Technische Universitt Mnchen The Digital Transformation Challenges and

Technische Universität München The Digital Transformation Challenges and Opportunities for IS researchers Prof. Dr. Helmut Krcmar Immediate past AIS President (2014 -2015) Chair for Information Systems – www. winfobase. de Vice Dean Informatics – www. in. tum. de Academic Director EMBA Business and IT – tum. eec. de TU München – www. tum. edu Institute for Public Information Management (IPIMA) – www. ipima. de fortiss g. Gmb. H, München - www. fortiss. org Co-Founder Initiative Digital Transformation – idt. in. tum. de © Prof. Dr. H. Krcmar

Technische Universität München Congratulations to The 8 th SIGSAND/PLAIS Euro. Symposium on Systems Analysis and Design From 2 © Prof. Dr. H. Krcmar

Technische Universität München founded in 1994, today around 4000 members 3, 890 members in 93 countries and 36 chapters (April 1, 2015) • 1681 in Region 1 Americas • 1010 in Region 2 Europe • 1191 in Region 3 Pacific Asia Countries with more than 100 members: AIS serves society • USA through • China the advancement of knowledge • Germany and the promotion of excellence • Australia in the practice and study • Canada of information systems. • New Zealand • www. aisnet. org 3 © Prof. Dr. H. Krcmar

Technische Universität München founded in 1994, today around 4000 members 3, 890 members in 93 countries and 36 chapters (April 1, 2015) • 1681 in Region 1 Americas • 1010 in Region 2 Europe • 1191 in Region 3 Pacific Asia Countries with more than 100 members: AIS serves society • USA through • China the advancement of knowledge • Germany and the promotion of excellence • Australia in the practice and study • Canada of information systems. • New Zealand • www. aisnet. org 4 © Prof. Dr. H. Krcmar

AIS conducts a wide range of activities Technische Universität München • Research – Conferences: ICIS AMCIS PACIS ISD MWAIS SAIS … – Journals: JAIS CAIS JITTA THCI TRR and more in the e. Library – Special Interest Groups: 37 different topics with 3611 members – Research Conduct Committee: Research code of conduct • Professional development – – Early career: Ph. D Consortia, Jr. Faculty Consortium Mid Career Workshop: “Tenure? Now what? ” Late Career Workshop: “late career and retirement issues” Career spanning: Webinars and Colleges • Advocacy – AIS as the Business “STEM” Discipline 5 © Prof. Dr. H. Krcmar – Awareness in Industry: Global Sponsors, “AIS Bright ICT

Technische Universität München „Industry 4. 0“ - „Smart Service World“ - „Digitale Agenda 2014– 2017“ 6 © Prof. Dr. H. Krcmar

Technische Universität München Digital Transformation 7

Technische Universität München Digital Transformation 8 Explanatory Pattern © Prof. Dr. H. Krcmar Leadership Behavior

Technische Universität München Trends – my selection • Demographic change • Urbanisation • Serviceation • Predictability § IT-Trends selection aka SMAC § § § 9 1950 Social Media Mobility & Consumerization Analytics / Big Data Cloud Computing Cyber-Physical Service Systems (CPSS) Platform-based ecosystems © Prof. Dr. H. Krcmar Customer’s value creation INTERACTION Production 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Technische Universität München Digital transformation Explanatory Pattern Inevitable 10 © Prof. Dr. H. Krcmar Leadership behavior

Technische Universität München The innovator´s dilemma • New techniques or business models get (at the beginning) poorer results (measured by traditional criteria), but are usually less expensive (at least later) and easier. • Ignoring a disruptive techniques for a long time can lead to an insurmountable resistance to change within the company. 11 • Openness to disruptive technologies needs to be the goal of every company's culture © Prof. Dr. H. Krcmar of innovation.

Technische Universität München Disruptive innovations often add up over time 12 © Prof. Dr. H. Krcmar

Technische Universität München Disruption, not immediate destruction enables innovation and efficiency performance New 100% more & different 100% 70% „Don´t confuse slow and declining with not needed, unnecessary, not being reinvented“. 30% t 2 t 1 13 © Prof. Dr. H. Krcmar Ginni Rometty, 14 -05 -2014 FT time

Technische Universität München Internet-milieus in selected population groups Germany Source: DIVSI 2013 b 14 © Prof. Dr. H. Krcmar

Technische Universität München Digital transformation Explanatory Pattern Inevitable Irreversible 15 © Prof. Dr. H. Krcmar Leadership behavior

Papal election 2005 16 AP/DPA - Source: Der Spiegel: Digitale Erleuchtung 2013 Photo: AP/DPA - Source: Der Spiegel: Digitale Erleuchtung 2013 © Prof. Dr. H. Krcmar Technische Universität München

Papal election 2013 17 AP/DPA - Source: Der Spiegel: Digitale Erleuchtung 2013 Photo: AP/DPA - Source: Der Spiegel: Digitale Erleuchtung 2013 © Prof. Dr. H. Krcmar Technische Universität München

Papal election 2005 18 AP/DPA - Source: Der Spiegel: Digitale Erleuchtung 2013 Photo: AP/DPA - Source: Der Spiegel: Digitale Erleuchtung 2013 © Prof. Dr. H. Krcmar Technische Universität München

Technische Universität München Digital transformation Explanatory Pattern Inevitable Irreversible Tremendously fast 19 © Prof. Dr. H. Krcmar Leadership behavior

Technische Universität München 2005: On whom would you lay your bets on? Founded in 2003 Founded in 2004 Founded in 2005 (Tom Anderson) (Zuckerberg et al. ) (Dariani/Behmann) 20 © Prof. Dr. H. Krcmar

Technische Universität München 2005: On whom would you lay bets on? Source: statista. de 21 © Prof. Dr. H. Krcmar

Technische Universität München 2005: On whom would you lay your bets on? 2014: It‘s obvious 2023: ? Source: statista. de 22 © Prof. Dr. H. Krcmar

Technische Universität München Digital transformation Explanatory Pattern Inevitable Irreversible Tremendously fast Uncertain in the execution 23 © Prof. Dr. H. Krcmar Leadership behavior

Technische Universität München Digital transformation Inevitable Explanatory Pattern Service Dominant Logic Irreversible Tremendously fast Uncertain in the execution 24 © Prof. Dr. H. Krcmar Leadership behavior

Technische Universität München Production and value creation Production perspective “Joint production process: the Customer participates as co-producer of resources and processes with the provider” (Eiglier & Langeard, 1975; Grönroos, 1978) Production ”Value Facilitation” (Grönroos, 2008) INTERACTION Customer’s value creation Added value perspective “Joint value creation process: the Provider participates as co-creator of value (valuein-use) with the customer” (Grönroos, 2008; Grönroos & Ravald, 2011) Grönroos (2011) 25 © Prof. Dr. H. Krcmar

Technische Universität München Disruption by Xaas: Substitution of existing industrial silos by service ecosystems • Smart Service World: From business-centric processes through to event-centered process assistance Source: Smart Service Welt, 2014, S. 18 • Industry 4. 0: From office-centered processes (coordinated centrally) through to workpiece-centered production (selforganized) 26 © Prof. Dr. H. Krcmar

Technische Universität München Digital transformation Explanatory Pattern Inevitable Service dominant logic Irreversible Ambidexterity Tremendously fast Uncertain in the execution 27 © Prof. Dr. H. Krcmar Leadership behavior

“It was the best of times, it was the worst of times, . . . ” Dickens, C. 1859 Innovation process: Exploitation and exploration Exploitation Utilization of existing potential in order to ensure efficient operations. Refinement, optimization, selection, implementation and execution Exploration March 1991 28 Generating alternative potentials to be able to react more flexibly to changing environmental requirements Search, variation, risk recording, experimentation, play, flexibility, discovery and research

Technische Universität München Digital transformation Explanatory Pattern Inevitable Service dominant logic Irreversible Tremendously fast Uncertain in the execution 29 Ambidexterity Open innovation on platforms © Prof. Dr. H. Krcmar Leadership behavior

Technische Universität München Open innovation from the perspective of platform Open innovation (Gassmann/Enkel, 2004) • • • Inside-out Outside-in Coupled-Process Fit to Service Ecosystems (Gassmann 2006) • Reuse • Knowledge exploitation • New business models 30 © Prof. Dr. H. Krcmar

Technische Universität München „My individual service is my commodity” „My individual service will be assembled through your commodity“ Consumer Linkage layer Producer 31 Effective use of platform for companies (Efficiency, innovation, strategy, survival, . . . ) Efficient advice on the use of and development on the platform (Supplier, composition, safety, . . . ) Long-term development and maintenance of reliable, large application environments and platforms (Cost-efficient production and delivery, . . . ) © Prof. Dr. H. Krcmar

Technische Universität München Digital transformation Explanatory Pattern Inevitable Service dominant logic Irreversible Ambidexterity Tremendously fast Open innovation on platforms Uncertain in the execution 32 Real Options in the portfolio © Prof. Dr. H. Krcmar Leadership behavior

Technische Universität München Shift of the innovation limit Today Competition uber industrial structures Competition via business models IT enables the use of Ubiquitous Computing Product- und process innovations process efficiency Strategic Information Systems Any use of IT Smart Service World Cyber Physical Service Systems IT/IS ecosystems IS as platform IT ecosystems Proprietary IS Proprietary IT 80 s 33 © Prof. Dr. H. Krcmar

Technische Universität München Towards a culture of (digital) transformation: people and technologies matter! Digital Transformation Explanatory Pattern Leadership Behavior Inevitable Service Dominant Logic Act „Value in use“ Irreversible Ambidexterity Live Exploit & Explore Tremendously fast Uncertain in the execution 34 Open innovation platforms Real Options in the portfolio © Prof. Dr. H. Krcmar on Speed-on&Stability-in the platforms Explore options

Technische Universität München Towards a culture of (digital) transformation: people and technologies and law matter Digital Transformation Inevitable Service Dominant Logic Privacy Act „Value in use“ Irreversible Ambidexterity Live Exploit & Explore Tremendously fast Uncertain in the execution 35 Explanatory Model Leadership Behavior Requirements until now Cyber. Security Open innovation platforms Trust Real Options Principles in the portfolio © Prof. Dr. H. Krcmar on Speed-on&Stability-in the platforms Explore options

Technische Universität München Disruptive platform-based innovation • Co-evolution in the entire-supply-ecosystem of single suppliers, solution developers and operators in the service ecosystem (in multilateral governance structure) • Co-evolution in the supply-demand-relationship of single suppliers, solution developers, operators and users throughout the service ecosystem (in multilateral governance structure) • Concept-context changes via (Re-)regulation 36 © Prof. Dr. H. Krcmar

Technische Universität München „new digital life“ “In face-to-face encounters, our interactions are "private by default, public through effort. " With mediated technologies, the defaults are inverted. Interactions are "public by default, private through effort. “ danah boyd 2011. in (co: //llaboratory, Gleichgewicht und Spannung zwischen digitaler Privatheit und Öffentlichkeit, 2011, p. 113) 37 © Prof. Dr. H. Krcmar

Technische Universität München Towards a culture of (digital) transformation: people and society, technologies and law matter Digital Transformation Explanatory Model Requirements today Inevitable Privacy Service Dominant Logic and individualized Ambidexterity Irreversible Leadership Behavior Act „Value in use“ services Live Exploit & Explore Cyber. Security and convenience Tremendously fast Trust Uncertain in the execution 38 Open innovation on Speed-on&Stability-in platforms and markets the platforms by regulation Real Options Explore options Principles and discourse in the portfolio © Prof. Dr. H. Krcmar

Technische Universität München And now ? - a managerial view “Any technology company not focused on speed will be disrupted from its position. Wal-Mart as a technology company and innovator will be a tale told on speed. ” (Karenann Terrell, CIO Wal-Mart, 2015 -May-6) • Design smart services • on platforms existing and new • in co-innovation with customers, suppliers, and competitors • in agile steps • by starting today 39 © Prof. Dr. H. Krcmar

Technische Universität München Digital Transformation Inevitable Service Dominant Logic Irreversible Ambidexterity Tremendously fast Uncertain in the execution 40 Explanatory Pattern Open innovation platforms Real Options in the portfolio © Prof. Dr. H. Krcmar on Research Challenges

Technische Universität München Some starting considerations • You can count innovations only after they are conceived – and the often come in Singularity • Reality poses problems – for those that see them – it does no pose methods – IS/IT might be one of the solutions • Researchers research – We all have our likes and skills • IT/IS is an artifact – which needs to be built and designed, and well to work based on Briggs, R. ; Krcmar, H. : The Simple Elegance of Scientific Inquiry in a Technical Field. Workshop held at HICSS 2012 41 © Prof. Dr. H. Krcmar

Technische Universität München The context of IS research has changed • The IT/IS-artefact is different today than just ten years ago – the first i. Phone was released on June 29, 2007 • People, organizations, and society use IT/IS-artefacts as embedded “tools” and do not even call it “computing” anymore – ubiquitous computing, ambient computing • The users of today are consumers and organizational IS -users alike - Any restrictiveness of user interfaces is easily recognized • The companies of today are engulfed in their digital transformation 42 © Prof. Dr. H. Krcmar – AND THE DIGITAL CHALLENGERS ARE

New contexts – new topics – more interdisciplinarity while „focussing“ on the individual, the organization, and society Technische Universität München Leimeister et al 2014 (DOI: 10. 1007/s 12525 -014 -0174 -6) 43 © Prof. Dr. H. Krcmar

Technische Universität München Digital Transformation Inevitable Service Dominant Logic Irreversible Ambidexterity Tremendously fast Uncertain in the execution 44 Explanatory Pattern Open innovation platforms Real Options in the portfolio © Prof. Dr. H. Krcmar on Research Challenges Human centric, but holistically

Technische Universität München Outsourcing through the times – From “Buyer-Beware” to “Expertise-Aware” • What if the assumptions that informed outsourcing research over the past decades do not hold (anymore)? • Today we know – In mature outsourcing markets client capabilities rather than vendor capabilities are the primary drivers of BPO performance – Vendor offerings converge, which requires that clients are flexible and adapt themselves to the service offerings • That means – These Results challenge the assumptions that informed the early outsourcing research (‘buyer-beware’ framing) 45 Which other IS-(Management) © Prof. Dr. H. Krcmarknowledge is similarly

Technische Universität München Digital Transformation Inevitable Service Dominant Logic Irreversible Ambidexterity Tremendously fast Uncertain in the execution 46 Explanatory Pattern Open innovation platforms Real Options in the portfolio © Prof. Dr. H. Krcmar Research Challenges Human centric, but holistically on revisit&reframe

Technische Universität München Design Research • Design Research tries to develop Artifacts that fulfill a certain purpose • „devising artifacts to attain goals“ (Simon, 1969) • Design Research can be defined as identifying a unique or innovative solution for a previously unsolved problem • Revolutionary • Evolutionary • Not intuitive (Briggs, 2006) Natural and Behavioral Science 47 observe artificial objects and phenomena © Prof. Dr. H. Krcmar create Design Science

Technische Universität München possible results of Design Science Research Terminology (Concepts, language) Theory (Cause-Effect-Relationships) Design Theories and Principles (Goal-Means-Relationship) Technology Models (Goal-Means-Relationship) 48 © Prof. Dr. H. Krcmar Methods Systems

Technische Universität München Digital Transformation Inevitable Irreversible Tremendously fast Uncertain in the execution 49 Explanatory Model Research Challenges Service Dominant Logic Human centric, but holistically Ambidexterity Open innovation platforms on revisit&reframe Design Principles Real Options in the portfolio © Prof. Dr. H. Krcmar

Technische Universität München Singularity of each Digital Transformation Process • Singular, context-rich, dynamically complex and situated – Sometimes all different & revolutionary, sometimes all similar & evolutionary • Implementation dominates DT effects – contexts might be too diverse for contingency based approaches • Researchers might need – to act as ethnograpers to explore the details of the technical and organizational implementation – to perform detailed documentation to enable multicase surveys for EBM – to design different technological solutions for different organizations 50 © Prof. Dr. H. Krcmar

Technische Universität München Digital Transformation Explanatory Model Research Challenges Inevitable Service Dominant Logic Human centric, but holistically Irreversible Ambidexterity revisit&reframe Tremendously fast Uncertain in the execution 51 Open innovation platforms Real Options in the portfolio © Prof. Dr. H. Krcmar on Design Principles Individual dynamics of digital transformation processes

Technische Universität München Now, what could be the result of DT research 52 © Prof. Dr. H. Krcmar

Technische Universität München Now, what could be the result of DT research • More papers 53 © Prof. Dr. H. Krcmar

The holy grail Technische Universität München Why do we want to do research? Relevatory Originality Incremental Practically useful Scientifically useful Utility adapted from Corley, K. G. , & Gioia, D. A. (2011). Building Theory About Theory Building: What Constitutes A Theoretical Contribution? © Prof. Dr. H. Krcmar 54 of Management Review, 36(1), 12 -32. Academy

The holy grail Technische Universität München Why do we want to do research? Relevatory Originality Incremental Practically useful Scientifically useful Utility adapted from Corley, K. G. , & Gioia, D. A. (2011). Building Theory About Theory Building: What Constitutes A Theoretical Contribution? © Prof. Dr. H. Krcmar 55 of Management Review, 36(1), 12 -32. Academy

The holy grail Technische Universität München Why do we want to do research? Relevatory Originality Incremental Practically useful Scientifically useful Utility 56 adapted from Corley, K. G. , & Gioia, D. A. (2011). Building Theory About Theory Building: What © Prof. Dr. H. Krcmar Constitutes A Theoretical Contribution? Academy of Management Review, 36(1), 12 -32.

Technische Universität München Now, what could be the impact of DT research • More papers • More citations • Change in the perception of actors (in academia and practice, suppliers and customers, …) • New product features, implementation processes, … • New suppliers (Startups, Spinoffs, Business units, …) • … 57 © Prof. Dr. H. Krcmar

ols Theoretical s Research Desi e gn es h t Lo po gic y Re H n Experimental Research tio a t fu tion e R lida Va Va futat lid ion ati on Design Guidelines From: Briggs, R. O. , Schwabe, G. (2011) On Expanding the Scope of Design Science Research. In H. Jain, A. P. Sinha, and P. Vitharana (Eds. ): Proceedings of Design Science Research in 58 Information Systems and Technologies: DESRIST © Prof. Dr. H. Krcmar 2011, LNCS 6629, pp. 92– 106, 2011. Treatments Controls es elin uid ns n G tio sig ela De Corr Co ntr Technische Universität München d ine pla ts ex Un Effec Unexplained Effects Un Exploratory Research Avenues of Enquiry ex p Eff laine ec ts d relevance in the IS discipline portfolio Applied Research / Engineering

Some Implications Technische Universität München • Collobaration in and with the „theatre of action“ – „in and out of the ivory tower“ with shared data sets • With many cycles and on many levels over extended time – „concatenated exploration“ (Stebbins, 2001, p. 12) • with different skills needed for each mode of scientific inquiry – Methodological plurality and tolerance • and different pitfalls to avoid for each mode of scientific inquiry – Often spanning different academic communities • In research programmes with an overarching question – „How to make Digital Transformation work“ A non-trivial balancing act over time as research programmes are realitydriven, projects are funding-driven, publications are outlet driven for each Knowledge nugget based on individual researcher´s perspectives and motivation instead of just following generally prescribed research as as craft prescriptions 59 © Prof. Dr. H. Krcmar

Technische Universität München Engaged Scholarship (Quelle: Van de Ven, 2007) 60 © Prof. Dr. H. Krcmar

Technische Universität München Ambassadors of the Possible enjoy, research, and engage! “Everything can look like a failure in the middle. Every new idea runs into trouble before it reaches fruition, and the possibilities for trouble increase with the number of ways the venture differs from current approaches. ” 61 © Prof. Dr. H. Krcmar (Kanter 2001, S. 274).

Technische Universität München A new course – for you and your students Leadership in Digital Transformation Prof. Dr. Helmut Krcmar Please join me Starting on October 6 at https: //open. sap. com/courses/ldt 1 -tl 62 © Prof. Dr. H. Krcmar