holahan et al., 2014); and an idea generation phase, a structured methodology phase and a commercialization phase (Ahmed, 1998). Further, the concept development phase can also be referred to as the front end of innovation (FEI) (Koen et al., 2016). Summarizing these, this study will use a division into four phases: (1) strategy setting, (2) front end of innovation, (3) product development and finally, (4) commercialization followed by post-launch. An illustration of the phases is found in Figure 2.

Figure 2. An illustration of the phases in the innovation and product development process.

According to Holahan et al. (2014), projects’ varying innovativeness and uncertainty require a variety in all these phases, whereby it is interesting to study what activities that are included in each of them and how they can be varied. Therefore, what have been told about this in previous studies is reflected upon in section 2.5.1-2.5.4. Since manufacturing companies usually allocate most of their resources on incremental innovation, their innovation and product development process probably is well-adapted to these. Unfortunately, digital innovation can bring consequences that influence how the process and its activities can support projects. Consequently, a second research question has been developed, which is presented below.

Research question 2: What activities must be taken into consideration in the formal development process to support digital innovation projects at manufacturing

companies?

2.5.1 Strategy Setting The first phase in the innovation and product development process is the strategy setting made by the company. According to Koen et al. (2016) the rest of the phases must agree with the company’s business strategy to result in a continuous flow of valuable outcomes. A company’s strategy should provide direction in the following phases on where to put most effort - in what “markets, applications, technologies and products” (Reid & Brentani, 2004, pp. 181). The Innovation Ambition Matrix is a tool that can be used to define what type of innovations companies prioritize;

15

it can rather be core, adjacent or transformational innovation (Nagji & Tuff, 2012). How the distribution among these types of innovation should look like is individually for each company; an average distribution for an industrial manufacturer is 70 percent on core innovation, 20 percent on adjacent innovation and 10 percent on transformational innovation, while the distribution is inverted for technological companies due to the high speed of technology development (Nagji & Tuff, 2012). This indicates that digital innovation that develops in a high pace will change how the manufacturing companies prioritize their innovations.

Even though this phase often is positioned first in the process, Reid and Brentani (2004) show that for highly radical innovations this phase may happen after the front end of innovation, if before uncovered opportunities are found. Companies’ strategy setting is in line with what Lerch and Gotsch (2015) mean helps companies to change, they say that manufacturing companies that embrace digital innovation and servitization must begin with identifying its potential. It is done by evaluating existing and possible development of capabilities, as well as, the needs among existing and potentially new customers (Lerch & Gotsch, 2015). Accordingly, it is highly important that companies’ desired embrace of digital innovation is noticed in its determined and communicated strategy to provide projects with a clear direction and the right prerequisites to succeed in the following phases.

Although the widely emphasized importance of having and conveying a company strategy, Merchant and Van der Stede (2012, a) state that failure most often happens “because of bad execution” (pp. 7). They also quote Jason Luckhurst (Merchant & Van der Stede, 2012, a), who clearly emphasizes the importance of ensuring the reflection of the strategy in all parts of the company and in all parts of the process, thus, so it is when companies embrace digital innovation as well. Jason Luckhurst said that “The difference between merely having a strategic vision and achieving strategic success is having a detailed understanding of what that vision means for every level of the business - how much funding you need, the branding and marketing strategy, which channels you will develop, how many people you need in which areas and when and what the organizational structure will be. It is also important to revisit the vision often and be aware of how close you are to achieving it at any given stage. This helps everyone in the company to stay focused” (Merchant & Van der Stede, 2012, a, pp. 8). Consequently, all parts of companies embracing digital innovation must be aware of the digital part of strategy as well as aware of how that particular part can contribute in the implementation of it.

2.5.2 Front End of Innovation The front end of innovation is often also referred to as the fuzzy front end (FFE) (Ahmed, 1998); Holahan et al., 2014). As the name suggests, Koen et al. (2016) state that it is often characterized by uncertainty and the activities are often unstructured and chaotic, however, they underline that it is manageable. It has even been highlighted as crucial for achieving a successful process (Koen et al., 2016). Koen et al. (2016) list five main activities involved: opportunity identification, opportunity analysis, idea genesis, idea selection, and concept and technology development. Here are ideas created and transferred into companies to harvest support (Holahan et al., 2014) and finally they are evaluated based on opportunities and the customers’ needs (Veryzer, 1998). However, the ideas must be managed differently depending on its innovativeness (Holahan et al., 2014). For instance, that the information tends to have a bottom-up direction in cases of highly radical innovations (Reid & Brentani, 2004), or that the evaluation might require more effort in cases of radical innovations since it can be more difficult to link the product to opportunities (Veryzer, 1998). Even lead users often lack the ability to assess the value of a radical innovation (Veryzer, 1998). If the targeted customer is known the identification of customer needs is possible though (Veryzer, 1998). Further, some of the early activities might be nearly impossible to implement with a too formalized process (Veryzer, 1998).

16

According to Koen et al. (2016), the activities included in this phase is mostly driven by companies’ culture, climate and leadership and the chance of creating new ideas is often increased by having a dialogue with customers and collaborate with other internal teams or external partners. In his study on highly radical innovations, Veryzer (1998) emphasizes the meaning of having one or a group of champions that have the ability to envision the application of technologies, but also to have a good understanding about the technology and its application on the market as well as the market itself. However, it requires a company that support these ideas and create congruence among employees (Veryzer, 1998). Accordingly, the use of personnel and cultural controls can have major effects in this part of the process, especially for digital innovation projects that are characterized by a rather high radicalness. However, in the latter part of the process where projects are evaluated, more formalized processes are to prefer. For example, Veryzer (1998) means that even for radical innovations where there will be uncertainties, business and market analyses must be made to provide senior management with expected directions so they can decide whether to let the project proceed or stop it. However, he states that these analyses can be made with descriptions of possible product applications instead of financial illustrations. When the concepts have been transformed to a confirmed product definition (Florén & Frishammar, 2012) and approved, they are passed onto the next phase (Ahmed, 1998) and onto the more structured product development (Koen et al., 2016).

2.5.3 Product Development Contrary to the fuzzy front end of innovation, the product development is characterized by structure, discipline, objectives and project plans (Koen et al., 2016). Here are new products compared with, and adapted to, the company’s overall objectives (Ahmed, 1998) and assigned a budget (Koen et al., 2016). Research links this phase with structured stage-gate processes, where stages and activities are predetermined and planned in a chronological order (e.g. Koen et al. (2016) and Ahmed (1998)). Holahan et al. (2014) note that such formalized processes as the stage-gate process often contribute to companies’ efficiency by “providing check-points on input and output” (pp. 332), “displaying the steps as being continuous and repeating” (pp. 332) and “producing a timetable” (pp. 332). Further, the gates ensure quality as well as help companies to manage risk and increase their efficiency (Veryzer, 1998). However, for projects where risk, uncertainty and ambiguity is high, research has argued that such a formalized process even can be harmful (Holahan et al., 2014), therefore, it can for digital innovation projects. Stage-gate processes demand that key questions are set early in the process (Veryzer, 1998), which the uncertainty of radical innovations complicates. Instead, radical innovation processes have been likened to a “probe and learn process” (pp. 333) that means that the process is being changed as the company and its project members learn (Holahan et al., 2014). Although research suggests flexible processes for radical innovation, Holahan et al.’s (2014) study shows how projects with a high level of radicalness have lower tendency to skip some activities than those with a low level. They reflect upon that if managers do not put sufficient structure to these projects, the uncertainty and cost for the long development time tend to increase rapidly (Holahan et al., 2014). Consequently, digital innovation projects may benefit from having structure to some degree, which in turn speaks to the use of action controls.

In this phase, the products are developed and according to Veryzer (1998) they are often presented as prototypes. The development is often performed in multiple iterations with evaluations and validations in between (Veryzer, 1998). Veryzer (1998) note that in the early product development, the technology is tested and when the innovation is nearly finished it is tested by customers to ensure the value, here he also mentions the successful use of a lead user. Still, Veryzer (1998) notes that for innovations with a high level of radicalness, customer feedback can be preventive since the customers themselves might not be able to determine the value of it. Hence, this might be to digital innovations as well.

17

2.5.4 Commercialization and Post-launch The fourth phase called commercialization and post-launch, is about commercializing the idea and bring it to market. Ahmed (1998, pp. 30) describes it as “making the idea an operational feasibility”, which might be in line with why Veryzer (1998) emphasize the increased interest among operational managers. During this phase, the focus shifts from being technology oriented towards becoming more customer oriented (Veryzer, 1998). Although some activities belong to the commercialization phase, they must be taken into consideration earlier in the process. For instance, Veryzer (1998) notes that exceptionally performed marketing activities early in the process have been shown as an important contributor to successful outcomes. Veryzer (1998) also notices the increase of marketing activities, such as customer trials and creation of marketing plans, to ensure a successful implementation of the product.

Following Holahan et al. (2014) who claim that innovativeness and uncertainty will affect all the phases presented section 2.5.1-2.5.4, namely strategy setting, front end of innovation, product development, commercialization and post-launch, and therefore, these will be considered when answering research question two.

18

3 METHOD This section aims to present the research design and the methods used in this study, to provide an understanding about how the study is conducted.

To be able to answer the two research questions, a qualitative study was performed based on semi-structured interviews. The interviews were later transcribed and coded, before the result was analysed and concluded. In combination with a presentation at each of the researched companies, validations were made, which in addition to the validation contributed with further insights about the recommendations. The including parts are further described in section 3.1-3.7.

3.1 Research Design This study is based on a multiple-case study, which is shown to be suitable when investigating areas where knowledge is limited and, it is useful when developing new theory (Williamson, 2002, a). Moreover, multiple-cases were appropriate for this study since it allows comparison between different projects. This study aimed to answer two research questions. Qualitative methods were chosen since it allows overall impressions and explanations, which can enable generation of new frameworks (Miles & Huberman, 1994, a). A total of five cases at two established manufacturing companies were investigated which is sufficiently many for theory building, while it simultaneously allows in-depth analysis (Williamson, 2002, a). The cases are ongoing or finished digital innovation projects at the companies in question, whom market outwards their initiatives within digital innovation. Both companies are global and have units located in Sweden. The first company takes part in the pulp, paper and energy industry, whereby we refer to this company as the Pulp Comp. The second company takes part in the metal working industry, whereby we refer to this company as the Tool Comp. Two of the investigated projects were run at the Pulp Comp and three of them were run at the Tool Comp.

3.2 Literature Study To gain a better, and more comprehensive, understanding of the topic and frame the research questions, a literature study was conducted and compiled in a theoretical framework. The study investigated and identified earlier findings that needed to be taken into consideration for this research. The literature study is based on the topics: Digital Innovation, Digital Innovation Projects, Innovation Management, Managerial Controls, Attention and finally Innovation and Product Development Processes. The literature study refers partly to books but mostly to scientific articles found through the searching tool named Primo. Search words that have been used are presented in Table 6. Moreover, additional literature has been found through the use and screening of reference lists in relevant literature.

19

Table 6: List of research areas and the used search words.

Research Area Search Words

Digital Innovation Digital Innovation, Digitalization, Digitization, Digital Innovation Projects, PSS, Product Service Systems, Servitization, Business Model Innovation

Digital Innovation Projects Digital Innovation Projects, Innovation Projects, Radical Innovation Projects

Innovation Management Innovation Management, Managing Innovation, Ambidexterity, Ambidextrous, Incremental and Radical Innovation

Managerial Controls Managerial Controls, Management Controls, Managerial Controls Systems, Management Control Systems, Organizational Controls, Organizational Control Systems

Attention Attention, Attention Management

Innovation and Product Development processes

Innovation and Product Development Process, Innovation process, Product Development Process, New Product Development Process, Incremental and Radical Product Development

3.3 Data Collection The study was introduced with a pre-study that ensured the relevance of the research and the applicability, as well as the comparableness, of the two selected companies. This was done through conduction of five semi-structured interviews with employees at the two companies; the used interview guide is to be found in Appendix A. Due to the relevance in the collected data from the pre-study, it was also used as complementary data in the main study.

The data in the main study was collected through 27 semi-structured interviews, with the five interviews from the pre-study included. These were conducted with a total of 23 respondents where 14 were a project member from, at least, one of the investigated projects. A minimum of two members from each project were interviewed. The respondents that were not a project member were interviewed since they had general knowledge about digital innovation projects, however, they had quite good understanding of the studied projects as well. What position each respondent has is presented in Table 7 and 8. The interview guide used for the project members respectively the one used for the respondents with general knowledge about digital innovation projects, are to be found in Appendix B and C. The first interview was used as a pilot interview to identify shortcomings in the interview guide design and provide possibilities for changes in it before the remaining interviews were conducted. The first interview for each project lasted for approximately 90 minutes and included a demo-part, to give the students a deeper explanation about the projects. The remaining interviews lasted for approximately 60 minutes. Moreover, additional meetings with experts were held to get more detailed information within certain areas. The interviews were held in Sweden and in Norway. Overall, the collected data mainly consists of recordings and transcriptions, and additionally, drawn timelines by the project members.

20

Table 7: The respondents’ positions at the Pulp Comp.

Pulp Comp

Respondent

(10 in total)

Position Pre-study Project General

Steering Function 5 16, 20 23

Functional Manager 2 20 19, 22

Project Manager 14, 17

Operative Function 14, 15

Table 8: The respondents’ positions at the Tool Comp.

Tool Comp

Respondent

(13 in total)

Position Pre-study Project General

Steering Function 1 12 1, 18, 21

Functional Manager 1 12 1, 18, 21

Project Manager 4 4, 7, 10

Operative Function 3 6, 8, 9, 11, 13

3.3.1 Interview Techniques All the conducted interviews were semi-structured since a structure was necessary to ensure that the purpose was fulfilled, while a dynamic conversation was necessary for making it fit all respondents and projects, as well as it allowed following up on leads (Williamson, 2002, b). The ambition was to hold each interview during a physical meeting, to enhance the motivation among the respondents, as well as enable conversations before and after the interview (Williamson, 2002, b). This improves the relation and provides a mutual understanding. This resulted in that 25 of the interviews were conducted through a physical meeting, and the remaining interviews were conducted over telephone due to difficulties in arranging a physical meeting. Since most of the interviews were held in Swedish, and only one were held in English, any quotes presented in the report have been translated. To facilitate the researchers to participate actively and avoid disruption (Williamson, 2002, b), the interviews were recorded in agreement with the respondents. For the project member interviews, a method called Journal Mapping was used. The respondents were asked to draw a timeline over the project’s proceeding, from the start until today. Thereafter they were asked to mark out incidents, such as activities, decisions and events, regarding the project. The timeline, in combination with developing questions, encouraged reflections on the marked-out incidents, which allowed the students and respondents to follow up on leads. Since not

21

all the researched projects are commercialized and they currently are in different phases of the development process, questions regarding future scenarios and expectations were added to not exclude the future perspective. Each interview consisted of three sections: (1) background (10 min), (2) project information (10 min) and (3) project journey (40 min). The third form of interviews were conducted using a similar interview guide, but with the questions less project specific and more generally about digital innovation projects. Also, the timeline was excluded.

3.3.2 Sample Since this study aimed at investigating events and processes regarding digital innovation projects at the researched companies, a purposive sample was chosen (Williamson, 2002, c). The five projects were chosen in collaboration with the supervisors at the studied companies, with the requirement that they must have a digital outcome. Also, how far the projects had come in the development process was taken into consideration, an illustration of this is shown in Figure 3. The criterion used for the respondents was that they must be, or must have been, a member of at least one of the studied projects, or, that they have insight in at least one of the these. These were chosen in collaboration with the supervisors and contact persons at the studied companies. An additional criterion was that at least one of the respondents from each project (i.e. project members) must have experience from non-digital projects as well, to facilitate comparison. The ambition was to find respondents with diverse positions, expertise and experiences to ensure a wide range of perspectives. Finally, the interviews at the Pulp Comp were held with four employees with a steering function, four employees at function management, two employees at project management and two employees with an operative function, whereas the interviews at the Tool Comp were held with four employees with a steering function, four employees at function management, three employees at project management and six employees with an operative function.

Figure 3. An overview of how far each project has proceeded.

In addition to the purposive sample, the snowball effect (Williamson, 2002, c) was used of mainly two reasons. First of all, to capture all important areas and relevant perspectives in each project, but also to contribute in finding experts within useful, as well as critical, areas for further in-depth questions. This was used by asking at the end of each interview for propositions of additional respondents that could be valuable, based on the topics raised. With some of the suggestions additional interviews were held, while some were deemed to be outside the scope or were not

22

available. Also, when no new information occurred in the interviews it was decided to stop following up the suggestions. The networks resulting from the snowball effect, showing how many suggestions that were followed up as well as how many that were left, are presented in Figure 4 and 5.

Figure 4. Network of suggested respondents at Pulp Comp (black=primary respondent, grey=suggested respondent, filled=interview conducted, empty= interview not conducted). The dotted lines refer to one-way propositions while

the filled lines refer to mutual propositions.

Figure 5. Network of suggested respondents at Tool Comp (black=primary respondent, grey=suggested respondent, filled=interview conducted, empty= interview not conducted). The dotted lines refer to one-way propositions while

the filled lines refer to mutual propositions.

23

3.4 Data Analysis To analyse the data a method called Critical Incident Analysis (CIA) was used by identifying critical events and prerequisites described by the respondents, in this case mainly described as success factors, obstacles and challenges to the digital innovation projects. The analysis was performed by compiling data from the interviews, i.e. transcriptions and drawn timelines, and data in the form of formal process descriptions from each company. More specifically, a coding procedure was conducted followed by an analysis of the formal process descriptions. Finally, the coding was compared to managerial controls, and compared and mapped together with the processes.

3.4.1 Coding Procedure and Inter-rater Reliability 25 of the interviews (including those conducted in the pre-study) were transcribed, and due that one interview were assessed to not include that much important data, it was listened through and the most important parts were transcribed. Also, one interview could not be recorded. All the transcripts were uploaded in a coding software called NVivo. NVivo was used to structure all the important findings from the interviews by coding the transcriptions into different nodes that were determined based on the research questions. These were entered into a coding scheme. To ensure that the writers coded in the same way, the function Coding Comparison was used to determine the Inter-rater Reliability. A conformity of at least 90 percent of the coding (Miles & Huberman, 1994, b) and a Kappa at a minimum of 0.4 (NVivo Kappa) should be pursued. The reliability was tested through four iterations by comparing the coding between the writers after they have coded the same transcription. Since the total conformity was higher than 90 percent from the beginning, more focus was put on raising Kappa. After each iteration, a review of each made coding were done followed by a discussion to identify differences.

The first iteration (1) was performed based on the coding scheme. Except from a lower Kappa than desired it was clear that one of the writers had coded a lot more than the other in the first iteration, whereby reflections were made and a strategy on how to be more consistent was set up. Also, missed out nodes were added to the coding scheme regarding the phases in the innovation process. The second iteration (2) gave a higher value of Kappa and the number of coded paragraphs were more consistent. A new discussion was held regarding the differences. The comparison pointed to different assumptions about what belonged to cultural controls and personnel controls, as well as challenges and obstacles. Therefore, the coding scheme was updated from just using keywords to more detailed descriptions of each node. The third iteration (3) resulted in an even higher value of Kappa. However, to further improve Kappa, certain nodes that had a lower Kappa were reviewed to find patterns for the occurred differences. Differences in the coding were found in nodes regarding the process steps, which therefore were further described. The fourth iteration (4) resulted in an even higher Kappa where some of the nodes had a Kappa much higher than the desired value, some nodes however, had a Kappa lower than 0.4. Yet, a decision was made to move on and start coding separately, and to ensure that both writers got to know all the transcriptions they coded the ones that the other had transcribed. The fourth iteration ended with a final discussion about possible improvements to have in mind while coding the remaining transcriptions. To further improve the reliability, for instance, it was decided to use a strategy to rather code too much than too little, and make an additional iteration after all transcripts have been coded where both students together go through the coding, each node at a time, and sort them into further ‘under-nodes’, as well as un-code some. The final coding scheme is presented in Appendix D.

When the students had gone through all nodes and had sorted them into under-nodes, the nodes were mapped to the research questions to identify the next step in the analysis. Since the coded Success factors, Obstacles and Challenges yet were too many to handle, it was decided to iterate the coding procedure one more time with a major focus on critically clear these categories based

24

on determined criteria, identify patterns and further sort them into under-nodes. Also, these were now more carefully linked to phases in the development process. Except from that the descriptions in the coding scheme were further specified, an additional criterion was determined to all three nodes - they must be specific for digital innovation projects, more specifically occur as a consequence of having a digital outcome, or of the complexity or high innovativeness characterizing digital innovation projects.

3.4.2 Analysis of Formal Process Descriptions The analysis of the formal process descriptions started with identifying the steps, activities and decisions stated in the descriptions at each company, that were relevant to the aim of this study. Then the perceptions of the processes were discussed with experts at each company and parts of the processes were selected to bring further to use in the analysis. The processes were then mapped to the theoretical process. The different phases were mapped according to two criteria for each phase - first the activities that must be carried out in each phase and second, what decision points that must be passed before proceeding to the following phase. More specific descriptions of the criteria for each phase are found in Table 9.

Table 9: Criteria used in the mapping of formal process descriptions.

Phase Activities and Decision points

Strategy Setting Activities: Company Vision, Digital Portfolio, Strategy - How to Achieve Vision, Mediation of Vision and Strategy

Decision points: -

Front End of Innovation Activities: Opportunity Identification and Analysis, Idea Genesis and Selection, Concept and Technology Development

Decisions points: Confirmed product definition

Product Development Activities: Product Development, Testing Technology and Value

Decision points: Product has ensured technology and value

Commercialization and Post-launch

Activities: Marketing Planning, Establish Business Model, Sales, Post-launch Support

Decision points: -

3.4.3 Mapping of Results The mapping was conducted for one company at a time and for each it was divided into two parts - one part for each research question. The mapping started by separating all success factors, obstacles and challenges from each company and put in different categories to create overall topics. They were printed out and cut apart to facilitate the categorization.

For the first research question, each category was connected to what managerial control that had been used, or if attention had been used, and was the reason to the success factor, obstacle or challenge, but only if the respondents had expressed it clearly. The analysis was made by referring to Table 1-4 in section 2.3.1-2.3.4, as well as Table 5 in section 2.4. The managerial controls were written in red if the companies had used them in a disadvantageous way or if they needed complementary controls, and they were written in green if the controls had been used in a beneficial way.

25

For the second research question, the studied formal processes at each company were mapped toward the theoretical development process. Thereafter, the categorized success factors, obstacles and challenges were connected to the different phases in the process, if it was possible. The ones that could not be connected to a specific phase were placed along the whole process.

3.5 Validation of Result To validate the findings, more specifically parts of them, a validation exercise was conducted. The exercise was done in connection with presentations of the result at the studied companies. Before the exercise the identified categories of influencing factors at the company were described and afterwards the rest of the result was presented. The invitation to the presentation was limited to ensure that the validation was made by employees with good insight in these projects, also, it was strived for having at least one representative from each studied project participating. At the Pulp Comp the validation was made with eight representatives that also were previous respondents in the interviews and at the Tool Comp it was made with eight representatives that also were previous respondents, as well as four representatives that had good insight in the formal development process at the company. The exercise that lasted for about 15 minutes, was performed in two groups where one group focused on validation of the result concerning managerial controls and one group focused on validation of the result concerning the formal development process. Afterwards they presented their result for the other group and discussed their result. The presentations were recorded and listen through afterwards. Thus, the data from the validation consists of recordings from all four presentations and photography of their respective solutions. Further explanations of the exercises are found in Figure 6 and 7, and the used list of controls is found in Appendix E.

Except from a validation that the influencing factors were perceived correctly from the interviews, conducting the validation exercises provided the study with a validation, and new insights, of the analysis – more specifically, of the suggested managerial controls related to influencing factors as well as of the suggested activities related to decision points in the process.

Figure 6. Illustration of the first exercise in the validation, where the participants were asked to map influencing factors to managerial controls.

26

Figure 7. Illustration of the second exercise in the validation, where the participants were asked to map influencing factors to the formal development process.

3.6 Evaluation of Methods In this study, the internal validity is considered good. Since a project is described as “a vehicle for implementing a firm’s strategy for innovation and diversification” (Davies & Brady, 2016, pp. 316), the choice of studying projects has probably led to that the identified factors are the most crucial ones; the ones that influence digital innovation projects’ proceeding and success the most. The same with the recurrence of influencing factors across projects, despite the kind of outcome - in this case software or sensor-integrated hardware. This indicates that the result is valid for digital innovation projects particularly, not only for one certain kind of digital innovation projects.

Consequently to that as many as five projects were studied, not as many respondents were interviewed in each project. This has to some extent prevented in-depth analysis and understanding of each particular project. However, referring to the purpose of the study that suggests some generalizability, the prioritization of number of projects before number of respondents can be considered as suitable. According to Williamson (2002, d) multiple-case studies are used to investigate “particular phenomenon in diverse settings” (pp. 114) and additionally, between four and ten projects were necessary for theory building. The sample of respondents were chosen based on determined criteria that strived for finding respondents with varying positions, which increased the internal validity since the study involves varying perspectives of the studied area. This is further increased since the criteria are well described. Unfortunately, the respondents were chosen in collaboration with supervisors and contact persons at the companies, which might have reduced the validity compared to if the sample would have been randomly selected among the ones that matched the set criteria. However, the snowball affect contributes with increasing the internal validity.

All interviews were held during a limited period with not much time in between them. This led to that the interviews were transcribed in parallel with that remaining interviews were held; however, the coding was saved until after. Miles and Huberman (1994, c) strongly recommend starting with the analysis, or coding in this case, early since it often leads to improvements in the data collection

27

and thereby, also to better data. Following that, this might have led to forgotten reflections and missed out improvement possibilities of the interview guides; thereby, this might have reduced the internal validity. However, perhaps the conducted pilot interview did contribute with some insurance regarding using a good data collection. What also increased the internal validity is that all interviews were held with both authors participating and also, that all interviews, except from two, were held during a face-to-face meeting. Initially, the interviews handled questions regarding digital innovation projects - the characteristics and definition of them. This showed to be good since it later has ensured that the respondents experience the same characteristics and that the remaining questions handled the same type of project. Thereby, that the study investigates digital innovation projects is valid. The technique used during the interviews with the project members, namely Journal mapping, made the respondents keep their focus on the projects, at least in most cases. Further, the validation exercise has increased the internal validity because it provided the respondents with the opportunity to correct possible misunderstandings; it confirmed to some extent that the findings agreed with the respondents’ perception of the influencing factors as well as the some of the suggested managerial implications were applicable, or in line with the respondents’ own thoughts.

The external validity has been positively influenced by the choice of studying two manufacturing companies in Sweden instead of only one. Further, the two companies showed to have some very diverse characteristics, not least, their respective industry they are active in, the kinds of traditional products they develop and the different formal development processes. Studying two companies with such diverse prerequisites and still identifying similar influencing factors to the digital innovation projects, indicates that the external validity can be reinforced further.

In this study a qualitative research design was chosen, which led to that the number of companies still is less than what a quantitative study could have allowed for instance. However, a qualitative study has been beneficial since the study aimed to explore a new area and additionally, it allowed a study of the project members own experiences and thoughts. Since the students did not have enough insight into these projects before the study started, a quantitative study would not have been suitable, however, combining the two could have led to a more complete understanding, if following Williamson (2002, e), and to that the external validity could have been emphasized further.

The reliability of the study is considered good since the two authors, who were conducting the interviews, have previous experience in conducting similar interviews. The interviews were recorded, in fact, from double technical equipment to ensure any recording at. This increases the reliability since the authors could concentrate on conducting the interviews instead of doing notes, as well as that the recordings reduced the risk of missing out of important information. Also, the interviews were transcribed literally to not influence the meaning and circumstances of expressions. The reliability is kept during the analysis as well since the authors carefully performed several iterations of an inter-rater reliability test to ensure that they coded in the same way and that the nodes in the coding scheme were adequately described.

28

4 RESULTS This section aims to present the empirical findings from the data collection, more specifically the identified influencing factors.

Although both the studied companies are active in the manufacturing industry the study has showed several different characteristics that separates them and their prerequisites to develop digital innovations, as well as the way they can support digital innovation projects. Table 10 presents characteristics for each company.

Table 10: Overview of company prerequisites.

Factors Influencing the Companies’ Characteristics

The Pulp Comp

The Tool Comp

Industry Pulp, Paper and Energy Metalworking

Development Process Pulse Stage Gate

Organizational Structure Matrix Matrix

Type of production Customized Discrete manufacturing

Lifetime of Traditional Product More than 20 years More than 8 years

Customer Business Business

This study has showed that these projects are perceived as innovative, radical and complex projects at both companies. Some respondents though, expressed that the involved technologies are not very new or innovative, it is the combination of them that makes them unique. Moreover, due to both companies’ background within traditional manufacturing in their respective industry, these projects become very innovative. In fact, it is the same with the complexity; their traditional products are commonly also complex; however, it is the combination with the innovativeness that makes the complexity more noticeable and more challenging in digital innovation projects. Also, the complexity increases since there are many components from different disciplines involved, software, electronics and hardware, which need to be integrated through interfaces that are new to the companies.

“It is very complex because it is so many parts that need to be integrated, and so many people

involved” - Respondent 14

“The most complex project we have ever had [...] digital projects are so complex because of the many directions it can take” - Respondent 11

“Digital things are not anything that you should have just because it is ‘nice to have’, since it is so complex and

comprehensive. If you do not know the customer values and what to do, you will lose customer value” - Respondent 11

29

“It is essential to work with the business and earning model early in the development process” - Respondent 22

The respondents were asked to describe what makes a project or an outcome digital. Many mentioned the fact that it is, or involves, a software to some extent. The projects at the Pulp Comp only included software and were therefore described as “It is just digital. It does not include anything physical at all. So that makes it extremely digital” (Respondent 14) and “That is because it is 100 percent digital. The information that is collected is digital, it is sent in a digital form, it is stored in a digital form and it is presented in a digital form” (Respondent 15). Respondent 12 at the Tool Comp agreed by saying “It is about three things - collecting the information, analysing the information and presenting the information”. At the Tool Comp, several projects involve sensor integrated hardware, which makes some of the comments distinguish from the ones at the Pulp Comp. Several respondents mention the involvement of many technology domains. Further, Respondent 8 described it as “Earlier [our products] have been totally isolated, now they get a connection to the outside world. That I would say, defines a digital project”.

“The cutting tool hardware will carry digital components, such as sensors, batteries, radio communication

connecting them to embedded algorithms and to external software for visualization. What we are developing and further expanding our solutions with, are new offers developed by the data we are collecting from not only our tools,

but also machines and other hardware” - Respondent 18

However, what the respondents agree on is that digital innovation is something new to the companies and that it demands new ways of working. For example, one respondent told that “it allows us to work outside the traditional structures and processes” (Respondent 4) and another said that “When I think about digital, I think that it is something new that is different from what we usually work with. It is something new that should be taken into our processes. [...] So, for me it is the next step in the development” (Respondent 19). Fortunately, these projects are highlighted as having great potential and as being pioneers to more similar ones. Comments such as ‘it has extremely high potential’, ‘It is tremendously important for us, regarding revenues’ and ‘a facilitator to providing new services’, reinforces this. Key features for each investigated project are presented in Table 11.

“The knowledge is the essential, the digital part is only the enabler” - Respondent 9

30

Table 11: Key features for each project.

Company Project Key Features

Pulp Comp

A The first project of this kind for the Pulp Comp. Development of software that can be hooked on already running sensor-equipped machines. The product aims to predict maintenance to reduce downtime.

B Project initiated as a follower of project A. Development of software that can be hooked on already running sensor-equipped machines. The product aims to predict maintenance to reduce downtime.

Tool Comp

C Development of a sensor integrated tool in collaboration with a partner owned by the Tool Comp, where the tool and the technology is developed by the partner and the commercialization is managed internally. The product aims to monitor while machining.

D Development of a sensor integrated tool in collaboration with an external partner, where the software is developed internal and the hardware and electronics are developed by the partner. The product aims to predict maintenance.

E Development of a software that aims to provide product data to the customers to facilitate communication.

4.1 Formal Development Processes In this section are the companies’ formal development processes presented, through short descriptions and illustrations. The result is based on formal process descriptions as well as meetings with experts at the companies. Formal Development Process at the Pulp Comp

The Pulp Comp is using a Pulse process for their development projects, which is illustrated in Figure 8. The colours in the process refer to different positions at the company; the responsibility for the red boxes lies on the steering function, the responsibility for the yellow boxes lies on functional managers and the responsibility for the blue boxes lies on the projects. The Pulp Comp has a room dedicated to Pulse meetings, where they can meet representatives from different ‘colours’ continuously. At each decision point, it is determined if the project can proceed or not. The process strives to facilitate decision-making at a level as low as possible.

31

Figure 8. Illustration of the Development Process at the Pulp Comp (the Pulse Process).

Formal Development Process at the Tool Comp

The Tool Comp is using a stage-gate process for their development projects, which is illustrated in Figure 9. The red boxes refer to decisions where the responsibility lies on the steering function. The illustrated process applies to the process until the outcome is ready to be commercialized. The commercialization is managed in a separate project, which sometimes is run in parallel.

Figure 9. Illustration of the Development Process at the Tool Comp (the Stage-gate Process).

32

4.2 Digital Innovation Projects at The Pulp Comp

The study at the Pulp Comp resulted in a total of 92 coded success factors, 60 coded obstacles and 210 coded challenges, related to the digital innovation projects. Further, the categorization of these resulted in 6 success factors (SF1-SF6), 4 obstacles (O1-O4), and 9 challenges (C1-C9), which are shown in an overview in Figure 10. Where in the development process, these occur was determined using the drawn timelines as support, which are found in Appendix F. Moreover, these are further described in section 4.2.1-4.2.3.

Figure 10. An overview of the success factors (green boxes), obstacles (red boxes) and challenges (blue boxes) at the Pulp Comp, and how they are related to the theoretical development process.

4.2.1 Success Factors In this section, identified success factors at the Pulp Comp with related managerial controls are presented (green or red letters refer to positive respectively negative effects), identified through an analysis based on Table 1-4 in section 2.3 as well as Table 5 in section 2.4. A summary of the identified managerial controls connected to the success factors are compiled in a table in Appendix G.

SF1: A well-working internal team

It is beneficial when team members are positioned close to each other and have an inspiring attitude.

Cultural

The software development team has shown to be a success factor due to several reasons. First of all, respondents from Project A and B mention that the project members and the project manager got the right attitude and spirit to run these projects where Respondent 15 answered “I think it is stubbornness” on the question what important characteristics the team members had. The project team has also got support from a manager higher up in the hierarchy which has shown to be an important factor as well. This has resulted in higher priority within the company and faster decisions. Another factor that has benefited the projects is that the software developers are positioned close to each other, which makes it easy to communicate within the software team. Since the software developers are dependent on the process-experts’ knowledge it has also been beneficial that the process-experts are positioned in the same building. A third factor that has

33

benefited the projects is the personal characteristics that the project members have, they have the right mind-set. Also, Respondent 20 highlights the success in having a good relation between the internal and external teams.

SF2: Having a pilot customer

It is beneficial when a project has a pilot customer since it gives the opportunity to test and verify its solutions.

Result Attention

It is a requirement to have a pilot customer when the Pulp Comp runs a digital innovation project. Having a pilot customer has shown to be a success factor in Project A since it helps the project team to motivate the product benefits, which in turn can help the project to get priority. Respondent 14 also mentioned the benefit in having a pilot customer since “it makes it possible for us to test real time data”. Getting real time data is highlighted by several respondents as crucial in these projects since it helps the project members, and others at the Tool Comp, to understand the value brought by the solutions. The more data they get, the better it is and therefore, has the use of several parallel pilot customers been raised. Also, it gives the Pulp Comp the opportunity to verify their solutions and offer improvement suggestions to the pilot customer, which in turn gives them a good reference to use in future businesses. Although the use of a pilot customer has been a success factor, the process for testing it has been criticized since it is not always performed systematically, and therefore, it can be supported further. This has led to less feedback from customers than what would have been possible.

SF3: Having access to the right competence

It is beneficial when a project has access to right competence at an operative, as well as a management, level.

Personnel

It has shown to be a success factor when the Pulp Comp has availability to the right competence. Respondent 14 mentioned that former employees have given warnings regarding challenges that will be met, since they had competence within databases. These warnings have helped the software team to avoid challenges that others have met. The fact that the project manager in Project A has had very much knowledge about the machine has been highlighted as a success factor, which further reinforces the beneficial effect of having the right competence. This facilitated the work among the software developers though they easily could ask their project manager about the current machine that the project concerned. The Pulp Comp have decided to hire software developers as well which also contributed to having the right competence.

“They had the knowledge to be able to give warnings very early in the process since they got a holistic

perspective” - Respondent 14

SF4: Using ambassadors and drivers

It is beneficial when a project is being supported by ambassadors and drivers. Cultural Attention

At the Pulp Comp ambassadors and drivers are used to advocate the importance of digital innovation projects and create a focus within the company. This has shown to be a success factor since it induces attention that gives these projects higher priority within the company. Not least, it contributes to having motivated team members.

34

“We have got a big focus within the company” - Respondent 20

“It is positive and makes it more fun to continue working with it” - Respondent 20

SF5: Connect to strategy

It is beneficial when the employees have a mind-set to follow the strategy. Personnel Cultural

It has been shown to be beneficial when people want to reconnect to, and follow, the strategy. Having people with this mind-set facilitates the work since no one needs to be persuaded to follow the strategy, they already want to move in the same direction. Respondent 16 describes it like “it is like opening an already open door”. One person has an overall responsibility to help projects move in the right direction and connect them to the strategy. This is beneficial since it helps the company to keep the whole digital unit together.

SF6: Short decision process

It is beneficial when the project members get quick decisions, which is supported by the current process.

Action

The projects at the Pulp Comp has the possibility to make fast decisions due to mainly two reasons. First of all, they have a process that aims to make the decisions at a level as low as possible and also, they have the opportunity to meet with representatives from all levels once every week. Additionally, they are sitting close to each other, and to some of the managers at different levels.

“you need decisions rather quick, and in Pulse we have the opportunity to get that” - Respondent 16

4.2.2 Obstacles In this section, identified obstacles at the Pulp Comp with related managerial controls are presented (green or red letters refer to positive respectively negative effects), identified through an analysis based on Table 1-4 in section 2.3 as well as Table 5 in section 2.4. A summary of the identified managerial controls connected to the obstacles are compiled in a table in Appendix G. O1: Missing a pilot customer

It has been a problem in one project with getting a pilot customer. This has led to a lack of customer feedback and eventually that the project has been put on hold, waiting for a pilot customer.

Action

This obstacle is a major one since it is one of several factors that has led to Project B being put on hold. The project has resulted in a prototype that needs to be tested but there is no pilot customer to test it with and no one know surely what the customers want, and thereby, neither what the objectives are. The difficulties of getting a pilot customer lies partly in that the area is new to many of the involved parties and also for the customers, “We have to attract customers with ‘low hanging fruits’ at first but also show that there can be much more if this would give results. But we have to prove both to them and ourselves the potential” (Respondent 16). A seminar was arranged where the product was presented but it did not result in the desired outcome, a pilot customer. One reason for this, that Respondent 14 reflected upon, was that the person that was supposed to present it was not provided with the right prerequisites. Since the company requires a pilot customer in the digital

35

innovation projects, more pressure is put on the process to handle it. However, Respondent 22 claims that “a development project alone is not designed to work with a pilot” and thinks that the organization is in need for something that can support the projects regarding the pilot customers. Eventually the money and time ran out without having a pilot customer, which led to that the project could not proceed.

“This has been proved in Project B [...], we have not made it clear who the customer is or what the customer

demands. So how are we supposed to set goals?” - Respondent 20

O2: Important Resources are not allocated to the project

That important resources are not allocated to the projects has been an obstacle since the projects have been lacking important information and thereby, have taken more time.

Personnel Cultural

This obstacle concerns both the studied projects at the Pulp Comp. The project members have been struggling with that important resources are not allocated to the projects. Moreover, some of the few that are allocated to it, either have many other tasks as well or are travelling a lot, which has led to that it is very difficult to book meetings with them. For instance, “resources and knowledge regarding the process” have been raised as the biggest challenge by Respondent 15. Consequently, the project members have had difficulties in getting important information from these competencies and thereby, the projects have taken more time than what would have been necessary. As expressed by Respondent 14 who argues the problem by saying “It has become a bit expensive if we look at the time since we have had problem with the resources” and “Because the project is so low prioritized and there are few that actually work with it, and that we know nothing about the process”. This obstacle has been especially challenging in Project B since the process the project concerns is more complicated than the one in Project A, and thereby, the demand on information is bigger. Respondent 14 raises that the resources that hold the important knowledge must be relieved from their other tasks to be able to support the digital innovation projects, but that has not been possible since “That resources do not exist, this is something that should be squeezed in between other things in the organization”. When the resources only attend in few of the meetings, the project members also must update them since a lot could have happened during the time in between meetings. Also, the project members in one of the projects have been forced to do several guesses regarding the development. One respondent experienced that it is more complicated to get resources allocated to digital innovation projects than traditional projects since it is outside the company’s comfort zone. As expressed by one of the managers, Respondent 19, an “inability to prioritize” these projects in relation to other things is a major obstacle. The need for more resources has been raised at meeting but it has only led to more resources that do not actually have time for it. “We, who are in the project, have felt that we have had very little time with the process-knowledgeable, therefore we

have had extreme problems with resources in this project. To get people to allocate their time on it.” - Respondent 15

36

O3: Lack of financial support

A general obstacle at the Pulp Comp is that the projects demand financial support from another business unit.

This obstacle has occurred due to that the Pulp Comp is divided into two business units with two separate results. The project is driven from one of them, but the other will get a rather big portion of the profit since it will lead to changes that benefits their business. The other business unit handles the after-sales activities and additionally, it gets the profit generated from it. Project A and B will essentially result in increased incomes from the new activities post launch, and thereby increase the profit for the other business unit. The first unit then, needs to convince the second unit to contribute with money and finance the projects, which has been difficult, especially since there sometimes are no representatives from the other unit at the meetings regarding resources. A contributor to why the other unit do not want to sponsor these projects is because they, due to the uncertainty, do not have a clear business case.

“The difficulty lies in that we are two stakeholders that share these projects” - Respondent 16 O4: Dependency on Platform Development

The project is dependent on a platform that do not fulfil the requirements and thereby, although that the outcome is finished, the project gets extended and cannot deliver to the customers.

Result Personnel

The project has developed a product that is dependent on a platform being developed by a partner. However, the requirements on that platform have been unclear from the beginning, which has resulted in that the Pulp Comp now has a product but is still waiting for the platform that do not fulfil what the product demands. Respondent 17 called it “a catastrophe” that the Pulp Comp had started the platform development without clear objectives. Since the requirements and the objectives have been unclear, the partner and the project have had totally different visions about the outcome. The Pulp Comp has been marketing the product and the customers ask for it but they cannot deliver it due to this major obstacle. In turn, this has led to that it has been extended and the motivation among the project members has decreased. Also, one respondent told that this was estimated to take about four months instead of one year and consequently, the Pulp Comp only has one and a half project instead of maybe three or four.

“Especially that it has been unclear what the platform is supposed to handle” - Respondent 17

“It is important to make clear targets and requirements for a cloud platform. A requirement specification is a crucial factor for all development projects, maybe even more crucial for these

types of projects” - Respondent 22

4.2.3 Challenges In this section, identified challenges at the Pulp Comp with related managerial controls are presented (green or red letters refer to positive respectively negative effects), identified through an analysis based on Table 1-4 in section 2.3 as well as Table 5 in section 2.4. A summary of the identified managerial controls connected to the challenges are compiled in a table in Appendix G.

37

C1: Miscommunicated strategy

It is challenging since the digital part of the Pulp Comp’s strategy is not mediated to all units within the organization.

The Pulp Comp has a strategy regarding their digital effort, several respondents mention that it is clearly stated that they should invest in digital technologies but few in the organization have a clear understanding of how they should get there. This is emphasized by, for example Respondent 14, who said “As I have understood it, everybody agrees on that this is what we should put our effort on, but the question is how” and Respondent 23, who said that “Everyone has a clear vision of the opportunities, but I believe that the solutions are very different. Therefore, I believe it is important to make it in clear steps”, and as also stated by Respondent 23, a common strategy is especially important when “there are many diverse competencies that need to collaborate”. The project members also ask for a more “holistic approach” (Respondent 14) and for clearer future vision. According to respondents at a steering function the strategy is clear to them, for example, Respondent 23 said that “I am surely updated, but that may be because I am working with it” and Respondent 16 said about the units at the Pulp Comp that “they are probably aware of that if we could do this, we would succeed”. The strategy for the Pulp Comp’s digital effort is mediated through presentations and they also work with stating must-wins, ”So there is a connection. Of course, the responsibility is on us managers to communicate the connections to the strategy so that everyone understands. So, the process exists, it is up to us and if we are good enough at communicating it” (Respondent 23). However, the functional managers, project managers and project members are not that convinced about that it is mediated well, for example they told that the Pulp Comp is not very good at mediating visions. Studying this at project level, it becomes apparent that they experience difficulties in identifying how the project fits with the overall strategy. One respondent expressed that a more holistic approach would contribute to a common vision at the company, and would probably also help in getting more resources allocated to the project. Even if it apparently exists a strategy, some consider it as too weak regarding the level of innovativeness. For example, it is emphasized by Respondent 19 who states “I believe that the digitalization must mean changes in the machines and in the plants as well, for us being able to take the most advantage of the digitalization”.

“But I believe that many are aware of that we are supposed to monitor the machines, collect data, send it to the cloud and analyze and compare it to other machines. That far, I believe most of us understand. But how does this fit

to the big strategy, that I am not sure everyone is aware of. I feel that even I am not sure” - Respondent 17

C2: Lack of new competence at all levels

It is challenging since the projects demand competencies that do not exist within the company.

Result

The competence gap has been raised by several respondents as the biggest challenge, and it has been expressed in comments such as “We are missing the competence within [the Pulp Comp]” (Respondent 14). One respondent also linked the lack of competencies to the perceived complexity and claimed the lack of competencies in the development projects as the single biggest challenge they face. Also, Respondent 17 explained the challenge in that the competencies within digital technologies that the Pulp Comp has, are positioned at an operative level. This complicates the work performed by the steering function since it makes it difficult to set clear strategies and goals, and to determine a project’s proceeding. Sometimes, attention to the specific project or the digital effort has been beneficial for getting more resources and competence. Regarding the lack of competencies many respondents mentioned the alternatives, to either invest in new internal competencies or to access them using external partners instead. For example, Respondent 19

38

reflected that “Should we hire the people so that they can contribute to that we proceed in the development, or should we use collaborations with the best ones?”. Moreover, difficulties related to knowing what competencies they need as well as where to find them have been highlighted.

C3: Limiting attitude

It is challenging since the current attitude is not very open to digital innovation. Cultural Attention

The project members have expressed that the climate and the motivation in the project team has changed over time in these projects, which has been challenging. Even though it at first was “very optimistic” according to Respondent 14, the climate has declined. The climate has been described as optimistic at first by those who started it, not by the ones who were supposed to execute it. Respondent 14 referred to the declined climate and said, “We lose motivation and then we become slower, which creates an evil spiral, slower and slower”. It has even been emphasized as being characterized by scepticism, for example due to comments in the project team, such as “They will never buy this or they will like it this way or that instead. Some scepticism” (Respondent 16). Further, the climate is influenced by the culture at the Pulp Comp, “The climate is trying to be innovative, but it is held back by the culture” (Respondent 14). That these projects are struggling with a culture and attitude that counteract innovation is further reinforced by comments such as “You have a bit of hurry - that is my feeling. Otherwise, you should have been doing differently” (Respondent 15) and “Sometimes we have a feeling of that we can do everything ourselves within [the Pulp Comp] since we are doing a lot” (Respondent 22). Other comments that emphasize the culture as a major challenge are “it is difficult for people who are not innovative to develop it” (Respondent 14) “It is a challenge to gain support for this type of development in a new area like this” (Respondent 22) and “It is a challenge to get everyone on the train” (Respondent 22). Respondent 14 said that when the project members are showing the product it has had beneficial effects on the support, “there are three of us that do not know anything about this, we need to make those who can to think about this”. However, some negative effects have also been raised. For example, that the projects have been out showing the products and explained that it will soon be on the market, but due to delays it becomes the opposite effect that creates resistance. “When we talk with some in the organization about the cloud, we sometimes make jokes about a dark cloud. But that

typically reflects that some are not very optimistic about the digitalization” - Respondent 14 One of the functional managers highlighted that the responsibility to influence the culture lies on the managers, “You have to consider how you express yourself so that it does not get inhibitory. So, we are working a lot with the culture. That we dare and that we allow mistakes. It is even more important in these radical projects” (Respondent 2). This is also highlighted by Respondent 14 who claims that they sometimes must dare to stop a project and admit that it did not went well. Also, if one project has failed it leads to a bad attitude towards the other as well. The motivation directed from management has been perceived as rather ambiguous, “If they really want us to do this, it would have been much more focus on it. I mean if you put more gas at the same time as you break... “(Respondent 16). This hindering culture puts much pressure on the project team, they ask for support in finding the innovative vein at those who are not that innovative. Further, the importance in having strong employees who engage in this task and to have a driver is actually highlighted as “extremely important when a large part of the organization is not used to… I do not know how they see it, as jump and play or science fiction?” (Respondent 15).

39

C4: Use of diverse processes

It is challenging since these projects need to follow two diverse processes. Action Action

The internal organization uses Pulse as a process and the external organization, as the project collaborates with, uses an agile process. This means that the digital innovation projects at the Pulp Comp need to follow two processes in parallel. This is challenging since they need to communicate in two different ways, which is both time consuming and difficult to combine. However, the Pulse process is beneficial according to Respondent 14 since “we must have a Pulse-board if we want it to be counted as a project, to make the people with the money to be able to see what we do” while the agile process is beneficial according to Respondent 2 since they use that process to communicate with the external organization and since they often work in cycles when developing software.

C5: Communication difficulties

It is challenging since these projects require a different type of communication. Cultural Attention

A challenge mentioned by several respondents is the difficulties regarding communication. Since there are collaborations with other sites, and some are in other countries, it is important that the communication works well. Unfortunately, Respondent 14 said that “We have been asking about it for a very long time but it seems like it does not reach all the way, so there are difficulties in communication” and Respondent 15 said that “I do not know if we speak the same language, which have created confusion among the involved”.

Another challenge is to reach the ones you want to communicate with and to get response. Respondent 14 also mentioned that “we screamed unusually loud here” and “sometimes it took a very long time to get answers on e-mail”. This reinforces the difficulties in reaching the respondents. Further, at occasions when the project members have had possibilities to communicate easier with partners, it has facilitated the project. For example, a meeting with a partner involved in Project A led to a higher development pace and made the project get more attention higher up in the organization.

A third challenge regarding communication is the communication within the company, between different levels in the organization. Since the specific knowledge often exists at a lower level in the organization, it is important that they can communicate and make people at other levels to understand. Respondent 23 said that “if you need a decision, you have to be able to communicate it. That is your responsibility”. At occasions when the project members have had the possibility to meet with managers and other involved parties, it has been a facilitator to the project’s proceeding and it has started many important discussions. This is emphasized by Respondent 14 who referred to a handover point for Project B and said “Partly they understood our problems and we got more resources afterwards, and partly it started a good discussion that confirmed that the project was moving in the right direction. That was a good handover point that ‘fuelled’ the project”.

“It took a while before we could speak the same language” – Respondent 14

40

C6: Difficulties in setting clear objectives

It is challenging since it is difficult to set objectives for digital innovation projects. Result Action

It has shown to be difficult to set and fulfil objectives for digital innovation projects at the Pulp Comp due to several reasons. One reason is an unclear strategy for the whole organization which makes it difficult to set goals. Another reason is that the objectives are unclear which makes it difficult to mediate them and to test the solutions. One respondent thinks that it should be more focus on setting the objectives early in the process and claims that “it feels like it is even more important for the digital innovation projects since those include new and uncertain things” (Respondent 22). Respondent 20 thinks that the tool used to visualize the objectives limits the ability to make them clear. The respondent claims that “we use a PowerPoint tool that is really hard to work with since there is not enough space and it is more focus on the graphic part than setting the actual goals”. The tool that the Pulp Comp is using works well for their traditional projects, since they easily can be translated into numbers. A third challenge regarding the objectives is the unlimited possibilities when it comes to digital innovation. Respondent 20 claims that “one of the major challenges when it comes to setting goals is to limit the projects, since it can take many directions”. It is also challenging to set measurable objectives where respondents express that they need to put more focus on that part. The respondents agree on that these projects demand clearer objectives from the start and most importantly, they need to spend more time than usual on the initial phase.

“We need to be much clearer when it comes to setting the objectives” – Respondent 20

C7: Difficulties in identifying customer needs

It is challenging since the customer needs are difficult to identify.

Identify customer needs has been a challenge within the Pulp Comp. First of all, it is difficult since the customers themselves do not know what they need – neither the Pulp Comp nor their customers are able to predict the future development. For these projects, it is important to find an appropriate customer to perform tests with, but it is also claimed that they need an iterative process to find these answers when they like to verify their solutions against customer needs. It is also important to let the customers be part of the searching for customer needs which Respondent 2 reinforced by claiming that “there is beneficial for us that the customers join us when we have our brainstorming sessions and workshops since when developing something totally new there is especially very important to have the end customers input”, however, Respondent 2 also highlighted the risk of doing so by saying that “there is always a risk when we share information with customers in this way, i.e. the customer can share this with a competitor the day after, but anyway I believe we have more to win than to lose by being more open with our customers and we need to cooperate and trust our customers”

“We and the customers want to be a part of the digitalization, but no one really knows what

they want” – Respondent 2

41

C8: Immature roles and responsibilities

It is challenging since these projects require new roles and role descriptions. Personnel

Roles and role descriptions are areas that have been challenging for the digital innovation projects at the Pulp Comp, which is something that is highlighted by comments such as ‘the roles are not very clear’. Several respondents also claim that they are not aware of who has what role and Respondent 14 mentioned that “when I have asked who has a specific role, I have got several names”, which indicates that some roles are highly uncertain. The project manager role has shown to be challenging in these projects. The role has been described as challenging and exhausting by project members, for this type of projects due to the high uncertainty and fuzziness characterizing them. Further, one project manager in these projects has had a position at an operative level as well which has been challenging and has put this person in a difficult situation. Respondent 20 explains this by saying that “the project manager is also a project member, which means that this person has to manner requirements, as well as being one in the group”. Further, due to the new demands that are put on the project manager, the role should include new competence.

“This is a totally new type of project, of course it needs a new type of project manager” - Reference 20 C9: Changing business models and after sales activities

It is challenging since these projects require new business models and after sales activities.

Several challenges regarding the business models and after-sales activities have been mentioned during the interviews. Respondent 16 claimed that “the biggest challenge that will be met in the future is when this solution needs to be delivered to a huge number of customers in a short period of time” and it has also been highlighted that activities like maintenance and the platform development are not solved yet. This challenge is further complicated due to that the company is divided into two business units. Another, and recurring challenge, is about the business models and how they can make profit from these new types of offer. This will be a challenge since the Pulp Comp’s customers are used to pay a one-time cost. Even if the company has started to develop a few business models it will still be a challenge to implement them since it is several internal stakeholders, at different sites, that need to agree on them.

“The challenge right now is to figure out how we can earn money on this? How do we get our customers to

understand that this is a value for them?” - Respondent 2

4.3 Digital Innovation Projects at The Tool Comp The study at the Tool Comp resulted in a total of 92 coded success factors, 38 coded obstacles and 245 coded challenges, related to the digital innovation projects. Further, the categorization of these resulted in 7 success factors (SF7-SF13), 8 obstacles (O5-O12), and 10 challenges (C10-C19), which are shown in an overview in Figure 11. Where in the development process, these occur has been determined using the drawn timelines as support, which are found in Appendix F. Moreover, these are further described in section 4.3.1-4.3.3.

42

Figure 11. An overview of the success factors (green boxes), obstacles (red boxes) and challenges (blue boxes) at the Tool Comp, and how they are related to the theoretical development process.

4.3.1 Success Factors In this section, identified success factors at the Tool Comp with related managerial controls are presented (green or red letters refer to positive respectively negative effects), identified through an analysis based on Table 1-4 in section 2.3 as well as Table 5 in section 2.4. A summary of the identified managerial controls connected to the success factors are compiled in a table in Appendix G. SF7: Participation in exhibitions

It is beneficial when the products can get feedback at exhibitions early in the process to create attention which helps being prioritized by the governance.

Cultural Attention

Several respondents from the digital innovation projects at the Tool Comp think that it is beneficial to participate in exhibitions since the attention confirms that there is an interest on the market, which in turn helps to convince the company that the project should be prioritized. Additionally, it functions as a deadline and puts more pressure on the projects to deliver. This has not only been emphasized as a positive effect since the pressure is not always beneficial. If the projects cannot deliver on time, it can be interpreted as confusing among customers that wonder when they can get the product. One manager said about the projects that they should have provided more support to the projects to make sure that they succeed. Respondent 11 told that they had a strategy in the project to always show a physical product, which often leads to good attention. A couple of respondents also claim that other positive effects from exhibitions are new positive energy within the project group and the feeling that what they are doing is important. These effects have shown to contribute to a more gathered and motivated team.

“The attention made us understand that there is an interest” - Respondent 6

“It creates an understanding of that we need to make a change at the company” - Respondent 4

43

“It makes the team feel motivated and provides them with more energy” - Respondent 18

Another positive effect from the exhibitions is that you can get attention among partners. Respondents from especially Project D claim that it has been beneficial to get pressure from partners because it indicates that the project will create value. In turn, this will increase the interest within the steering group, which increases the chance to be prioritized and to get access to more resources.

“It was a huge interest at the exhibition” - Respondent 6

“It was a big interest from the steering group when it was mentioned that we were going to develop this with a

partner” - Respondent 6

SF8: Execute pre-studies to confirm value

It is beneficial when a project can rely on a pre-study and reconnect to customer needs.

Result

To have a pre-study to lean back on is beneficial since digital innovation projects can be uncertain and it is easy to get lost. A collaboration with an external company was made in Project E to make sure that it will deliver a value and to verify it. A functional manager reinforces this by explaining that in traditional projects are the changes often incremental and we just do it automatically - if you do not understand the customer from the beginning in these projects, you will probably spend a lot of unnecessary time and money.

SF9: Collaboration between customers and project team

It is beneficial when the project members have a possibility to have a close collaboration with customers.

Result

When projects have been collaborating with customers, it has had beneficial effects. For example, letting the project members have a close collaboration with customers has been shown to be a success factor in Project C. When the people that are going to develop the solution, have handled the contact with customers, they have got a good understanding of the customer needs themselves. This has also been further emphasized by managers at the Tool Comp, that ask for “collaborations with a prospective customer early in the process to get data and response” (Respondent 1) and “We need to put much more effort into the early phase, to really understand our customers’ problem they want help with and the value we will deliver” (Respondent 18).

Collaboration with customers has also been shown as a success factor regarding tests and feedback. When the project has possibilities to test the outcome with customers, it provides an opportunity to verify technique and how it is perceived by the customers.

“We know what the customers actually need, and because of that I think we have solved many problems. We get information directly from the customers” - Respondent 11

44

SF10: Having a motivated and collaborating team

It is beneficial when the project team can, despite unclear roles, ‘roll up their sleeves’ and just do the work.

Cultural

Since digital innovation projects are uncertain and new to the Tool Comp, they have contributed to un-clarity when it comes to role descriptions since they bring completely new tasks and activities. Therefore, to not be afraid of going outside your comfort zone and your responsibilities have been an advantageous attitude and mentality in some of the projects. It has also been beneficial to be supportive of each other’s work and to have faith in each other’s competencies, to create a mentality that reinforces the team’s capability. Moreover, the most mentioned characteristics that the project manager should have according to the respondents are motivation, driving spirit and faith in the project members. We have had great competence, but I do not always understand what the construction or design unit do, and neither

do they understand what we at the software unit do. But we understand that we are dependent on each other” - Respondent 11

“We do the best we can and keep each other updated, I think this is something that makes us having confidence in

each other” - Respondent 11

SF11: Getting priority

It is beneficial when a project gets prioritized since it helps the project to get sponsors.

Personnel Cultural

Several respondents mention the importance of being prioritized at the company. This has especially been mentioned by project members in Project C since the priority has been facilitating for them. Being a part of a specific program or be a highly-prioritized project within a specific department, helps the project to get prerequisites that will bring the project forward. Having dedicated project members that can set all their time and focus on the project has also been beneficial for the project.

“It has made a rather big difference, that it is a project that has been prioritized at the company” - Respondent 4

SF12: Fast decisions

It is beneficial when decisions can be made on a project level since it saves time and it is the people with the knowledge that make them.

Action Personnel

Letting the people with the knowledge make decisions regarding digital innovation projects is beneficial. They often feel more comfortable to make these decisions since they have the knowledge and it also saves time. One respondent also mentioned that it is easier to make decisions if the project group is quite small since it allows them to be more dynamic.

“Since we are a smaller group everything goes quite fast for us, we make our own decisions and work close to each

other [...] we have an extremely short decision process” - Respondent 11

45

“We have very competent employees, who can work independently without asking the management at higher levels” - Respondent 13

SF13: Work close to each other

It is beneficial when the project members are sitting physically close to each other.

Cultural

Having all the project members sitting close to each other has shown to be beneficial. It makes it easier to get an overview of how the project is doing and to get decisions faster. Respondent 11 claimed that “it is easier for us to handle chaotic situations since we are a small group that are sitting together”.

4.3.2 Obstacles In this section, identified obstacles at the Tool Comp with related managerial controls are presented (green or red letters refer to positive respectively negative effects), identified through an analysis based on Table 1-4 in section 2.3 as well as Table 5 in section 2.4. A summary of the identified managerial controls connected to the obstacles are compiled in a table in Appendix G. O5: Down-prioritized digital innovation projects

A common obstacle is that resources are prioritized to other projects to ensure the completion of them instead of the digital innovation projects.

Several respondents have expressed that some projects never get initiated due to that the resources are allocated to other projects to ensure the completion of them. Moreover, Respondent 7 said that “If you look at one project like this one, and one [traditional project], the hard products are almost always prioritized”.

O6: Disagreements on where to steer the project

A concept presented by a partner got denied at first so that the Tool Comp could steer the project internally instead.

Cultural

A partner owned by the Tool Comp had implemented a pre-study regarding sensor-integrated tools and presented that to the Tool Comp. But the Tool Comp wanted to steer this project internally and therefore start a new pre-study. As the time went by the Tool Comp understood that the partner already had done many of these things, they eventually were convinced about collaborating with the partner and let the technological development be steered by them. However, this obstacle led to unnecessary time spent and an unpleasant atmosphere at the beginning.

O7: Partnership that had to end

The project collaborated with a partner that did not follow the instructions provided by the project and thereby, did not deliver what was required.

Personnel

The project collaborated with a partner where the relation was good. However, at first the project got delayed of several reasons and then the partner did not follow the instructions provided by the project members at the Tool Comp, which led to an ended partnership and the project had to start over with a new one.

46

“Then we had to cut off that collaboration, even though we had spent a lot of time and money on it” - Respondent 9

O8: Misjudged resource consumption

The estimated workload was incorrect and the project did not have enough resources to finish the product with the desired quality.

Because Project D required new kinds of competence that are limited at the Tool Comp, some of the resources have been overloaded with work. The newness of these areas complicates this further since it makes it difficult to estimate the work’s magnitude. The fact that these projects are uncertain and difficult to plan, as well as making a time schedule, contributes to the experience of a lack of resources. Comments like “we did not understand the workload” (Respondent 7) and “they totally failed with their planning” (Respondent 9) are two examples from the interviews.

O9: Dependency of another unit

The project was dependent on another unit, which did not have enough resources to finish their work in time.

Action

Project E was dependent on another unit, which was determined by the management. Unfortunately, the delivery that the project desired took much more time than expected and the project had to wait for them to complete their mission. This was probably caused by a lack of resources at the other unit. The project was dependent on their time axis and therefore, the project got really delayed as much that the ‘windows of opportunity’ for selling it as a neutral product passed.

O10: Time consuming certification process

The certification process showed to be much more comprehensive than expected and had late implications on the design.

The Tool Comp is not used to the certification process and was not prepared for how comprehensive it is. It took a lot more time than expected and was really demanding, and this has been raised by all the interviewed project members. The certification process influences many other aspects regarding the product, for example, the company needs to decide which markets to launch to, but it can also influence the design of the product. For some of the components the right decisions were made but for some the design had to be iterated.

“We had the attitude ‘how hard can it be?’, but it was really difficult!” - Respondent 12

O11: Denied payment-model

An important customer did not agree on the developed payment-model right before launch.

Action

Representatives from the Tool Comp visit an important customer right before launch to introduce them to this new product. During this meeting, they found out that it is completely excluded for the customer to accept the offer according to the developed payment-model. Luckily, they agreed on an alternative solution but the payment-model may have been rather stressfully developed. This

47

is expressed as an obstacle when selling the product and as an important problem that they should have considered and investigated earlier.

O12: Customer References are missing

Customers ask for customer references, which the project did not have. One customer has the product but did not prioritize it.

Result

The product has been developed and is delivered to a customer to test it, get feedback for possible improvements and get customer references. Now, when the product is launched, customers ask for references but unfortunately there are none. This obstacle does not hinder the projects’ proceeding but it hinders the outcome’s growth on the market and thereby the project in the post-launch phase. This leads to that customers do not dare to take the risk of buying the product. Having customer references has been highlighted as essential when selling the product, especially for highly innovative products, since it makes customers feel safer when buying the product. “It could have given us important feedback on what was not working or if they needed other functions. We have got

some feedback that gave us a little, but it could have given us more” - Respondent 12

“Many ask for customer cases and we would have had that. I think it is sad that we do not have that. [...] It creates some kind of calmness” - Respondent 10

4.3.3 Challenges In this section, identified challenges at the Tool Comp with related managerial controls are presented (green or red letters refer to positive respectively negative effects), identified through an analysis based on Table 1-4 in section 2.3 as well as Table 5 in section 2.4. A summary of the identified managerial controls connected to the challenges are compiled in a table in Appendix G.

C10: Difficulties in getting decisions

It is challenging since the decisions take too long and they are often unclear.

Action Result

The uncertainty and the increased technological development pace that characterizes the digital innovation projects increases the demand on the governance and a well working decision-making process. Several project members express that the usual decision-making process is too slow for these projects, and that it is common that they either need to wait for important decisions too long or that they simply must make the decisions by themselves. This is emphasized by project members’ comments, such as “We are not quick to make decisions in this company. No, that is one of our major problems” (Respondent 4). But is also emphasized by managers at a higher level, with comments such as “The steering group is not very mature yet” (Respondent 21) or that the problem is “not the funding but the governance. To have all that in place” (Respondent 21), and “We as managers have not supported these projects sufficiently, neither investigated what the problem is properly, not until recently. However, with a more problem solving approach and more resources we are taking small steps” (Respondent 18). According to what the respondents have highlighted, this challenge comes of two main reasons. Firstly, the decision-making process is adapted to traditional products where the projects often have time to wait for decisions. The need for a quicker decision-making process is highlighted through comments such as “I think we need decisions more quickly. It should not take half a year

48

to confirm [something], it should take a week or a couple of days, we think this is the right decision, can we go for that? Yes or No?” (Respondent 4).

“Traditional steering groups commonly have meetings with an occurrence of one to one and a half months in between the meetings. Here we talk about having meetings, at least, every two weeks as things and develop and

change so rapidly” - Respondent 18 Although some of the respondents ask for more freedom in the projects, some emphasize that some decisions preferably should be made by the steering function. This leads to the second reason, that the steering group often have extensive knowledge within the traditional area but none has a background within any of the new technologies. When the steering function lacks the right knowledge, or the right information and support, to make the right decisions the project members experience that they make many of the decisions by themselves and that they are left alone, “We have been taken care of ourselves very much” (Respondent 9).

“So that nobody is sitting here at our level and makes decision that fits this project but is completely wrong for the whole company. There must be this helicopter view in the decision-making process and we are the best company for that. The individuals at the steering function are smart, but they do not have a background within this area. Then we

cannot demand that they make the decisions for it either” - Respondent 9 C11: Increased demand on coordination

It is challenging since there are many parties involved and the digital outcome requires higher demand on coordination.

Due to the mentioned organizational complexity with all the involved parties, the coordination of employees has become more important, and thereby also more challenging when it does not work properly. The Tool Comp is used to working in silos with all the competencies clearly divided into disciplines or units where each unit manages its specific outcome. Also, the structure is rather hierarchic. Nevertheless, a digital outcome requires a cross-functional work in projects, which by many the respondents has been raised as a major challenge in several of the digital innovation projects. The way these projects are working between functions is described as inefficient. Some of the new technologies and the new competencies have not yet matured in the Tool Comp, which further complicates the cross-functional work and the communication between units. Due to the mutual dependency between units’ deliveries and processes, the need for more coordination is raised by many. In fact, the dependence on other units is raised as the major challenge in Project E. The missing coordination is both on project level and on positions on a higher level. Some respondents raise the struggle that comes with an informal leadership at project level, which especially complicates the coordination when there are “many with their own wills, and with strong wills” (Respondent 6). This leads to that the projects are run inefficiently. Whereas, some miss the support from management higher up - one respondent said that that the informal steering is inappropriate for the complexity and dependency in these projects. The risk with having a lack of coordination, and additionally project members who are not only dedicated to the particular project, is described as “there will be many half-finished stuff done. There will be nothing finished and you will never get rid of anything” (Respondent 8). Another difficulty with working together with many parties is when they are positioned at diverse sites. This is emphasized since it has been raised as a challenge in one project while having all competencies close has been raised as a success factor in another – respondent 18 said “positioned at diverse sites, not having continuous follow-ups and having diverse objectives, will guarantee you will collide and fail”.

49

“There are very many that run very much, and sometimes not fully coordinated” - Respondent 8

C12: Immature roles and responsibilities

It is challenging since the roles and responsibilities are immature. Personnel

Another thing that is perceived as a challenge in the digital innovation projects are unclear roles and responsibilities, it has been raised as challenging in all the projects - “It is not clear at all. It is an unclear structure when it comes to roles and responsibilities” (Respondent 12). Respondents believe it depends on that it is a new area that the existing system does not yet support, and mean that they have pushed it through the system. The uncertainty regarding roles has partly been shown in that the project members have experienced difficulties in knowing who to report to. For example, Respondent 9 said that “Due to reorganizations, the steering group has changed so it has been kind of fuzzy on an organizational level regarding the steering of the project”. Further, one respondent raised the problem with not having the same steering group for all the disciplines in the project.

It has also been shown in the role of being a product owner. This is a role that otherwise is well grounded for traditional products at the Tool Comp, but since the digital innovation projects involve many new disciplines the role changes and has not yet matured. Therefore, the responsibilities have been unclear regarding ownership of all the involved components in the outcome. The challenge in this was described by several of the respondents, Respondent 12 said “Since we have not had this kind of product before, it is hard to identify who is responsible for the software for instance. Who are the owner? Who makes the decisions? That we do not know”, and Respondent 4 described it as “But who has that responsibility, where is the limit for responsibility, who determines the goals and who determines the sales targets?”.

C13: Difficulties in setting clear objectives

It is challenging since the complexity of digital outcomes increases the number of directions the project can take and the number of errors that might occur.

Result

Action

The digital outcomes involve many components that need to be integrated. This means that it takes time to bring all involved parts through the development process. Moreover, the fact that the outcomes involve many components increases the number of directions for the project and it also increases the number, and difference, of errors that may occur - the complexity is put in comparison to a ball-point pen, where the number of errors that can occur is limited. Even if the Tool Comp’s traditional outcome also can be complex, these projects involve many competencies that are new to the company which makes the complexity more noticeable and even more challenging. Respondent 4 means that this kind of project would be a “walk-in-the-park” for a company whose main business is electronics but due to the Tool Comp’s history and background it becomes very complex. When it is put in comparison to traditional projects, where you decide a specific scope very early in the process, this becomes more about finding customers’ ‘pain-points’. Due to the uncertainty, planning these projects has been very challenging for the Tool Comp. Several respondents have expressed the comment “you do not know what you do not know” which reinforces that statement.

“It is like being in the jungle with a machete, you do not know where to go and you do not have a map or a GPS, but

still you have to do it twice as fast” - Respondent 9

50

The respondents have experienced difficulties regarding setting clear objectives, which has been emphasized by two perspectives. First of all, it has shown to be more difficult to specify clear objectives for these projects since a digital solution require more requirements that need to be understood. Another challenge regarding the objectives occurs when it comes to collaborations. It has been challenging to both reach the goals, and deliver on time, because the different parts use different working processes and because they are dependent on what the other part does. Lastly, another challenge is to mediate the objectives. It has shown to be difficult to define scope for the digital innovation projects. Respondent 18 claims that they know how to do it for the traditional projects due to their long experience and expresses that “we almost take it for granted”. Unfortunately, the objectives for the digital innovation projects easily become fuzzy and it is difficult to determine when an objective is fulfilled.

C14: Improper process

It is challenging since the existing processes are adapted to traditional products which has led to that these projects act outside these and the steering becomes inefficient.

Action

The Tool Comp has processes and methods that have for long been well suited to their traditional products. The lack of processes adapted to the digital innovations projects have been experienced as a challenge by several respondents. For example, Respondent 1 said that “In the traditional business, the product development process is very well structured and described, but in a completely new business, new processes, routines and organizations have to be built up”. Also, several respondents express that the Tool Comp needs a process on how to take advantage of all the learnings they get from these projects. Respondent 9 also came with expressions like “We cook soup on the same nail all the time. And that is why it does not happen so much in a time perspective. That could have happened if we had an organization and an efficient way of working from the beginning” and “This is like a container of knowledge. So, we must find a process on how to get this knowledge into our systems”.

“So that we can create a process that considers all these new aspects, I believe that if we manage that, it will be an

important benefit” - Respondent 12

C15: Lack of experience regarding sales and after-sales activities

It is challenging since the organization is not yet prepared for the sales and after-sales activities that are added due to the digital outcome.

Another challenge that has been raised during the interviews is the implementation phase. Respondents have mentioned that going towards the industrialization phase requires processes and methods regarding both support systems and new sales systems that the Tool Comp does not have today. Respondent 11 mentioned that “the industrialization phase that we have never done before, has shown to be much bigger than we thought”. Challenges will also occur regarding business models and scaling up as well as, maintenance of a flow of new functions. The business models require license management which will result in new challenges, where Respondent 9 said that “a very heavy part is to get the legal parts in place”. The new business models will also be challenging for the sales department. Today’s sellers do not have the knowledge to sell digital products and Respondent 7 highlighted that “if not our own sellers believe in it and use it, we will neither accomplish a change at the customers”.

51

C16: Limiting attitude

It is challenging since the Tool Comp struggles with rivalry, to some extent, and an attitude of ‘not invented here’.

Cultural

The Tool Comp is active in a conservative industry which makes it challenging to adapt to changes. Respondent 7 said that “we are in a phase when we are not prone to change” and Respondent 7 also said that “we must dare to make a change, but… we still use our old processes”. Many of the respondents see the attitude as a challenge. They want to see a change in the leadership where motivation and an increased amount of freedom are in focus. There is an attitude at the Tool Comp that creates a rivalry. This rivalry leads to jealousy and prestige within the company that creates an inhibitory atmosphere. Recurring comments like ‘not invented here’ and ‘this company has a history in thinking that they can do everything themselves’ confirm this challenge.

C17: Miscommunicated strategy

It is challenging since the Tool Comp’s strategy regarding digital innovation is rather unclear, which makes it difficult to understand how each unit or individual can contribute to it.

Result

Setting a strategy for the company has shown to be a challenge. According to Respondent 7 it is unclear how everyone is supposed to contribute to fulfil the strategy and said that “there is a lot in the communication that has failed”. Another respondent thinks that everyone is talking about the digitalization but there are no clear directions, which makes it fuzzy. Most at the company have agreed on that going into the digitalization is the right decision, however, the big challenge is to decide on what level.

Respondents think it is a challenge for a non-digital company to embrace the digitalization and understand how fast it develops. Respondent 7 also said that “right now there is a ‘window of opportunity’ but those windows are not very long sometimes” and Respondent 11 said that “technology moves very fast, if you do not jump on the train you will miss it”. Hence, setting a strategy, mediate and understand the new pace that comes with it is a big challenge.

C18: Unfamiliar external collaborations

It is challenging since the projects often involve collaborations with external partners, which often is complicated due to colliding processes, deliveries or cultures.

Personnel

All the projects have had external collaborations of any kind and there have been more or less challenges regarding the majority of them. One reason that is mentioned is that the digital innovation projects require new kinds of partnerships that the Tool Comp are not used to manage. The mutual dependency on collaborators’ development pace, processes, business models and legal circumstances complicates these a lot. Further, the diverse access to resources also contributes to this complexity. Challenges have arisen due to for example, colliding ways-of-working, which later have led to time-consuming conflicts. Except from the processes, the diverse cultures can influence the collaborations and has appeared as a challenge when these problems surprisingly have occurred in the middle of the project. For example, one said that they and their partner had agreed on a timeline and objectives early in the process but their perception did not agree and the conflict came as a surprise. In another project, they had difficulties with communication between the Tool Comp and their partner, which led to that the development took a lot more time than what was necessary.

52

However, these collaborations may be important since it is a quicker way to get the right competence. Also, all resources may not be needed at full time. Finding the right partners has been difficult and as mentioned, has also the collaborations. The Tool Comp is used to collaborations but those are often with partners from similar disciplines that have developed a relation with the Tool Comp for a long time.

“Now comes the tool deliverer and should connect to a new [smartphone] that they have never done before, which makes this a totally new interface. However, if you have an engineer from [a large smartphone developer] that you are used working with, they would have been able to tell you how to do directly. It is about finding the right person

to do it” - Respondent 8 C19: Not enough resources

It is challenging since the projects do not get sufficiently many and the right resources.

Personnel

The move that the Tool Comp must make towards digital innovation means that they need to get much new competence within electronics, software, data analysis, licensing, certification and all the other areas that do not belong to their traditional business. So far, the lack of resources and competence has been emphasized as a major challenge in these projects - “We have had a shortage of resources” (Respondent 12).

“It is a challenge that the organization has not dared to invest in enough new skills” - Respondent 11

Except from that some competence is missing, the existing resources are too few which almost has been stated as even more challenging. This is claimed by a comment from Respondent 8 who said, “That all the involved parties have so many other stuffs going on [...] so there are no one that really work dedicated with one of these projects, everyone have other stuffs too”. This has led to that the projects must share the resources that they already have.

“But these products require totally new competencies and therefore, we would need additional resources, but what we have done is to reallocate the ones we have and that means that it has been at the expense of other things that we

also should have done. But as it was, we did not have a choice” - Respondent 12 Further, it was expressed by a manager that the most important things they should do is to understand what people and competencies digital innovation projects require. This challenge clearly influences the result since the resources are reallocated, but it has additionally been highlighted as influencing the climate since the lack of resources and the feeling of not having enough time induces frustration among the project members. Many of the respondents mention new collaborations and partnerships as possible ways to get the right resources more quickly.

4.4 Validation at the Pulp Comp The validation exercises at the Pulp Comp concerned four chosen influencing factors, namely the success factor having with a pilot customer (SF2) and the obstacles important resources are not allocated to the project (O2), lack of financial support (O3) and dependency on platform development (O4). These were chosen since they were considered interesting during the analysis. The exercises resulted partly in managerial controls connected to each of the factors and partly in

53

that the factors were placed out in relation to the Pulp Comp’s formal development process, which are presented in Table 12 and Figure 12. During the presentation regarding managerial controls, the first group chose to put more focus on the success factor since they thought it was most important, especially when it comes to make sure they kept the pilot customer. However, putting more effort on keeping the pilot customer also means more work, and even smaller projects, which will be more difficult to manage. Therefore, the group expressed that it is important that the objectives for the collaboration with the customer is clear. When it comes to the dependency of platform development the group thought that a lot of actions were needed, however they agreed on that the project manager plays an important role, that fast decisions are important and that clear role descriptions were necessary to avoid this obstacle. Regarding the lack of financial support the group chose to add their own solution by claiming that the financial support needs to come centrally from the company. If the company is going to undergo a digital transformation, financial support should not have to come from different units within the company. Instead the initiative should be treated independently. Finally, the group saw the project team as important regarding the obstacle no allocated resources. They said that it is important that they also got allocated resources from the traditional areas as well as the digital area. However, estimate how much time that is needed is still a challenge.

Table 12: Validated influencing factors at the Pulp Comp and the connected managerial controls.

Influencing Factor Chosen Managerial Controls

SF2: Having a pilot customer have a project manager that is good at coordination

collaborate with customers early in the process

have clear objectives for the project

show concepts in an early phase

O2: Important resources are not allocated to the project

addition: project team - generally

O3: Lack of financial support addition: transformed business - must be financed centrally in the company.

O4: Dependency on platform development

have a motivated project manager with ‘sharp elbows’

have a project manager who is knowledgeable within digital technology (software, electronics etc.)

all decisions are fast and efficiently made by steering function

develop role descriptions

have clear objectives for the digital initiative

When the other group presented where in the process these factors should be considered, they started with the obstacle Lack of financial support since they think that you cannot start a project without making sure that the project is funded. Therefore, they think it should be taken into consideration before planning the project. The group placed the remaining factors before the next decision point, the decision to start a project. They described allocated resources, dependency of platform and pilot customer as resources for the project and that they all should be taken into consideration before the project is getting started, otherwise there is a risk that the project will stop during the development.

54

Figure 12. Validated influencing factors at the Pulp Comp, connected to decision points in their formal development process.

4.5 Validation at the Tool Comp The validation exercises at the Tool Comp concerned six chosen influencing factors, namely the success factors participation in exhibitions (SF7) and collaborations between customers and project team (SF9) and the obstacles partnership that had to end (O7), time consuming certification process (O10), denied payment-model (O11) and customer references are missing (O12). These were chosen since they were considered interesting during the analysis. The exercises resulted partly in managerial controls connected to each of the factors and partly in that the factors were placed out in relation to the Tool Comp’s formal development process, which are presented in Table 13 and Figure 13. The first group started to present how to avoid obstacles regarding the denied payment model by suggesting actions like initiating collaborations with customers early in the process, executing tests, testing customer values and getting continuous feedback from them. They also think it is beneficial to show concepts regarding the whole package including technology and business models. Finally, they think it is important to let the project team make more of the decisions. For the time-consuming certification process the group saw a success in educating existing employees and to let those who are performing this to sit close to each other since the certification process is difficult to perform. Also, this is something that needs a process since the activity will be repeated in several projects. To handle the recurrent exhibitions, it was important to have a project manager with high coordination skills and a clear process to follow since these events are happening every year. Also, the group think it is important to show more complete concepts since it should be on the market within a specific timeline. When it comes to collaboration between customers and the project team the group suggested to initiate collaborations with customers that are positioned close to the company which will facilitate the testing against customer values. Additionally, the group thinks it is important to work with ambassadors internally and to find driving customers where the company feel comfortable in failing. Regarding the lack in customer references the group mentioned the importance of testing customer value again, and they also said that they should use their own production as a reference. Finally, regarding the partnership that had to end, the group suggested that a senior project manager, to initiate a collaboration with the right profile and competence and to have clear objectives regarding the partnership are three important actions.

55

Table 13: Validated influencing factors at the Tool Comp and the connected managerial controls.

Influencing Factor Chosen Managerial Controls

SF 7: Participating in exhibitions have a project manager who is good at coordination

have a clear process for the activity

get continuous feedback from customers

show the concept when the product is done

SF 9: Collaboration between customers and project team

initiate external collaborations with those who are closest

have the opportunity to test technology

have the opportunity to test customer value

get continuous feedback from customers

show concept in an early phase

use ambassadors that advocate the project

O7: Partnership that had to end have a motivated project manager with ‘sharp elbows’

(addition: senior project manager)

initiate external collaborations with those who are closest

initiate external collaborations with those who are world-leading

(addition: good profile and competence are more important)

have clear objectives for the project

have clear objectives for the digital initiative

O10: Time-consuming certification process hire a new competence

train existing personnel

have a project group that is sitting close to each other

have a clear process for the activity

O11: Denied payment-model collaborate with customers early in the process

decentralize decision-making

have the opportunity to test customer value

get continuous feedback from customers

show concept in an early phase (addition: the whole concept with business model and development)

O12: Customer references are missing collaborate with customers early in the process

have the opportunity to test customer value

get continuous feedback from customers

use ambassadors that advocate the project

addition: use our own production

56

When the other group was going to place where these factors should be taken into consideration they all agreed on that it should be early in the process. The customer collaboration and planning for exhibitions should be considered already before the decision point to start the project. Denied payment model, ended partnership and time-consuming certification process should be considered before the project execution and should therefore be a part of the pre-study. When developing payment models, one suggestion was to develop a portfolio of different payment models that can be used to different products. Lastly, the obstacle lack of customer references should be taken into consideration before you take a decision to continue product execution. However, this obstacle might also be taken into consideration earlier when collaborating with customers since they can help to validate the idea.

Figure 13. Validated influencing factors at the Tool Comp, connected to decision points in their formal development process.

57

5 ANALYSIS The section aims to present an analysis based on the empirical data and the theory framework, and will through that answer the two research questions.

The found factors influencing digital innovation projects that are presented in section 4.1 and 4.2 range across the whole companies. When putting it in comparison to the five capabilities Holahan et al. (2014) note as consistently mentioned in best-practice studies when it comes to new product development, the result in this study relates to all of them. They list (1) the development process and its activities, (2) the organization of teams, leadership and people, (3) the strategy and product portfolio, (4) the internal culture and climate for innovation, and (5) senior management and corporate commitment including for example, support and finally resources (Holahan et al., 2016). The indication that digital innovation influences all these capabilities at manufacturing companies, reinforces the many aspects that companies need to take into consideration when embracing digital innovation. In this study, this will be reflected on, first in relation to managerial controls and attention in section 5.1, followed by the innovation and product development process in section 5.2.

5.1 Managerial Controls Supporting Digital Innovation Projects at Manufacturing Companies

This section presents an analysis of the use of managerial controls and attention at the studied companies. It aims to answer the first research question (RQ1) by reflecting upon the managerial controls the companies already are using successfully and the managerial controls they can replace, or complement, the not as successful ones with. The analysis is presented for one control at the time in section 5.1.1-5.1.5, to motivate how managerial controls, as well as attention, can support digital innovation projects at manufacturing companies. Finally, theoretical implications regarding managerial controls are presented in section 5.1.6.

5.1.1 Using Result Controls to Support Digital Innovation Projects Result controls have been identified in relation to all three of success factors, obstacles and challenges, at both companies, and they refer to both the determination of expected results (Nilsson, 2015) and the monitoring and controlling of the outcome (Haustein et al., 2015). The empirical findings show that result controls are crucial to be able to test, verify and get feedback (SF2, SF8, SF9), which in turn have been shown to be especially important in the digital innovation projects since they are uncertain, complex and it is easy to lose direction. Having unclear objectives has had spread consequences, such as lack of motivation (O4), unnecessary time consumption (O4) and finally, doubtful customers due to a lack of reference customers (O12), which reinforce the importance of using result controls in digital innovation projects.

When Cardinal (2001) argues what managerial controls that can benefit companies that are active in an uncertain environment, result control is one of them, together with action and personnel controls. However, due to the uncertainty, and the complexity, characterizing the digital innovation projects, it has been challenging to set clear objectives. This is shown to be a common reason to several of the six obstacles and challenges that are related to result controls (C6, C13). Contrary to Cardinal (2001), the inappropriateness of using result controls has been raised in earlier studies specifically due to the complicating effects the uncertainty has on setting clear objectives (Haustein et al., 2014).

58

The Pulp Comp uses action control to regulate the demand of having a pilot customer, and it gives them the opportunity to test and verify their digital outcomes (SF2). This has shown to be a successful result control; despite that it helps verifying the outcome it also contributes to the creation of attention, which in turn has led to good references and priority from the governance. The fact that Project B at the Pulp Comp could not succeed since they were missing a pilot customer and therefore, had difficulties in determining the objectives (O1), reinforces both the beneficial effects of regulating the use of a pilot customer and the very importance of having clear objectives, more specifically, using result controls. During the validation, the respondents highlighted the importance of preparing collaborations with customers by putting most focus on the success factors that concerned that. Early collaborations with customers has also been raised as a success factor at the Tool Comp, both by managers and project members (SF8, SF9), even though these are not regulated. Moreover, this was confirmed during the validation. It has been especially beneficial when the project members themselves are part of the identification of customer needs since it has also led to increased motivation. This reinforces previous studies that have emphasized customer-based measuring, instead of financial measures, in uncertain projects (Gschwanter & Heibl, 2016), since financial controls have been shown inappropriate for organizations where for example, the development involve complex technologies (Haustein et al., 2015). As also noted by Gschwantner and Heibl (2016), can the combination of using interactive controls to set the objectives and governing measurement controls, contribute to dynamic tensions and thereby, embrace ambidexterity. However, at both companies have respondents expressed that they have not got the full advantage out of the collaborations later in the process (SF2, O12), at the Tool Comp it has even led to that they cannot use the reference customer. This speaks to that the result control can be complemented, either by another result control regarding the initiation of clear objectives and expectations on the customer collaboration, or an action control by providing a process or guidelines on how to steer the collaboration to take the full advantage out of it. Apparently, respondents at both companies argue the importance of having clear objectives since it supports decision-making when the projects are uncertain, which moreover, is argued in previous studies as well (Haustein et al., 2014). Haustein et al. (2014) emphasize that decision-facilitating measures should be used for evaluations more often. Further it relates to the purpose of managerial control provided by Merchant and Van der Stede (2012, a, pp. 6): to “ensure that the behavior and decisions of their employees are consistent with objectives and strategies”. The decision-making has been raised as especially challenging in the Tool Comp, however, not only due to the use of result controls but also due to the use of action controls since the process is highlighted as too slow, which hinder the efficiency to verify solutions. Moreover, the employees both at the Pulp Comp and the Tool Comp experience that it is difficult to get decisions since the competence within these new areas often is on project level. Some of the respondents advocates decentralization then, whereby some argue that the decisions must be made on higher level to be in line with the strategy. This is emphasized in research as a typical tension at organizations, to provide flexibility at the same time as steering projects in the right direction (Lövstål & Jontoft, 2017), as well as an important reason to why a balance of managerial controls is so important (Mundy, 2010). To reverse this into a successful control, it can be complemented by other controls, where contrary controls often is good to create the necessary balance (Gschwantner & Heibl, 2016). The result control in this case, can be complemented by personnel or cultural controls. Personnel controls can be used by adding new competence to the steering function, which will make them more comfortable with making the decisions. Using cultural controls refers to a bottom-up approach, where a better communication can provide them with information to make the decisions or to have such a strong culture that enable decentralization of decisions. Since clear objectives and continuous testing have been such emphasized at both companies, as well as such challenging when not working successfully, this study agrees on Cardinal (2001) and thereby, claims that result controls are valuable to support digital innovation projects. Although

59

the uncertainty, they have shown to be more appropriate, than inappropriate as reflected by Haustein et al. (2015). In fact, the existence of uncertainty reinforces the use of result controls since the projects can take so many directions and needs steering to align with the companies’ strategies, however, as stated by Gschwantner and Heibl (2016), it can be complemented by contrary controls to further embrace exploration. Further, how the companies currently are using result controls have had both beneficial and hindering effects. The beneficial effects are strongly connected to the testing and feedback from customers and the hindering effects have mostly been connected to the determination of objectives. A common action made by the companies is that they have intensified their use of, and collaborations with customers when, testing compared to their traditional products, while in most of the projects they use the same approach for determine as well as, define their objectives. At least, any change regarding the goal-setting has not been mentioned. This speaks to that for avoiding that the obstacles and challenges connected to goal-setting recur, companies must consider their approach when setting the objectives. Gschwantner and Heibl (2016) advocate interaction for determining objectives, i.e. complement result controls with cultural controls, which further has been emphasized by respondents in Project C that got to be part of the identification of customer needs. Also, cultural controls can be used to induce courage to involve customers early in the process. Personnel controls can also be a useful complement, by assigning a resource to manage and maintain the collaboration. Finally, the study also shows that the effects of result controls are strongly related to the combination with other controls. Most importantly, to have successful personnel, as well as cultural controls, when setting the objectives.

5.1.2 Using Action Controls to Support Digital Innovation Projects The empirical findings indicate that the Pulp Comp’s development process is beneficial when it comes to digital innovation projects, since decisions often can be made at a low level, and if not, it contributes to efficient decision making since they have frequent meetings with representatives from all levels (SF6). This process is an action control that the Pulp Comp uses successfully, and as action controls often do, it has contributed with efficiency in the projects (Gschwantner & Heibl, 2016). The beneficial effects of having meeting more frequently has also been indicated in the empirical findings regarding the decision-making at the Tool Comp (C10). According to previous studies, action controls can be hindering under uncertain conditions since it often includes much administrative (Haustein et al., 2014). Since a lot of the communication happens through short meetings, some of the administratives may have been avoided and thereby, have contributed to the successful use of an action control. At the Tool Comp, however, recurring challenges have been mentioned concerning the current development process. Which is one of their most prominent action control (Haustein et al., 2014). Historically, the development process probably has contributed with efficiency, as stage-gate processes often do (Veryzer 1998), but according to the respondents, the current process is immature and does not fit the digital innovation projects (C14) and second of all, the decision process is too slow (C10). This reinforces what Holahan et al. (2014) reflect upon, that formal processes, such as stage-gate for instance, can be harmful to projects where risk, uncertainty, and ambiguity is high. The differing consequences of the companies’ use of action controls, and the fact that it has been a success factor at one company whereas it has led to challenges at the other, indicates that the way action controls are used has a great impact on the result and thereby, must be used with care. Yet, that action controls can be valuable also for digital innovation projects. After all, theory has claimed that some structure is necessary also for radical projects, otherwise costs and development time tend to escalate (Holahan et al., 2014). Further, Ahmed (1998) treat processes and structures, and means that if they are used incorrect the climate gets influenced and thereby, they become obstacles to innovation. What distinguishes the use between companies, is partly the decentralization of decision-making, and partly also a greater reliance on culture since the project members are steered rather flexible in between meetings with the steering function. This can be

60

contributing factors to the difference of using it successfully or not, and points toward that the combination of action controls and cultural controls can provide sufficiently much structure, yet, allow experimentation and thereby, support digital innovation projects. What further reinforces this, is that Gschwantner & Heibl (2016) raise the suggestion of having clear milestones but provide flexibility in between, more specifically use interactive processes (i.e. action controls and cultural controls) in a combination with clear targets (i.e. result controls) when developing more radical innovation.

Overall, it is clear that both companies have problems when using action controls since all, except from one, of the identified actions can be connected to either an obstacle or a challenge. This might indicate that using a process is not always beneficial, which Nilsson (2015) confirms by claiming that radical innovations can benefit from formal processes in terms of tools instead of restrictions and Gschwantner and Heibl (2016) advocate that new product development rather needs determined milestones with a more unstructured and flexible process in between. Moreover, the findings from the validation indicates that the use of action controls is desired for recurring activities within digital innovation projects, probably to save time during the activities.

5.1.3 Using Personnel Controls to Support Digital Innovation Projects The use of personnel controls has in multiple cases, for both the companies, resulted in successful, as well as challenging or hindering, outcomes. The successful outcomes are strongly connected to that the projects have been provided with very competent resources that can give warnings early in the process (SF3) and that they feel comfortable in making decisions at a project level (SF12). However, when decentralizing the decision-making, Haustein et al., (2014) highlight a greater demand on coordination and integration at the company (i.e. on cultural controls). Highlighted at the Pulp Comp is also that they have been provided with resources that have the right digital mind-set which help them follow their digital strategy (SF5). These mentioned success factors have, according to Merchant and Van der Stede (2012, c), occurred using personnel controls in a successful way, since they claim that personnel controls help companies with both the understanding of the direction and to make sure that the projects have the right prerequisites to succeed. Therefore, these actions should be kept in mind when managing future digital innovation projects.

Several obstacles that have occurred in the studied projects are related to the access to resources and competence, and thereby, also to the use of personnel controls. The respondents at the Pulp Comp highlight that important resources are not allocated to the project (O2) and the respondents at the Tool Comp raise the challenge in having immature roles and responsibilities (C12). This indicates that the change towards managing digital innovation projects demand an increased focus on personnel controls. This supports what have been told in researched, for example, that personnel controls have been claimed to contribute in understanding the company strategy (Merchant & Van der Stede, 2012, c) and to be particularly important in uncertain conditions (Haustein et al. 2014), hence, also for digital innovation. Consequently, companies can support digital innovation projects by increasing their emphasis on personnel controls, which is further supported by Haustein et al. (2014) who highlight the accurate recruitment necessary for managing complex technology. Some of the obstacles and challenges that have occurred when using personnel controls are strongly connected to partnerships. Using partners is a good and fast way to extend the knowledge, however, it has been both hindering being dependent on another partner (O4) as well as challenging to collaborate with a partner from a totally new discipline (C18). According to Haustein et al. (2014), embracing digital technology will demand new knowledge, but also a development of the existing ones. Therefore, collaborating with partners is definitely a good way of extending the knowledge. Unfortunately, activities to develop the in-house resources does not seem to be taken into consideration as much. However, during the validation at the Tool Comp training of existing personnel was highlighted as beneficial, for example concerning the

61

certification activity. Nilsson (2015) suggests training and job rotation while working with highly uncertain projects. To avoid obstacles and challenges in collaborations in future digital innovation projects, complementary controls could be useful to facilitate the collaborations. For example, result controls can be useful for determine clear objectives, which has been raised as a contributing factor to the challenges, as well as additional personnel control by having an internal resource that holds the competence to communicate and manage the partnerships. Since these collaborations are both new to the companies and are handling uncertain and fuzzy projects, it is therefore important to have some kind of structure which Nilsson (2015) reinforces by discussing how radical innovations can benefit from the use of formal processes, in terms of tools, which is an action control. In conclusion, using personnel controls is crucial for this type of projects, however, introduce new collaborations may not be the only way to extend the knowledge within the companies. Also, these collaborations can need support from other controls as well to be more successful.

5.1.4 Using Cultural Controls to Support Digital Innovation Projects The use of cultural controls has had both positive and negative effects. An interesting finding is that the positive effects are connected to how the people at a lower level have used the cultural controls and many of the negative outcomes are connected to how people at higher levels have used cultural controls. Success factors that have occurred at both companies are the spirit and motivation among the team members (SF1) and the fact that they are positioned close to each other (SF10, SF13). These success factors can definitely have occurred due to the use of cultural controls since Haustein et al. (2014) claim that creating a good climate and promoting interaction are two factors that can be created by the use of cultural controls. Regarding the allocation of resources, emphasized as an obstacle at the Pulp Comp (O2), it seems like these projects do not always get priority and that valuable resources are asked to contribute with their knowledge regarding their traditional business. This indicates that the company relies on the personnel’s willingness to contribute, which puts much higher demands on the culture, and thereby, on the cultural controls. Since the project members experience this as an obstacle the use of cultural controls might not be the best solution, at least not itself. What could replace or complement cultural controls in this case, is personnel controls that according to Merchant and Van der Stede (2012, c) are used to ensure that the projects have the right and enough resources to succeed. For example, the Pulp Comp can allocate the resources to the digital innovation projects by adding it in their role descriptions (Haustein et al., 2014). The limiting ‘not invented here’-attitude and rivalry within the organization (O6, C16) at the Tool Comp and a challenging culture that may not be very open to digital innovation (C3) at the Pulp Comp emphasises the need of cultural controls. To create creativity and innovation, companies need to work with their culture and climate that reduce fear of failure as well as rivalry within the organization (Gschwantner & Heibl, 2016), therefore both these companies need a more extensive investment in cultural controls. Overall, more positive effects, than negative, have been identified at both companies when using cultural controls. However, cultural controls are missing sometimes, for example, to support the increased demand on coordination and interaction. Gschwantner and Heibl (2016) claim that cultural controls can be useful for companies that are embracing digital innovation since it will require a major change for the organization. However, the companies still need to work on their culture within the whole organization to create an acceptance to change and failures. Therefore, it is important that both companies continue to use the cultural controls they already use, but also consider to use them in a greater extent, to succeed in future digital projects.

62

5.1.5 Using Attention as a Control to Support Digital Innovation Projects Both companies have, consciously or not, used attention to motivate the digital innovation projects. At the Pulp Comp, pilot customers (SF2) and ambassadors and drivers (SF4) are used to direct attention to these projects and at the Tool Comp exhibitions are commonly used to direct attention (SF7). Ambassadors and drivers have also been raised as beneficial to innovation, and according to Holahan et al. (2014) these can be representatives from diverse disciplines and can be used both to support what they refer to as high-technology and low technology projects. Mostly, the positive effects have been raised, such as attention being a source of getting support, priority, and motivation within project teams and finally, an increased interest within the steering group. The study confirms what earlier studies have noted, that large companies tend to prioritize incremental projects in front of the more highly innovative ones (McDermott & O’Connor, 2002) and that increased radicalness also induces increased resistance (Rice et al., 2001). This is reinforced since it has become a challenge at the Pulp Comp (C3) and an obstacle at the Tool Comp (O5). The mentioned positive effects indicate that attention clearly influences the projects by motivating the project members and pushes the project forward, and by doing so has a top-down effect, which agrees with Ocasio (1997) who claims that attention can control perception and action to desired activities. However, the most frequently mentioned effects stated by the project members is the effect attention has on decision-makers at a steering function and thereby, how it has a bottom-up effect. Ocasio (1997, pp. 188) describes the ‘focus of attention’ as “What decision-makers do depend on what issues and answers they focus their attention on”. Moreover, attention has been shown to have positive effects across functions as well, since it has helped the team at the Pulp Comp to get access to knowledge from other functions. This further relates to Holahan et al. (2014) who note that champions can protect projects by influencing the allocation of resources.

However, getting attention has not only been positive. In some cases, it seems like the attention has resulted in too much pressure to deliver and when the project has been delayed due to for example, the uncertainty, the attention has resulted in doubtful customers. Also, at the Pulp Comp attention has resulted in resistance to the whole digital effort from other units or disciplines, due to that one digital project could not deliver. This leads to another challenge that the result indicates: several respondents at both researched companies told that the failure of one of the digital innovation projects induces a resistance towards the other ones as well, which in turn relates to the major challenge a ‘fear of failing’ attitude means to innovation (Gschwantner & Heibl, 2016). This further reinforces the fact that radical innovation usually has a greater need of attention, advocacy and protection (Holahan et al., 2014) than incremental innovation, however, not only due to the radicalness but also due to the minority it has within large companies that leads to that they are perceived as being ‘the same project’. Further, most of the obstacles and challenges that have occurred due to directed attention, depend more or less on timing and planning, the project has not been able to deliver on time.

This study builds on previous theory by adding the negative effects attention can have on these projects, and thereby, advocates that companies rather should use attention as a conscious control to provoke support and priority to these projects. However, attention is not a managerial control, but rather an employee control since it can be used by employees at different positions. Also, attention is related to managerial controls since the use of any of the managerial controls seems to be able to induce attention in some way. Further, companies will be able to strategically decide when to direct attention to a specific project. Especially, this study shows the very importance of using attention bottom-up and, specifically in cases where the knowledge within these new technologies is at project level since people with the right competence usually have a better opportunity to connect environmental uncertainty to internal effects (Haustein et al., 2014). Additionally, Reid & Brentani (2004) have stated that information often has a bottom-up direction for radical innovations.

63

5.1.6 Theoretical Implications on Managerial Controls The use of managerial controls has been shown to be an interesting target to study regarding digital innovation projects. Most importantly managerial controls seem to be even more valuable in these projects since they are characterized by such a complexity and uncertainty. Haustein et al. (2014) note that the use of managerial controls must be adapted to the company’s circumstances and since the circumstances clearly changes with the embrace of digital innovation, it is not surprising that the use of managerial controls also changes.

Referring to previous studies, some claim that managerial controls can be harmful to innovation (Allen et al., 2015), whereas, some claim that the use of managerial controls rather is crucial for innovation (Lövstål & Jontoft, 2017) - this study strengthens the latter since the empirical findings indicate that digital innovation projects are innovative. Also, referring to Merchant (1985) who highlight the choice of both what controls to use and how to prioritize them, the use of result controls seems to be the most crucial direct control for digital innovation projects and should therefore be prioritized, rather than action controls that have been shown in the empirical findings to be both facilitating and hindering. This can be due to the diverse demand on action controls it these projects, similar to what Haustein et al. (2015) indicate for more uncertain projects. However, as suggested in previous studies, for example Haustein et al. (2015), result controls have been shown to be difficult to use. Therefore, this study adds to theory that result controls must be complemented by personnel and cultural controls for being successfully used in digital innovation projects. The empirical findings also show that personnel controls are important for digital innovation projects, and indicates that the projects are characterized by uncertainty and complexity. This is in line with Nilsson (2015) and Haustein et al. (2014) who embrace personnel controls under such conditions. Moreover, the use of personnel controls by adapting partnerships, must be complemented in digital innovation projects with other personnel controls, such as internal competence, to understand, communicate and manage the collaboration.

5.2 How Formal Development Processes Can Support Digital Innovation Projects at Manufacturing Companies

This section presents an analysis of the formal development processes at the two studied companies. It aims to answer the second research question (RQ2) by showing what they need to consider and where in their processes (in relation to their decision points) they need to consider it, to avoid the recurrence of the obstacles and to ensure the recurrence of the success factors in future projects. At first, the analysis of the researched companies’ development processes resulted in a mapping towards the theoretical development process. This can be seen in Figure 14 and 15 for each of the companies. The theoretical development process clearly differentiates the involved phases, probably since they often demand different prerequisites for being managed successfully. According to Holahan et al. (2014) varying innovativeness and uncertainty requires a variety in all the phases. For example, the difference in level of structure that is advocated for the front end of innovation respectively the product development process (Koen et al., 2016) reinforces the importance to differentiating these. Unfortunately, the mapping revealed that the reality does not completely relate to these phases since there were difficulties in identifying the interfaces between the phases. This reinforces similar reflections that have been presented in theory, for example, that the phases have become more overlapping (Veryzer, 1998) and that the process often in presented as linear even if it is complex and iterative in the reality (Holahan et al., 2014). The complications at the first interface, between the strategy setting and front end of innovation, is not that surprising since theory has raised that this procedure sometimes is reversed, in cases of radical innovations for instance (Reid & Brentani, 2004). Yet, the more surprisingly it is that the interface between the front end of innovation and the product development is unclear. According

64

to theory, the criterion for a product to pass to the product development is that there must be a confirmed product definition (Florén & Frishammar, 2012) since the product development often is characterized by more structure (Koen et al., 2016), which otherwise can be harmful to creativity (Holahan et al., 2014). Consequently, if this distinguish is not clear, there might be a risk that activities demanding creativity, especially when developing radical innovations, happen too late in the process where the projects are steered by structure and discipline. Finally, the interface between the product development and the commercialization, as well as, the post-launch phase, was even more complicated to identify - these were driven separately at both companies. The unclear interface between these phases can explain why many companies perceive the increased interaction and mutual dependency between product and business development as challenging.

Figure 14. The Pulp Comp’s formal development process mapped to the theoretical development process.

Figure 15. The Tool Comp’s formal development process mapped to the theoretical development process.

65

Overviews of the success factors, obstacles and challenges, and where in the process some of them need to be considered, are found in Figure 16 and 17. The analysis of the formal development process is done in relation to the phases in the theoretical development process, and is presented in section 5.2.1-5.2.4, to motivate what activities that must be taken into consideration in the formal development processes to support digital innovation projects at manufacturing companies.

Figure 16. Overview of where in the Pulp Comp’s process the specific success factors and obstacles should be considered. The yellow lines show decision points and the red line shows a hand-over point where the steering

function has the responsibility.

Figure 17. Overview of where in the Tool Comp’s process the specific success factors and obstacles should be considered. The red line shows decision points point where the steering function has the responsibility.

66

5.2.1 Using the Strategy Setting to Support Digital Innovation Projects Both the Pulp Comp and the Tool Comp undergoes a major change when they are embracing digital innovation, and according to Lerch and Gotsch (2015) such a change in strategy requires that the company identifies its potential and evaluates existing and possible capabilities, as well as customer needs. As found in the study, the digital effort is included in the companies’ strategies since it is noticed by several respondents at different positions. However, it does not seem to be mediated enough, neither at the Pulp Comp (C1) nor at the Tool Comp (C17). This is reflected in several of the identified success factors, obstacles and challenges, whereby, it stresses the importance of this phase.

The importance of mediating the strategy is reinforced both by a manager at the Pulp Comp (C1) and by previous research. By Merchant and Van der Stede (2012, a) for instance, who emphasize that to successfully achieve a vision, companies must create a detailed understanding of what it means for every level of business. Unfortunately, this is not the case at any of the companies. At the Tool Comp, several respondents claimed that the traditional innovation projects get higher priority, and more assigned resources, than the digital innovation projects do (O5) and at the Pulp Comp the respondents experienced that it is easier to get resources to traditional projects than to digital innovation projects. The lack of having a mediated strategy has been more noticeable at the Pulp Comp. This might be due to that the decision-making is decentralized (SF6), which increases the demand on having a mediated strategy that can support with a direction. Consequently, companies can support the digital innovation projects better by focusing on mediating their strategy and what it means to each business, for example, by intensifying the use of ambassadors and key-personnel in this phase, since that has been shown to be successful at the Pulp Comp (SF6).

What also is important in this phase is to provide the right prerequisites to fulfil a vision or strategy, since it has been emphasized that the remaining phases must agree with the strategy (Koen et al., 2016). Moreover, failures rather happen due to bad execution of a strategy (Merchant & Van der Stede (2012, a). The de-prioritization of these projects has been emphasized in the study (O5, O2), and additionally, having the right competence has been raised as a success factor (SF3). To ensure that the projects get the right prerequisites, the companies must consider how to provide competence in order not to fail due to bad execution. The competence that must be considered is both at managerial level (C2) and team level to be able to develop the project, but also to plan, communicate and identify deviations in possible partnerships (SF3) and collaborations. Accordingly, the companies can better support digital innovation projects by making sure that the company holds the right competence for being able to implement their set strategy.

5.2.2 Using the Front End of Innovation to Support Digital Innovation Projects The Front End of Innovation follows the strategy setting at both the Pulp Comp and at the Tool Comp. However, what is worth noting is that research highlights that these phases might need to be swapped in cases of more radical innovations (Reid & Brentani, 2004), which speaks to that the process should allow that for being better adapted to digital innovation projects.

Since collaborations with customers has been shown to be a crucial success factor at the companies (SF2, SF9), especially at the Pulp Comp where a missing pilot customer has been a major obstacle (O1), the companies should consider this before entering the product development to ensure that the success factors happen again and avoid the obstacle of not having the collaboration. When doing so they should have a defined product definition according to Florén and Frishammar (2012), however, the uncertainty characterizing digital innovation projects might complicate this. As noticed at the Tool Comp (SF9), involving the customers early in the process has been noted as beneficial. For example, Koen et al. (2016) stresses collaborations with customers as well as internal and external teams in this phase. Since information has a tendency of being transferred bottom-up in cases of radical innovations (Reid & Brentani, 2004), this can be considered as

67

especially important for the digital innovation projects. Hence, the Pulp Comp can benefit from ensuring a pilot customer, not only for being able to test and verify as mentioned in the study (SF2), but also to identify objectives that otherwise has been particularly challenging in this digital innovation projects (C6). Similarly, the Tool Comp can benefit from ensuring collaborations with customer (SF9) as well as that a pre-study regarding customer needs is used (SF8). This is strengthened by Abrell et al. (2015) since they stress that user knowledge is valuable in cases of radical innovations, partly since it can help making the right decisions early. To facilitate a better goal-setting for the digital innovation projects, the companies should consider their process that may be too formalized for more radical innovations, which is a common risk in this phase (Veryzer, 1998). Consequently, the companies can better support digital innovation projects by ensuring customer collaborations early in the process and benefit from it regarding identification of customer needs, goal-setting, as well as testing later in the process. As emphasized in research, the evaluation part of this phase might require more effort for radical innovation than for incremental innovation (Veryzer, 1998), which is what the companies are used to. The difficulty in identifying a business case has been stressed in research (Veryzer, 1998) and with an increasing radicalness, the risk increases and thereby, also the uncertainty of returns (Holahan et al., 2014). Business often aims at identifying opportunities that increase return maximally with as few resources as possible, which has been raised as an obstacle to radical innovations (Holahan et al., 2015). This has shown to be a problem to digital innovation projects at both companies, at the Pulp Comp has difficulties in identifying a business case been highlighted (O3) and at the Tool Comp are often traditional projects prioritized over digital innovation projects. Although this difficulty, research stresses that providing analyses regarding business and market are necessary for radical innovations as well, to facilitate decision for the governance (Veryzer, 1998). Veryzer (1998) suggests alternative basis, such as possible product applications instead of financial basis. Such product applications could be confirmed by using the collaboration with pilot customers or a pre-study as support. Holahan et al. (2014) also claim that increased involvement of management and governance can support radical innovations. Hence, companies can support digital innovation projects by giving more time for the evaluation of ideas and allow alternative processes.

5.2.3 Using the Product Development to Support Digital Innovation Projects The product development phase consists of several decision points in both companies where this phase is a big part of the development process, and project planning is an activity that is typical for this phase (Koen et al., 2016). Even though this phase often is structured to reduce risk, a too structured process might be harmful to more radical innovations since risk and uncertainty is naturally present in these (Holahan et al., 2014). For the same reason is often the planning challenging for radical innovations (Veryzer, 1998), hence, it might be for digital innovations as well. Many of the identified obstacles can be connected to the product development phase, where deviations in the planning phase might be the reason. This has been indicated in the empirical findings as well as in the validation exercise made by the respondents themselves. One example is the inability to prioritize these projects in relation to others (O2). In the early phase of the product development process at the Pulp Comp, resources are allocated but apparently is most of the focus on allocating resources for the development, software developers in this case. The obstacle of not always having good access to competence within their traditional disciplines (O2) has clearly affected the digital innovation projects since they are dependent on that knowledge, and has led to time consumption and more expensive projects.

Other obstacles and challenges like estimate the workload (O8) and inappropriate processes (C14) are having their consequences taking place in the product development phase as well. Therefore, these activities are also in need of a better planning. Further, allocation of resources from the other business unit within the Pulp Comp has occurred as a problem (O3), as well as an engaged manager that provides fast decisions (SF1). Referring to Holahan et al. (2014), if managers do not put

68

enough structure to the more radical projects, the outcome often result in even more uncertainty and expensive projects due to a prolonged development time. To clearly planning something, you do not know or have never done before is difficult, but necessary. Therefore, the planning part should get more attention in the product development phase. Since it is difficult, often due to its radicalness, Veryzer (1998) links this phase to a ‘probe and learn process’. This means that this phase can be dynamic and change as the company increases its knowledge. Additionally, this means that the project planning can be an iterative process that gets clearer over time.

Trying to avoid possible obstacles and challenges is one way to support digital innovation projects. Another way to support them is to create prerequisites for success factors that have occurred in earlier projects to happen again. Success factors that have occurred during the product development phase are the ability to be sure that it actually is a customer need that is being fulfilled due to a well-executed pre-study (SF8) and also due to a close collaboration between the team members and the customers (SF9), which is something that the Tool Comp has succeeded in doing. We suggest that these success factors should be planned for as well, to increase the chance that they are happening again. Finalizing, for the product development phase to better support the digital innovation projects within manufacturing companies, this phase needs to have more focus on the project planning even if the planning is difficult, therefore it might be beneficial to make this part iterative. However, for this to happen it requires a culture that allows the projects to not be totally figured out when starting it.

5.2.4 Using the Commercialization and Post-Launch to Support Digital Innovation Projects Some of the identified challenges occurred in the last phases, the commercialization and post-launch phase, like for example the certification (O10) and reference customers (O12). Veryzer (1998) highlights the importance of starting the marketing activities early in the process to have a successful outcome. This is strengthened by findings at the Tool Comp that indicates that the commercialization and post-launch become hindering since they are placed too late in the process. However, the product definition must be enough developed for being able to perform the involved activities. Further, it is important that those who are responsible for the marketing activities collaborate with those who are responsible for the product development phase, especially during the planning to make sure the commercialization and post-launch activities are concerned even there. Also, during the validation it was emphasized that the activities in post-launch increases, which leads to much work and consumption of time. Therefore, this phase need more time than before.

At the Pulp Comp is the situation reversed since this phase often happen in parallel with the front end of innovation phase, where the business model often is set and the products are even sold before they are developed. However, in the digital innovation projects it is difficult to determine these as early due to the uncertainty. Therefore, digital innovation projects often have difficulties in passing this initial phase. This means that either must the criteria for passing this phase be changed or must the phase be moved forward in the process for the development and feedback from pilot customers to contribute to an easier determination of a business case, which Veryzer (1998) thinks is important by discussing how marketing activities, such as customer trials, can ensure a successful implementation of the product. Also, since the uncertainty and the fact that the products already are sold, has contributed in that customers now are waiting for a product that not yet can be delivered. This indicated that the commercialization phase demand some structure. In summary, for the commercialization and post-launch phase to better support digital innovation projects they need to start their work in parallel with the product development phase, which means that it needs to start earlier in the Tool Comp and later in the Pulp Comp when developing digital innovation projects.

69

5.2.5 Theoretical Implications on Formal Development Processes The empirical findings reinforce Holahan et al.’s (2014) note that the process often is arranged rather linear even though it in reality is complex and iterative, since the findings show that projects have been delayed due to that some of the phases have taken more time than expected or since the phases of other reasons must happen in parallel. However, if the process does not reflect upon that complexity it becomes difficult to understand and follow it. This study adds to theory some activities that must be conducted before a project passes to the next step.

Further, by showing that the strategy is not very clear about the companies’ digital effort, which neither is well mediated, the empirical findings reinforce that the process must allow reversed strategy setting and front end of innovation, as claimed by Reid & Brentani (2004). What this study also emphasize is to make sure that the projects have the right prerequisites to succeed since they have shown to be so challenging. Also, the study adds the importance of the planning phase in digital innovation projects. Veryzer (1998) claims that this phase requires more effort in cases of more radical innovations, however, what the findings indicate is more specific implications on what must be considered in this phase in digital innovation projects. Finally, what is not that surprising is the increased effort in the commercialization phase. Since the findings have shown that digital innovation often also brings new payment-models and business model innovations, this phase becomes more important. What the findings adds to theory is that the activities must be considered earlier in the process than indicated in the theoretical development process, in parallel with the product development and after that the planning phase has been conducted.

70

6 DISCUSSION This section aims to discuss interesting up-comings that have occurred during the study and to present managerial implications.

How Different Positions Can Support Digital Innovation Projects The reflection upon that attention can be used as a bottom-up control, means that employees at an operative function can influence the proceeding of a project. This leads us into an interesting discussion about that people at different positions use different controls to support digital innovation projects. This study is based on interviews with respondents at different positions: steering function, functional management, project management and operative function. All these positions have different responsibilities within a company which relates to the purposes the different managerial controls have. Employees at a steering function, who have the responsibility to connect projects to the overall strategy, are most likely using result and action controls (i.e. direct controls) since they want to ensure the objective completion and control the behaviour of the employees while working towards the objective fulfilment. Employees at the functional management are commonly responsible for the personnel and competence development. Therefore, they most likely are using personnel and cultural controls (i.e. indirect controls) to increase employees’ self-control as well as group-control. The employees at the product management though, who have the responsibility for both the project and its members, can use all four managerial controls. Since the study aims to investigate how managerial controls can support digital innovation projects, this discussion can provide further guidance in how different roles can support these projects.

The Paradoxical in Managing Complexity and Uncertainty Complexity and uncertainty has shown to be characteristics for digital innovation projects and have contributed to multiple obstacles and challenges identified in this study. One of the most distinguishing problem is that these projects can take many directions and are therefore in need of clear objectives. Paradoxically, complexity and uncertainty also complicates the determining of objectives, which in turn leads to projects with too lose frames. Since the result for research question two indicates that most of the identified problems are related to either planning or strategy shows that it is difficult to plan digital innovation projects. Problems have occurred because of omitted planning, however, problems have occurred when planning, which in turn reinforces the earlier mentioned paradox for digital innovation projects.

Balancing the Use of Managerial Controls The experience has been that large organizations commonly use an over emphasis of direct managerial controls, probably because they have not needed indirect controls since they often are working with incremental innovations. The study indicates that the companies are already using these controls widely within the company and that several of the respondents speak in terms of solving problems with the same types of controls. This may be due that it is less complicated to adapt new action and result controls than it is to change an organizational culture. Additionally, that the digitalization is moving very fast makes it even more difficult to adapt cultural controls since cultural change requires a lot of time, especially in large companies. When an organization is feeling stressed it is easier to use action controls to solve the problems. Unfortunately, digital innovation brings new challenges and may need more than just direct controls. Companies must therefore release the reins; however, this is a risk in these large organizations since they easily get chaotic if the organizations are managed too unstructured. Since combinations of managerial controls have been advocated, preferably by use combinations of contradictory controls, to create ambidexterity, and thereby reach a balance between radical and incremental innovations. Thereby, the researched organizations should increase their use of indirect controls to achieve a balance so they can stay structured at the same time as they embrace digital innovation.

71

7 CONCLUSION The aim for this section is to present a conclusion for this report.

The aim of this master thesis is to create an understanding of how manufacturing companies can support digital innovation projects using managerial controls and formal development processes. By identifying possible influencing factors, such as success factors, obstacles, and challenges, the thesis contributes with knowledge regarding how to manage digital innovation projects at manufacturing companies. The master thesis investigates influencing factors to five digital innovation projects at two large global manufacturing companies in Sweden. Finally, it presents suggestions on how managers can use managerial controls and formal development processes to support digital innovation projects at manufacturing companies. Based on a literature study, semi-structured interviews, coded and analyzed data, information gathered in a validation exercise and with a finalizing analysis, the research questions that are presented below have been answered.

RQ1: How can managerial controls support digital innovation projects at manufacturing companies?

RQ2: What activities must be taken into consideration in the formal development process to support digital innovation projects at manufacturing companies??

Managerial controls have been shown to be beneficial to digital innovation projects by combining direct and indirect controls. This is something that the theory also advocates which can be confirmed through this study. Because different controls are used by employees at different positions, new collaborations are necessary for being able to use beneficial combinations of the controls. All four controls, and attention, have been shown to be necessary to support digital innovation projects. The study shows that result controls, rather than action controls, are crucial to show the direction of a project, however, they need supporting controls for being beneficial. Formal development processes have shown to be supportive of digital innovation projects by allowing ideas to occur both before and after the strategy setting, having a more dynamic planning phase as well as having the commercialization phase run in parallel with the product development phase. Also, to add requirements for passing decision points to control the activities necessary for digital innovation projects. However, the theoretical development process is not fully adapted to how the reality looks like, since the process is often described as linear although the reality it is more complex. The answers to the research questions are further formulated into managerial implications in section 7.1 and 7.2.

7.1 Managerial Implications on Managerial Controls and Attention

For managerial controls, and attention, to support digital innovation projects, some implications have been developed. Most of the implications are related to that digital innovation projects are innovative, complex and uncertain, and are about how to manage these challenging characteristics. What the study has shown is that all controls are necessary but that digital innovation projects make it more difficult to use each of them and therefore, the demand on using them correctly increases. The study suggests managing these difficulties using complementing controls, often contradictory controls. Consequently, digital innovation projects bring new combinations regarding the use of controls, and thereby, also new relations and collaborations between positions in companies might be required. Especially, more focus should be directed at the use of result

72

controls and personnel controls since they have been highlighted as crucial. How each managerial control, as well as attention, can be used, and by whom in an organization, to support digital innovation projects at manufacturing companies are presented in Table 14.

73

Table 14: A summary of the key takeaways for each managerial control as well as attention.

Managerial Controls and

Attention

Key Takeaways Position

Result Controls Setting clear objectives is clearly a challenge in digital innovation projects, however, it is crucial to manage the uncertainty and complexity. The empirical findings indicate that result controls must be complemented by for example, personnel and cultural controls - first, by adding knowledge and interactivity while setting the objectives, but also to create a culture that allow early collaborations with customers and create a role description that has the responsibility of maintaining customer collaborations. Also, action controls have been shown to have an impact, by choosing an appropriate process when setting the goals as well as when collaboration with customers.

Steering Function

Product Management

Action Controls The empirical findings show both successful and harmful use of processes. Strict processes can be harmful to digital innovation projects; therefore, our result suggests that setting milestones and let the work in-between be unstructured could be beneficial for these projects. However, if the decision making is decentralized it is important to complement that with all the other controls to ensure that decisions are aligned with the strategy, since these projects can take so many directions. Too much action controls can easily lead to too much administrative which is time consuming and inefficient for the project. A successful use of result controls can replace action controls and still maintain clear directions.

Steering Function

Product Management

Personnel Controls

These projects have shown to demand extensive new knowledge and, they seem to struggle with a poor amount of resources. This indicate that personnel controls are important, resources must be allocated to the projects. If a company still wants the project members to ask for help instead of getting the resources work dedicated to the project, it puts large demands on cultural controls to make sure that the experts who is not a project member are willing to take their time and help. Initiation of external collaborations is a fast way to induce new knowledge, however, collaborations might need support from additionally controls as well to make them successful. Most importantly, internal competence as well to manage the external collaboration. Projects that get access to the right knowledge in an early phase can avoid pitfalls at a later stage. Personnel controls can also be used to find drivers for the projects.

Functional Management

Product Management

Cultural Controls

Cultural controls could be used to create a supportive climate to these projects. They could also be used to mediate the strategy which will increase the chance that the organization will move in the same direction, which will give these projects higher priority. Cultural controls can also be used to eliminate attitudes that creates rivalry within the company. Cultural controls generally must be used to a larger extent.

Functional Management

Product Management

Attention Attention can be used to get priority, which otherwise is especially difficult in these projects. To do so, attendance on exhibitions and pilot customers are two ways of creating attention. Attention can create motivation among the project members, but it can also have a negative effect in terms of pressure. The empirical findings show that attention can lead to prioritization from other levels and functions in the organization. Thereby, using attention is a good way for employees at an operative function to use controls.

Operative Function

74

7.2 Managerial Implications on Formal Development Processes

For formal development processes to support digital innovation projects at manufacturing companies, implications regarding the decision points and three main changes regarding the involved phases have been suggested. First of all (1), more effort must be put in the strategy setting phase and the front end of innovation phase when working with digital innovation projects. By doing so, it facilitates being prioritized and be assigned resources. Moreover, since previous research has suggested that radical innovation often goes the other way, more specifically start with an idea and a concept that instead adds to the strategy, one can imagine that most of the digital innovations do so as well since they probably have similarities to radical innovations in the manufacturing industry. Therefore, the process should allow innovations to occur both ways. Second of all (2), to avoid that the same obstacles and challenges recur, as well as ensure that the success factors recur, in future digital innovation projects it has shown to be important to plan for them. However, due to the fuzziness and uncertainty characterizing these projects, everything cannot be planned for ahead, which means that these projects might benefit from having an iterative planning procedure. The planning phase include planning for product development but can beneficially also include planning for commercialization since that phase require more attention in digital innovation projects, for example to plan for what markets to enter.

Finally (3), having the commercialization and post-launch phase in parallel with the product development phase might be beneficial. Having it start before the product development is difficult since that to some extent requires a business and payment model which is difficult to set before the project development has even started due to these projects being so uncertain. Having it start after the product development phase may limit the development since the commercialization phase can have implications on the product development phase, and vice versa. Moreover, when the commercialization phase starts, it is important that the planning phase ends since many activities in the commercialization and post-launch phase, such as marketing, planning for launch and sales, demand a deadline for customers to know when they can buy the product. Based on these three implications, an alternative process to the traditional process with its five phases has been suggested and is shown in Figure 18, with belonging decision points that are described in Table 15.

Figure 18. Suggested alternative process for digital innovation projects (the patterned arrows show where phases were placed in the theoretical process).

75

Table 15: Decision points (DP) in the suggested alternative process.

DP Decision Requirements

DP 1a Add to strategy Defined concept

A concept should be defined and evaluated before it adds to the strategy

DP 1b Start ideation Set strategy with defined steps

A strategy should facilitate an understanding on how each unit can contribute to it

DP 2 Start planning of project

Identified customer needs

The uncertainty brings an importance of having identified customer needs from the beginning of the process

Clear objectives

Clear objectives is crucial for these projects since they can take so many directions, these should be based on customer needs

Concept evaluated

A concept must be evaluated for a decision to be made about starting a project. The process should allow alternative ways – financial, possible application or customer confirmations of value

Prepared for directing attention

Attention has led to support and priority. As soon as a strategy and/or concept is developed start marketing the idea internally

Ensured internal competence

The projects are challenging and uncertain, do not start a project until the right prerequisites are ensured

DP 3 Start execution of project

Arranged customer collaboration

Customer collaborations have been shown crucial during the whole process for being able to verify the solution. Determine what the expectations are and who are responsible for it

Arranged possible partnerships

Arrange and agree on the frames and expectations for the partnerships to manage the mutual dependency

Ensured resources from all involved disciplines

Ensure that resources are allocated and able to dedicate time to the project. Not only the ones within digital technology but also the ones with traditional knowledge

Plan for decision point 4

Determine the criteria for passing decision point 4

DP 4 Continue project Project specific criteria

This is a decision point that determines whether to continue the project or not, the requirements for this can be project specific

76

DP 5 Start Commercialization and Post-launch

Product enough developed and defined for marketing, business- and payment model

For marketing the product an enough developed product definition is required. Also, in the development of business- and payment model it must be rather clear on what is being delivered

Product tested regarding technology

At this stage, the product should be tested regarding technology

Planned for commercialization and Post-launch

Since the planning phase ends and these phases require some structure and plan, should the planning been made before passing this decision point

DP 6 End Product Development

Business and payment model developed

Due to that these activities can have implications on the product development, and vice versa, these should be developed before ending the product development

Sales training conducted

Sales training is important since these products demand new ways of selling, this should be conducted before ending the product development since sales people also can provide valuable insights regarding the development

Product locked

Before ending the product development, the product should be locked

Product tested with customer regarding the whole concept – technology, business model and payment model

The product should be tested to customers to ensure value. Since different combinations of these three can generate different values it is important to test the whole. concept

DP 7 End Commercialization

Product launch

The commercialization ends when the product has been launched

DP 8 End project Ensured services and maintenance of offer

Since the amount of post-launch services and maintenance increased with digital technologies, these must be ensured and this phase will probably need more time than in traditional projects

77

8 FUTURE RESEARCH This section aims to present interesting areas that have occurred during this thesis and should therefore be further investigated.

Interesting areas have occurred during this thesis which can be suggestions for future research. First of all, this thesis is limited to investigate projects with innovation as an outcome, however, innovation as a process is also an interesting area. Findings from this thesis have showed that processes have major implications on digital innovation projects where the outcome is digital, therefore, it would be interesting to study how digital technology can support in the process, i.e. study digital innovation as a process.

Further, interesting reflections have been made on the relation between digital and radical innovations. For some companies, digital innovations are more radical than others. How the connection between radical and digital innovation looks like within different firms is also an interesting future research.

The relation between position and the use of managerial controls is an interesting area that should be further investigated. Since this thesis showed that digital innovation projects bring new responsibilities and suggests updated role descriptions, it can be even more interesting to investigate how the use of managerial controls might change between digital and traditional innovation projects, and if it influences who is using them. Another interesting perspective that can be further investigated is if the use of managerial controls can have an enabling affect when one position uses it and an opposite effect if another position uses it. As discussed in this thesis, a paradox has been identified regarding the fact that digital innovation projects are complex and uncertain and need clear objectives, but unfortunately, due to the complexity it is difficult to set clear objectives which puts these projects in a difficult position. In this thesis, we suggest that decisions should be based on customer value instead of financial value. How to create suiting processes of guidelines for these decisions should be further considered.

Lastly, one suggestion for future research is to put more concentrated focus on a specific part in the formal development process. For example, investigate what difference it might be if an idea goes from strategy setting to front end of innovation or the opposite direction, how an iterative planning phase would work or what differences that may occur if the commercialization phase goes more in parallel with the product development phase.

78

9 REFERENCES Abrell, T., Pihlajamaa, M., Kanto, L., Brocke, J. V. & Uebernickel, F. (2016). The role of users and customers in digital

innovation: Insights from B2B manufacturing firms. Information & Management, 53(3), 324-335.

Ahmed, P. K. (1998). Culture and climate for innovation. European journal of innovation management, 1(1), 30-43.

Allen, M.R., Adomdza, G.K. & Meier, M.H. (2015) Managing for innovation: Managerial control and employee level outcomes. Journal of business research, 68, 371-379.

Alvesson, M. & Kärreman, D. (2004). Interfaces of controls. Technocratic and social-ideological control in a global management consultancy firm. Accounting, Organizations and Society, 29(2004), 423-444.

Benner, M. J. & Tushman, M. L. (2003). Exploitation, Exploration, and Process Management: The Productivity Dilemma Revisited. The Academy of Management Review, 28(2), 238.

Björk, J. & Magnusson, M. (2009). Where Do Good Innovation Ideas Come From? Exploring the Influence of Network Connectivity on Innovation Idea Quality. Journal of Product Innovation Management, 26(6), 662-670.

Brentani, U. D. & Reid, S. E. (2012). The Fuzzy Front-End of Discontinuous Innovation: Insights for Research and Management. Journal of Product Innovation Management, 29(1), 70-87.

Cardinal, L. B. (2001). Technological Innovation in the Pharmaceutical Industry: The Use of Organizational Control in Managing Research and Development. Organization Science, 12 (1), 19-36.

Chen, J., Zhu, Z. & Zhang, Y. (2017). A study of factors influencing disruptive innovation in Chinese SMEs. Asian Journal of Technology Innovation, 25:1, 140-157.

Crossan, M. M. & Apaydin, M. (2010). A Multidimensional Framework of Organizational Innovation: A Systematic Review of the Literature. Journal of management studies, 47(6), 1154-1191.

Davis A. & Brady T. (2016). Explicating the dynamics of project capabilities. International Journal of project management, 34, 314-327.

Dewar, R. D. & Dutton, J. E. (1986). The Adoption of Radical and Incremental Innovations: An Empirical Analysis. Management Science, 32(11), 1422-1433.

Dougherty, D., & Hardy, C. (1996). Sustained Product Innovation in Large, Mature Organizations: Overcoming Innovation-To-Organization Problems. Academy of Management Journal, 39(5), 1120-1153.

Florén, H. & Frishammar, J. (2012). From Preliminary Ideas to Corroborated Product Definitions: Managing the Front End of New Product Development. California Management Review, 54(4), 20-43.

Grant, R. M. (2013). Contemporary strategic analysis. (8th ed.) Malden: Blackwell. pp. 796, a

Grant, R. M. (2013). Contemporary strategic analysis. (8th ed.) Malden: Blackwell. pp. 224, b

Gschwantner, S. & Hiebl, M. R. W. (2016). Management control systems and organizational ambidexterity. J Manag Control 27, 371-404.

Haustein, E., Luther, R & Schuster, P (2014). Management control systems in innovation companies: a literature based framework. J Manag Control. 27, 343-382.

Hlavacek, J. D. & Thompson, V. A. (1973). Bureaucracy and new product innovation. Academy of Management journal, 13(3), 361-372.

Holahan, P.J., Sullivan, Z. Z. & Markham, S. K. (2014). Product Development as Core Competence: How Formal Product Development Practices Differ for Radical, More Innovative, and Incremental Product Innovations. Journal of Product Innovation Management, 31(2), 329-345.

KapsaliBrowaldh, M. (2013). Equifinality in Project Management Exploring Causal Complexity in Projects. Systems Research and Behavioral Science, 30, 2-14.

Koen, P., Ajamian, G., Burkart, R., Clamen, A., Davidson, J., D'Amore, R., Elkins, C., Herald, K., Incorvia, M., Johnson, A., Karol R., Seibert R., Slavejkov A. & Wagner K. (2016). Providing Clarity and A Common Language to the “Fuzzy Front End”. Research - Technology Management, 44(2), 46-55.

Lerch, C. & Gotsch, M. (2015). Digitalized Product-Service Systems in Manufacturing Firms - A Case Study Analysis. Research Technology Management, pp.45-52.

Lobo, S. & Whyte, J. (2017). Aligning and Reconciling: Building Project Capabilities for Digital Delivery. Research policy, 46, 93-107.

79

Lövstål, E. & Jontoft, A-M. (2017). Tension at the intersection of management control and innovation: a literature review. J Manag Control, 28, 42-79.

Malmi, T. & Brown, D. A. (2008). Management control systems as a package - Opportunities, challenges and research direction. Management Accounting Research, 19, 287-300.

McDermott, C. M. & O´Connor, G. C. (2002). Managing radical innovation: an overview of emergent strategy issues. Journal of Product Innovation Management, 19(6), 424-438.

Merchant, K. A. (1985). Organizational Controls and Discretionary Program Decision Making: A Field Study. Accounting Organizations and Society, 10(1), 67-85.

Merchant, K. A. & Van der Stede, W. A. (2012). Management Control Systems: Performance Measurement, Evaluation and Incentives. Pearson, 3rd ed. U.K. pp. 3-10, a

Merchant, K. A. & Van der Stede, W. A. (2012). Management Control Systems: Performance Measurement, Evaluation and Incentives. Pearson, 3rd ed. U.K. pp. 15-17, b

Merchant, K. A. & Van der Stede, W. A. (2012). Management Control Systems: Performance Measurement, Evaluation and Incentives. Pearson, 3rd ed. U.K. pp.81-88, c

Mezger, F. (2014). Toward a capability-based conceptualization of business model innovation: insights from an explorative study. R&D Management, 44(5), 429-449.

Miles, M. B. & Huberman, A. M. (1994). Qualitative Data Analysis. Thousand Oaks, CA: SAGE Publications, pp. 1, a

Miles, M. B. & Huberman, A. M. (1994). Qualitative Data Analysis. Thousand Oaks, CA: SAGE Publications, pp. 64, b

Miles, M. B. & Huberman, A. M. (1994). Qualitative Data Analysis. Thousand Oaks, CA: SAGE Publications, pp. 50, c

Mundy, J. (2010). Creating dynamic tension through a balanced use of management control systems. Accounting, Organizations and Society, 35, 499-523.

Nagji, B. & Tuff, G. (2012). Managing your Innovation Portfolio. Harvard Business Review, 90(5), 66-74.

Nilsson, S. (2015). Making Innovation everyone’s business: Using Routines and Controls. Doctoral Thesis no.3, Royal Institute of Technology, Stockholm.

NVivo Kappa. (2018, April 16). Retrieved from http://help-nv11.qsrinternational.com/desktop- /procedures/run_a_coding_comparison_query.htm

Nylén, D., & Holmstrom, J. (2015). Digital Innovation Strategy: A Framework for Diagnosing and Improving Digital Product and Service Innovation. IEEE Engineering Management Review,45(3), 128-138.

Ocasio, W. (1997). Towards an attention-based view of the firm. Strategic Management Journal, 18(Summer Special Issue), 187-206.

Ocasio, W (2011). Attention to Attention. Organization Science, 22(5), 1286-1296.

O’Connor, G. C. & DeMartino, R. (2006). Organizing for Radical Innovation: An Exploratory Study of the Structural Aspects of RI Managements Systems in Large Established Firms. Journal Product innovation management, 23, 475-497.

Ouchi, W. G. (1979). A Conceptual Framework for the Design of Organizational Control Mechanisms. Management Science, 25 (9), 833-848.

Parida, V., Rönnberg, D. R., Lenka, S. and Wincent, J. (2015). Developing Global Service Innovation Capabilities: How Global Manufacturers Address the Challenges of Market Heterogeneity. Research-Technology Management, 35-44.

Reid S. E. & Brentani U. D. (2004). The Fuzzy Front End of New Product Development for Discontinuous Innovations: A Theoretical Model. Journal of Product Innovation Management, 21, 170-184.

Rice, M. P., Kelley, D., Peters, L. & O’Connor, G. C. (2001). Radical innovation: triggering initiation of opportunity recognition and evaluation. R&D Management, 31(4), 409-420.

Schilling, M. A. (2017). Strategic management of technological innovation. New York, NY: McGraw-Hill Education, pp.48-49.

Tidd, J. (2001). Innovation management in context: environment, organization and performance. International Journal of Management Reviews, 3(3), 169-183.

Tuschman, M. L. & Anderson P. (1986). Technological Discontinuities and Organizational Environments. Administrative Science Quarterly, 31 (3), 439-465.

80

Tushman, M. L. & O´Reilly, C. A. (1996). Ambidextrous Organizations: Managing Evolutionary and Revolutionary Change. California Management Review, 38(4), 8-29.

Ustundag, A. & Cevikcan, E. (2018). Industry 4.0: Managing the Digital Transformation. Switzerland, Springer, pp. 3-6.

Veryzer, Jr. R. W. (1998). Discontinuous innovation and the new product development. Journal product innovation management, 15, 304-321.

Visser, M. D., Weerd-Nederhof, P. D., Faems, D., Song, M., Looy, B. V. & Visscher, K. (2010). Structural ambidexterity in NPD processes: A firm-level assessment of the impact of differentiated structures on innovation performance. Technovation, 30(5-6), 291-299.

Westerlund, M., Leminen, S. & Rajahonka, M. (2014). Designing Business Models for the Internet of Things. Technology Innovation Management Review, July, 5-14.

Williamson, K. (2002). Research methods for students, academics and professionals. Wagga Wagga, NSW: Center for Information Studies, 112-115, a

Williamson, K. (2002). Research methods for students, academics and professionals. Wagga Wagga, NSW: Center for Information Studies, 242-244, b

Williamson, K. (2002). Research methods for students, academics and professionals. Wagga Wagga, NSW: Center for Information Studies, 231, c

Williamson, K. (2002). Research methods for students, academics and professionals. Wagga Wagga, NSW: Center for Information Studies, 114, d

Williamson, K. (2002). Research methods for students, academics and professionals. Wagga Wagga, NSW: Center for Information Studies, 34, e

Yoo Y., Henfridsson O. & Lyytinen K.(2010). The New Organizing Logic of Digital Innovation: An Agenda for Infromation Systems Research. Information Systems Research, 21 (4), 724-735.

i

APPENDIX A: INTERVIEW GUIDE PRE-STUDY This appendix presents the interview guide used in the pre-study. The interviews were conducted in Swedish, therefore, the interview guide presented here has been translated.

Introduction Name, can we record, role, time at the company, background How are digital innovation projects defined at your company? What is a digital innovation project? What are the characteristics for such a project? Is these project easier or more difficult compared to a traditional project? What does the digitalization mean to your company? Why is it important? People often talk about both digitalization and automation, how do you perceive these expressions? Are those the same? The innovation and product development process What does your innovation process look like? Short description! How does it work? Good or bad? How does it work in the digital innovation projects? What does the product development process look like? Short description! How does it work? Good or bad? How does it work in digital innovation projects? How do these work in relation to each other? What factors have the greatest impact on the digital innovation projects? What factors do you think make a project perform well? What factors do you think have the opposite impact? In what way? How important is the leadership in a project? In what way? How are the digital innovation projects different from the traditional projects when it comes to these factors? Is there any factor that distinguishes from the others? Open discussion regarding these factors: Culture, objectives, leadership, resources, competence, time, fellowship, collaboration, steering, rules, structure, roles etc. Ending Have we missed anything? Is it okay if we contact you again? Do you know anyone that you think would be good for us to interview? (e.g. involved in a digital innovation project)

ii

iii

APPENDIX B: INTERVIEW GUIDE MAIN STUDY (PROJECT MEMBERS)

This appendix presents the interview guide used in the project member interviews in the main study. The words and sentences given in italic are supporting words or examples of follow-up questions.

Background Is it okay if we record the interview? Can you tell us about yourself? Name, role, other roles, time at the company, education, experience of projects, experience of digital projects The project This interview will be about [project name]. Can you briefly tell us about this project? Product, customer, purpose, how many that are involved, internal or external This project is chosen because it is a digital innovation project. What would you say makes this project digital? How? In what way? For who? Why? Would you say this project is innovative? Unique? How? In what way? For who? Why? How complex is this project from an organizational perspective? Is the project expensive? Time vs. investments The project’s proceeding Please draw a timeline for the project. When did the project start? Where is the scheduled launch? Why did this project start? Background, ideas, customers, technique Can you mark out on the timeline and describe an event, situation or activity that has been beneficial for the project?

• What happened? Why? Who? How? • What was the consequences for the project? Result or proceeding? • Did it happen due to the fact that it was a digital innovation project?

Can you mark out on the timeline and describe an event, situation or activity that has been an obstacle for the project?

• What happened? Why? Who? How? • Was the obstacle negative? • What was the consequences for the project? Result or proceeding? • Did it happen due to the fact that it was a digital innovation project?

iv

Can you mark out on the timeline and describe an event, situation or activity that has been challenging for the project?

• What happened? Why? Who? How? • Was the challenge negative? • What was the consequences for the project? Result or proceeding? • Did it happen due to the fact that it was a digital innovation project?

Decision, new direction, collaborations, project team, customer need, market, leadership, competence, result Organization of project Cultural controls What did the leadership look like? Project level? Organizational level? How was the climate? Free? Controlled? Has it changed over time? Why? Action controls Have you had enough with resources? How was the project managed? Formal or informal? Did you follow any existing processes? What processes? What processes, tools and methods did you use? (that are different from the non-digital innovation projects) Idea and concept development, product development, implementation phase Did you follow ant guidelines or principles? Can you remember any important decisions that has been made during the project? Who made those decisions? What were the consequences? Why? Result controls Did you have any objectives? What did they look like? How did you develop the concept for this project? (tools, methods, criteria) How do you evaluate the concepts and decide what concepts you take further? Did you measure anything? How? Have you made any tests for this project? What did you test?

Cultural controls Climate, collaboration, information, communication, leadership

Action controls Tools, methods, processes, structure, rules

Results controls Portfolio, measure success, objectives, visions Attention How much attention would you say this project has had? For what, positive, negative, why, used strategies, changes over time What did the attention result in? Acceptance, resistance, resources Potential for innovation What would you say is the potential for this project? Novelty, improvements, for who? What has been the greatest challenges for the whole initiative so far? Understanding, acceptance, politics What do you think will be the biggest challenges for the future? Acceptance from customers, internal acceptance, necessary improvements?

v

If we have time over What is the biggest learning from this project? What do you think is important to remember the next time you work in a digital innovation project? How can the organization better support these projects? (structure, processes, tools, methods, leadership) Was it anything that you have been missing during the project? Ending Is there anything you would like to talk about that we have not mentioned during the interview? When you have heard our questions, is there anyone you think we should interview? If new questions appear later in the project, is it okay if we contact you again? We will finish the recording now!

vi

vii

APPENDIX C: INTERVIEW GUIDE MAIN STUDY (GENERAL)

This appendix presents the interview guide used in the general interviews in the main study. The words and sentences given in italic are supporting words or examples of follow-up questions.

Background Is it okay if we record the interview? Can you tell us about yourself? Name, role, other roles, time at the company, education, experience of projects, experience of digital projects The project This interview will be about digital innovation projects. Can you tell us what makes an innovation project digital? How? In what way? For who? Why? Would you say these projects are innovative? Unique? How? In what way? For who? Why? Are these projects often complex? From an organizational perspective? Are these projects expensive? Time vs. investments The project’s proceeding Can you and describe an event, situation or activity that can be beneficial for a digital innovation project?

• Why? Who? How? • What is the consequences for the project? Result or proceeding?

Internal collaborations, external collaborations, Cross-functional, driving leadership, exhibitions, testing Can you describe an event, situation or activity that can be an obstacle for a digital innovation project?

• Why? Who? How? • Was the obstacle negative? • What was the consequences for the project? Result or proceeding?

Partners, diverse pace, lack in knowledge Can you describe an event, situation or activity that can be challenging for a digital innovation project?

• Why? Who? How? • Was the challenge negative? • What was the consequences for the project? Result or proceeding?

Decision, new direction, collaborations, project team, customer need, market, leadership, competence, result

viii

Organization of project Cultural controls What has the leadership looked like in your digital innovation projects? Climate, controlled, hierarchic How would you prefer it to look like? Why? Action controls Do you follow any existing processes in the digital innovation projects? What processes? What processes, tools and methods do you use in the digital innovation projects? (that are different from the non-digital innovation projects) Idea and concept development, product development, implementation phase Did you follow ant guidelines or principles? Who makes and where are most of the decisions made regarding the digital innovation projects? What are the consequences for these decisions? Where do you think these decisions should be made? Result controls What kind of objectives are used for the digital innovation projects? (technical, value, specifications) Is everyone aware of the objectives? Do you actively mediate these? Have you made any tests for these projects? What did you test?

Cultural controls Climate, collaboration, information, communication, leadership

Action controls Tools, methods, processes, structure, rules

Results controls Portfolio, measure success, objectives, visions Attention How much attention would you say the digital innovation projects get? For what, positive, negative, why, used strategies, changes over time What does the attention result in? Acceptance, resistance, resources Potential for innovation What would you say is the potential for digital innovation projects? Novelty, improvements, for who? What has been the greatest challenges for this type of initiative? Understanding, acceptance, politics What do you think will be the biggest challenges for the future? Acceptance from customers, internal acceptance, necessary improvements? If we have time over What is the biggest learning from these types of projects so far? What do you think is important to remember in future digital innovation projects? How can the organization better support these projects? (structure, processes, tools, methods, leadership)

ix

Ending Is there anything you would like to talk about that we have not mentioned during the interview? When you have heard our questions, is there anyone you think we should interview? If new questions appear later in the project, is it okay if we contact you again? We will finish the recording now!

x

xi

APPENDIX D: CODING SCHEME This appendix presents the final coding scheme used in the data analysis.

Code Code Description

Interviewee Background Descriptions of interviewee background that explains its reliability as well as proves the wide range of experience among the interviewees.

For example: role description, project experience, digital project experience.

Key Features Key features that describes the purpose, value and scope of each project.

Digital Innovation Projects (DIP)

Things that describes the project characteristics and why they are, as well as the projects’ potential, more specifically, innovativeness, complexity, costs, uncertainty and pace.

DIP - Characteristics If the respondent expresses what characterizes a digital innovation project.

DIP - Innovativeness If the respondent expresses that the project is innovative or why it is innovative.

DIP - Complexity If the respondent expresses that the project is complex or why it is complex.

Influencing Factors (IF)

IF - Success Factors Events, activities or circumstances that have been beneficial for the project’s result or proceeding.

Related words: very good, good, beneficial, success factors, useful, valuable, important.

IF - Challenges Events, activities or circumstances that have been challenging for the project’s proceeding, i.e. have made it difficult to implement.

Related words: challenging, confusing, difficult, stressful, exhausting.

IF - Obstacles Events, activities or circumstances that have been an obstacle for the project, i.e. have hindered its proceeding.

Related words: obstacle, hinder, stopped, waiting time.

Managerial Controls (MC)

MC - Result Controls (R) Situations when the organization has (or when it could have) provided support that focuses on the output and the completion of objectives. Determining expected results, monitoring, measuring and rewarding outputs.

For example: objectives, visions, performance measurement.

xii

MC - R - Current If the respondent expresses that they use a result control.

MC - R - In Need Of If the respondent expresses that they need a result control.

MC - R - Useful If a result control had been necessary.

MC - Action Controls (A) Situations when the organization has (or when it could have) provided support that helps focus employees’ behaviour and way of working for the company to reach its objectives.

For example: procedures, guidelines, rules and restrictions.

MC - A - Current If the respondent expresses that they use an action control.

MC - A - In Need Of If the respondent expresses that they need an action control.

MC - A - Useful If an action control had been necessary.

MC - Personnel Controls (P) Situations when the organization has (or when it could have) provided support to ensure enough resources and increase employees’ self-control.

For example: resources, skills, training, role descriptions.

MC - P - Current If the respondent expresses that they use a personnel control.

MC - P - In Need Of If the respondent expresses that they need a personnel control.

MC - P - Useful If a personnel control had been necessary.

MC - Cultural Controls (C) Situations when the organization has (or when it could have) provided support to achieve group control, as in shared values and norms. Companies can create a good climate by using codes and a mentoring leadership, as well as promoting interaction and communication.

For example: climate, codes, interaction, communication and leadership.

MC - C - Current If the respondent expresses that they use a cultural control.

MC - C - In Need Of If the respondent expresses that they need a cultural control.

MC - C - Useful If a cultural control had been necessary.

Innovation and Product Development Process (P)

P - Strategy Setting Comments on, or effects of, the company’s overall strategy. The strategy should provide direction on where to put most effort - in what “markets, applications, technologies and products”?

xiii

P - Concept Development Events or activities that have happened (or that the interviewee claims are necessary) during this phase. This is where ideas are created and transferred into company to harvest support and be evaluated. It involves: (1) opportunity identification, (2) opportunity analysis, (3) idea genesis, (4) idea selection, and (5) concept and technology development.

P - Product Development Events or activities that have happened (or that the interviewee claims are necessary) during this phase. This is where new products are developed and compared with the company’s overall objectives and assigned a budget. Common activities are evaluation and validation - early regarding technology and later validated by customers.

P - Commercialization Comments on, or effects of, the activities in the commercialization phase on the project. Common activities are marketing activities, such as customer trials and creation of marketing plans, to ensure a successful implementation of the product.

Attention (A) Sentences related to attention. In particular, (1) events connected to the creation of attention, (2) attention on the project or similar ones, or (3) effects of attention.

A - Events or Activities Descriptions on how they got the attention.

A - Effects Comments on what the attention resulted in.

Goodies Full sentences that are descriptive “good stuff” that can be valuable quotes, or things that are worth keeping but do not really belong to any node.

New Respondents Proposals on additional respondents and why they would be interesting.

xiv

xv

APPENDIX E: LIST OF MANAGERIAL CONTROLS USED IN THE VALIDATION EXERCISE

This appendix shows the list of suggested managerial controls that was used in the validation exercises at the companies.

Project Manager

have a project manager who is good at coordination

have a motivated project manager with ‘sharp elbows’

have a project manager who is knowledgeable within digital technology (software, electronics etc.)

have a project manager who is knowledgeable within traditional technology/organization (process etc.)

Process

get guidance from a strict process

get guidance from an iterative process

no requirements on using a process

collaborate with customers early in the process

collaborate with customers later in the process

collaborate with customers during the whole process

have a clear process for the activity

have guidelines for the activity

have access to a toolbox for the activity

decentralize decision-making

all decisions are fast and efficiently made by steering function

initiate new rules

Competence

hire new competence

hire all involved competence

hire consultant / several consultants

train existing personnell

initiate external collaborations with those who are closest

initiate external collaborations with those who are world-leading

develop role descriptions

Objectives

have clear objectives for the project

have clear objectives for the digital initiative

have reconciliations regarding objectives with the steering function

have reconciliations regarding objectives within the project team

get support by a clear vision for the company

have the opportunity to test technology

have the opportunity to test customer value

get continuous feedback from customers

Project Group

have a project group that is sitting close to each other

have a project group with faith in each other’s competence

rely on that project members perform outside their role descriptions

Attention

show concept in an early phase

show the concept when the product is done

use ambassadors that advocate the project

get attention from steering function

xvi

xvii

APPENDIX F: DRAWN TIMELINES This appendix shows a compilation of timelines drawn by respondents during the interviews in the main study. The different colours refer to the respondents different notes – what colour that belong to each respondent can be seen to the right of each timeline.

A summarized timeline for Project A.

A summarized timeline for Project B.

xviii

A summarized timeline for Project C.

A summarized timeline for project D.

xix

A summarized timeline for Project E.

xx

xxi

APPENDIX G: SUMMARY OF THE IDENTIFIED MANAGERIAL CONTROLS

This appendix shows a summary of the identifies managerial controls, connected to the identified influencing factors.

Pulp Comp Tool Comp

Influencing Factor

Used Managerial Control

Influencing Factor

Used Managerial Control

SF1 Cultural SF7 Cultural Attention

SF2 Result Attention

SF8 Result

SF3 Personnel SF9 Result

SF4 Cultural Attention

SF10 Cultural

SF5 Personnel Cultural

SF11 Personnel Cultural

SF6 Action SF12 Action Personnel

O1 Action SF13 Cultural

O2 Personnel Cultural

O5

O3 O6 Cultural

O4 Result Personnel

O7 Personnel

C1 O8

C2 Result O9 Action

xxii

C3 Cultural Attention

O10

C4 Action Action

O11 Action

C5 Cultural Attention

O12 Result

C6 Result Action

C10 Action Result

C7 C11

C8 Personnel C12 Personnel

C9 C13 Result Action

C14 Action

C15

C16 Cultural

C17 Result

C18 Personnel

C19 Personnel

www.kth.se