Professional Documents
Culture Documents
Strategies For Digitalization in Manufacturing Firms
Strategies For Digitalization in Manufacturing Firms
Joakim Björkdahl1
SUMMARY
This article discusses the digitalization efforts of 26 leading manufacturing firms, the
difficulties encountered, and how they can be handled. It shows that many firms are
far from ready to benefit from digitalization and are mainly focused on achieving
greater efficiency through digitalization rather than pursuing a growth agenda. This
imbalance is because of the difficulties related to identifying profitable configurations
of competencies, assets, and data generated from digital technologies, orchestrating
them, and exploiting them in an agile organization. Practical implications of
digitalization are highlighted, specifically in terms of strategies for supporting the
current business and embracing long-term digital transformation.
H
ow should established manufacturing firms embrace digitaliza-
tion? Rather than trying to reduce the question to the advances of
digital technologies, business leaders need to focus on developing
new practices, capabilities, and strategies that will allow the cre-
ation and capture of value from digitalization.
Currently, most chief executive officers (CEOs) are preoccupied with
attempting to understand how the digital revolution is affecting and will continue
to affect their firms, in light of the ongoing paradigm shift from an industrial to a
more digital economy. In some industries such as retail, the profits of large domi-
nant firms are declining, despite attempts to stem this decline. For example, H&M,
the world’s second largest clothing retail firm, only sensed the changes and seized
the opportunities of digitalization much later than its main competitors such as
17
18 CALIFORNIA MANAGEMENT REVIEW 62(4)
Understanding Digitalization
Digitalization involves the increased use of digital technologies3 and their
integration and cross-fertilization in the firm’s products and inbound and out-
bound activities.4 This can result in fundamental changes, especially to how firms
create and capture value.5 In simple terms, digitalization can be seen as increased
generation, analysis, and use of data in order, on one hand, to increase the firm’s
internal efficiency, and on the other hand to grow the firm by adding value for
customers through the change from analog to digital formats.6
The challenges, opportunities, and effects of digitalization have had a major
effect on both business leaders and politicians. Digitalization has come to be seen
as the fourth industrial revolution (after the steam engine and mechanization,
electricity and mass production, and computerization and automation).7 The
German government has defined the challenges, opportunities, and effect of digi-
talization for manufacturing firms as “Industry 4.0.”8 This has inspired efforts in
several other countries described as “Smart Manufacturing” in the United States,
“Industrie du Futur” in France, “Fabrica Intelligente” in Italy, and “Smart Industry”
in the Netherlands. However, Industry 4.0 and similar initiatives are limited
Strategies for Digitalization in Manufacturing Firms Strategies for Digitalization in Manufacturing Firms 19
Product Development
Digitalization has the potential to make manufacturing firms’ product
development more efficient. Digitalization of product development reduces the
need for physical artifacts and prototypes; computer-based design and visualiza-
tion as well as numerical computation programs are increasingly sophisticated
and interactive, making product design much easier.
20 CALIFORNIA MANAGEMENT REVIEW 62(4)
Manufacturing
Most manufacturing firms are engaged in extensive work to make their
production more competitive by means of digitalization.10 They can increase
Strategies for Digitalization in Manufacturing Firms Strategies for Digitalization in Manufacturing Firms 21
throughput and quality, decrease variance, and minimize the number of break-
downs and stoppages by making the manufacturing process more intelligent
through the use of digital technologies and more and better data. However, the
breadth and depth of these efforts differ substantially among firms.
In some cases (i.e., pulp and paper and steel sector firms), these activities
are limited to the possibility of obtaining new data and linking different data
sources to improve decision making and achieve integration among machines.
The firms identify the reasons for production disturbances that result in reduced
operational efficiency by identifying abnormalities and logging breakdowns to
identify root causes.
The leading firms also perform many other activities allowed by digitaliza-
tion. For example, computer visualization systems that use machine learning
algorithms to identify defects in the manufacturing process reduce the need to
take products or materials out of the production line and check them manually.
In addition, although the end products used by customers are not connected to
the cloud, manufacturing firms often employ “digital twins” or models of a built
product that reflect the complete manufacturing process and can allow improve-
ments based on the performance of the product in a live setting. AI-enhanced
predictive maintenance is taking over from preventive maintenance. The use of
accelerometers, digital sensors, and advanced software algorithms allows report-
ing of the machines’ real-time conditions. This translates into savings on time and
resources, fewer expensive stops to production, and lower maintenance and
inspection costs.
One of the most recent developments is the construction of completely
digital factories. For instance, the commercial vehicle manufacturer Scania has
invested $220 million in a new heavy truck cab factory to produce cabins for its
European market. The only remaining manual activities are related to the provi-
sion of materials for production and surveillance and servicing of production.
Scania’s production capacity has doubled, and the number of breakdowns and
production stops has reduced. Another company, SKF, the world’s largest bearing
manufacturer, also has digital factories. Based on their experience from a test fac-
tory that they built in Sweden, SKF is constructing another new factory in
Germany. Similar to Scania’s experience, SKF has improved its production plan-
ning because the manufacturing process can be changed without causing disrup-
tion and errors. The observations show that firms are investing in digital factories
because they believe they will make them more competitive and produce better
quality goods at lower production costs. Another important implication of digital
factories that has yet to materialize is that since fewer individuals are required for
production, the activity can be positioned strategically with less consideration of
salary costs. It could be beneficial to relocate production facilities to somewhere
with an existing digitally competent workforce, especially for firms such as SKF
with production facilities in 103 locations around the world. Although SKF’s first
digital factory was a test factory, the firm reduced the number of employees work-
ing in and with the factory by 77%; it expects even higher staff reductions in rela-
tion to future digital factories.
22 CALIFORNIA MANAGEMENT REVIEW 62(4)
throughout the firm’s value chain activities, for example, by tracking the position
in the supply chain of a specific customer order, using machine learning, or linking
end products to data from the manufacturing process and the input materials used.
not match expectations. At the same time, several manufacturing firms are trying
to change their business model from selling products to selling services. However,
the results of most of these changes have yet to materialize. For example, some
automotive firms have ambitions to switch from selling vehicles to selling vehicles
as a service and have been working on this for some time, but so far without
much implementation. In sum, business leaders have focused mainly on cutting
costs based on greater efficiency, and these initiatives have proven more success-
ful than the few initiatives aimed at growth.22 Business leaders believe that major
competitive and market effects will not emerge without changes to their business
offers to customers.23 However, a growth agenda will require these manufacturing
firms to shift from greater efficiency in established ways of working to working
differently.
Driving growth is a different game than using digitalization to achieve
greater efficiency and is also experienced as more difficult (see Table 1 for a sum-
mary). For the firms in this study, operational efficiency based on digitalization
has been confined primarily to achieving excellence in individual functions.
Compared to achieving growth, elimination of waste, for instance, has been rela-
tively straightforward and generic across firms and sectors.24 It is relatively easy
also to evaluate returns on investments aimed at cost-cutting via operational effi-
ciency. However, digitalization aimed at driving growth involves combining func-
tions that require a good fit among internal activities across functions. Firms also
need to create customer value in a more uncertain external environment. This is
a challenge in the earliest stages of development. As described by Day and
Schoemaker in the case of emerging technologies, customer usage patterns and
behaviors are exploratory and formative and are accompanied by scarcity of mar-
ket knowledge and embryonic competition among new solutions.25 Hence, invest-
ment in digitalization is considered uncertain for innovation and growth.
According to the case firms, processes are inadequate, governance is weak, and
there is no relevant and appropriate growth strategy that explains the asymmetric
gains between cost-cutting and growth efforts.
Digital technologies combined with the manufacturing firm’s inherited
resources and capabilities can produce fundamental changes to how the firm cre-
ates and captures value,26 which makes the nature of future competition difficult
to predict.27 In turn, this adds to the importance of innovation and growth to
achieve long-run competitive advantage. Work in the area of dynamic capabilities
has taught us that such circumstances demand the honing of internal technologi-
cal, organizational, and managerial processes to sense and seize opportunities.28
If manufacturing firms do not seize opportunities and do not transform
themselves to embrace the growth opportunities offered by digitalization, they are
likely to be outcompeted by firms able to solve customer problems in more creative
ways. In the present climate of Schumpeterian competition, this threat comes from
both incumbent firms and firms outside the industry29 because on many occasions,
new technologies can produce disruptions to an established technical advance-
ment trajectory.30 Digitalization has changed the game for incumbents in many
Strategies for Digitalization in Manufacturing Firms Strategies for Digitalization in Manufacturing Firms 25
Cost-Cutting/Operational
Efficiency Growth/Innovation
Data management Data are generated internally and Data are generated from customer
usually fewer variables need to be applications and many variables
considered to identify efficiency need to be considered to identify
improvements. growth options.
industries by introducing competition from firms outside the industry and compe-
tition with more asset-light business models.31
Teece, Peteraf, and Leih note that in environments characterized by uncer-
tainty, firms must grasp opportunities for growth before their logic becomes
26 CALIFORNIA MANAGEMENT REVIEW 62(4)
apparent to all market players.32 However, this does not assume first-mover
advantages (or disadvantages) and we have to be very careful with such assumptions.33
Digital transformation is equally important for the ability to follow, to have options
related to growth, and to achieve learning advantages over firms that have yet to
undergo digital transformation. Moreover, the digital transformation of manufac-
turing firms does not necessarily involve a radical business model, a new product
category, or response to a competing technology; it can take many shapes. In the
context of the firms in the sample, until markets stabilize, it is too early to claim
that digital transformation pioneers have achieved first-mover advantages or dis-
advantages.34 What can be said is that many firms’ attempts to achieve growth
and to obtain economic returns from innovation have failed, but this cannot be
attributed only to second-mover advantages. Nevertheless, business leaders from
the observed firms believe that without some transformation, their companies’
prospects are poor, and they do not consider it to be a waiting game.35 Some of the
case firms would be suffering had they not sensed and seized opportunities and
embarked on a digital transformation.36 One of the most successful examples of a
digital transformation among the case firms is Assa Abloy. The firm dominated the
world market in mechanical door locks. Assa Abloy had no experience of using
digital technologies or working with data but recognized that it needed to trans-
form itself to exploit the opportunities related to various types of digital door
locks. The market emerged in Southeast Asia with contributions from several
firms from other sectors (e.g., Samsung). After a major transformation, Assa Abloy
has become the market leader in digital door locks and is collaborating success-
fully with complementors such as Apple and Google to drive the market forward.
Assa Abloy appears in the Forbes list of the world’s 100 most innovative compa-
nies, and 57% of its top line comes from electromechanical products and digital
solutions. It now also enjoys recurring revenue based on subscriptions and
upgrade services.
ad-hoc nature and lack of strategy and their being based on ideas the firm con-
sidered feasible with no consultation with customers.
In addition, very few firms have central control of data, which tends to be
spread throughout the organization (across different functions and market seg-
ments, and geographically). If these different firm functions do not routinely coop-
erate and share data, it can be difficult for the firm to organize digitalization
efforts.38 This lack of control over the data also means that in most cases, firms are
unable to share data outside the firm boundaries.39 Many firms also lack the capa-
bilities for rigorous analysis of available data to decide how they should be exploited.
A potential solution to facilitate the better use of data is setting up data science
groups. Volvo Cars and Scania have established such groups to work on data-
driven innovations. For Scania, data science is viewed as necessary for firm sur-
vival and provides a way to adapt to the new reality. Volvo Cars and Scania believe
that data science has the potential to identify previously unrecognized patterns
that would allow the firm to leverage its new knowledge to improve existing or
create new business. These firms have created so-called data lakes that allow their
firm members to access and analyze data. A data lake is a single storage for all the
firm’s data (structured, semi-structured, unstructured, and binary data).40
As firms find better processes for working with data and as their businesses
develop, more problems arise. They need to establish governance structures and
mechanisms to allow good coordination of their internal organizational and man-
agerial processes. The observations conducted as part of this study show that firms
find the organization of and responsibility for digitalization extremely difficult.
The importance of digitalization is exemplified by the fact that most of the firms
analyzed have created the post of CDO, although responsibilities and the position
in the hierarchy vary among firms. For example, in Atlas Copco, Saab, Volvo Cars,
and most steel manufacturing firms, promoting digitalization is the responsibility
of the IT department. However, many IT department members lack experience in
building new business and are more appropriately cast in the support function. At
the same time, if they have the required experience, they may not have budgetary
authority and may be dependent on another firm function. For example, in
Husqvarna, Autoliv, and Inwido, this responsibility belongs to the R&D depart-
ment. Although this can result in digitalization efforts organized to develop new
customer solutions, problems arise in relation to coordination with sales and mar-
keting functions to launch new products and services. Thus, problems can arise in
the hand over and coordination of digitalization efforts across firm functions.
Appointing a CDO but retaining the existing organizational structure may not
solve organizational problems related to promotion of growth by means of digita-
lization. Many functions and firms are stuck in old ways of organizing, which
results in silos. Not all firms have a CDO to promote growth. Several firms (e.g.,
Bombardier, SKF, Volvo Penta) consider that digitalization should not be driven
by one specific function but rather is an organization-wide responsibility. However,
they may risk a lack of focus in their digitalization efforts and are trapped in an old
way of organizing. Moreover, the lack of an appropriate culture to support digital
28 CALIFORNIA MANAGEMENT REVIEW 62(4)
transformation and strategy can result in stagnation. It seems clear that digitaliza-
tion will entail ongoing complex organizational and managerial challenges. Its
design is important because it has been shown to be a crucial enabler of dynamic
capabilities and the capacity to sense changes, seize opportunities, and to trans-
form the firm.41
Many business leaders want their firms to become more agile and see the
need for more flexible working as a result of digitalization. However, most have
not come to grips with working with data, organizing for digitalization, or achiev-
ing better cooperation among different functions. Development and maintenance
of agility is costly, but trying to exploit the opportunities and benefits from digita-
lization without an agile organization may be even more costly.42 Looking for-
ward, many large firms will need to coordinate their functions in new ways and
find easier, faster, and more efficient ways of working to achieve full digitalization
and drive a growth agenda. However, there is no “one-size-fits-all solution,” and
firms need to have dynamic capabilities to achieve agility and address the business
environment changes caused by digitalization.43
Scania, one of the case firms, has reorganized more appropriately and
changed its organizational dynamics, which allows it to benefit from the new
growth opportunities brought by digitalization. Scania established “Digital” as a
new business function responsible for coordinating, developing, and driving the
firm’s digital transformation. It has undertaken other efforts to improve organi-
zational dynamics and to better govern how it integrates, builds, and reconfig-
ures competences to address digitalization. It has reallocated the IT department’s
responsibilities among various firm functions, and every department in the firm
includes data scientists. The result of these changes to the organizational struc-
ture is that all the firm functions are involved in the digital transformation and
are less dependent on input from software developers and data scientists from
other functions in their efforts to explore and develop new customer solutions. A
data lake allows all firm functions easy access to internally generated and cus-
tomer data. Each firm function includes digitalization champions who are respon-
sible for driving the digital transformation and keep digitalization high on the
firm’s agenda. The different functions focus on sharing information to achieve
greater coordination and unity. All these efforts are supported by the CEO who
believes and communicates clearly that digital transformation is necessary for the
firm’s survival.
Another consideration is what firms should do themselves and how much
they need to cooperate with or acquire other firms. Many of the observed firms
cooperate outside the firms’ traditional boundaries for the development of tech-
nological solutions, and several firms have made acquisitions to obtain access to
technological competencies for immediate use or that they view as real options.
The present manufacturing firm value system is based largely on the ecosystem,44
and because digitalization increases system dependence among technologies,
products, and services to form a system of systems, firms need to be better pre-
pared to work according to an open paradigm to create and capture value.45
Strategies for Digitalization in Manufacturing Firms Strategies for Digitalization in Manufacturing Firms 29
Implications
How can business leaders develop management practices, capabilities, and
strategies that will allow better creation and capture of value from digitalization?
The implications of this study are as follows.50
Where? Having established why (or if) digitalization is important, business lead-
ers need to explore where digitalization would create most value, and its feasibil-
ity and urgency. A digital transformation needs a focus, and because it requires
capital, resources, and commitment, there must also be trade-offs. Business leaders
must formulate possible acceleration initiatives based on whether the digital trans-
formation evolution is related to operational efficiency and/or growth along the
vectors of product development, manufacturing, supply chain, product innovation,
service innovation, and business model transformation (e.g., selling their products
as services or catalyzing the development of ecosystems). Business leaders then
have to decide what they should and should not do, based on the value creation
and capture potential, effort (cost, speed, resources) and feasibility, and prioritiza-
tion of the initiatives. Porter emphasized that strategy renders choices about what
not to do, which are as important as what to do.55 Therefore, business leaders play
a critical role in deciding where resources should be allocated to realize the most
valuable opportunities. If they make the wrong decisions, the firm will fail.
Successful firms are selective about what they do, try not to do too many
things at the same time, and have a clear view of what they want to achieve.
Many unsuccessful firms suffered from false starts and misguided efforts, espe-
cially in relation to their growth agendas. Many business leaders do not under-
stand the need to make choices. They sometimes believe they can work on several
value dimensions simultaneously, leading to piecemeal initiatives with poor
results because there is no clear understanding of objectives.
Strategies for Digitalization in Manufacturing Firms Strategies for Digitalization in Manufacturing Firms 31
Digital Transformation
Why Why could digital technologies and data help the firm to resolve its problems and promote
value for the firm and its customers?
Where Where do digitalization efforts create the most value, and how feasible and urgent are they?
What What enablers and capabilities are needed to support digitalization efforts?
How How is the firm approaching identification of an operating model, including culture, and
organizational and managerial processes, to drive the transformation?
of competence gaps and the need for new talent, but will also show the extent
to which firms need complementary assets from other firms to succeed with
their digital transformation (because they are too costly or difficult to acquire or
develop in-house).
Author Biography
Joakim Björkdahl is a Professor of Strategic Management and Innovation at the
Department of Technology Management and Economics at Chalmers University
of Technology (email: joakim.bjorkdahl@chalmers.se).
Acknowledgments
I would like to express my gratitude to the editors of California Management
Review, the four anonymous reviewers, and Marcus Holgersson for constructive
comments and guidance throughout the review process.
Notes
1. D. J. Teece, “Profiting from Technological Innovation: Implications for Integration,
Collaboration, Licensing and Public Policy Research Policy,” Research Policy, 15/6 (December
1986): 285-305.
2. V. S. Katkalo, C. N. Pitelis, and D. J. Teece, “Introduction: On the Nature and Scope of
Dynamic Capabilities,” Industrial and Corporate Change, 19/4 (August 2010): 1175-1186;
P. J. H. Schoemaker, S. Heaton, and D. J. Teece, “Innovation, Dynamic Capabilities, and
Leadership,” California Management Review, 61/1 (Fall 2018): 15-42; D. J. Teece, “Explicating
Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise
Performance,” Strategic Management Journal, 28/13 (December 2007): 1319-1350; D. J. Teece,
“Dynamic Capabilities: A Guide for Managers,” Ivey Business Journal, 75/2 (March/April
2011): 29-32; D. J. Teece, G. Pisano, and A. Shuen, “Dynamic Capabilities and Strategic
Management,” Strategic Management Journal, 18/7 (August 1997): 509-533.
3. Digital technologies can be classified as general-purpose technologies (GPTs) because they
can be combined with a multitude of other technologies. On GPTs, see T. F. Bresnahan and
M. Trajtenberg, “General Purpose Technologies: ‘Engines of Growth’?” Journal of Econometrics,
65/1 (January 1995): 83-108.
4. J. Björkdahl and M. Holmén, “Exploiting the Control Revolution by Means of Digitalization:
Value Creation, Value Capture, and Downstream Movements,” Industrial and Corporate
Change, 28/3 (June 2019): 423-436.
5. J. Björkdahl, “Technology Cross-Fertilization and the Business Model: The Case of
Integrating ICTs in Mechanical Engineering Products,” Research Policy, 38/9 (November
2009): 1468-1477.
6. Gartner IT Glossary defines digitalization as the process of changing from analog to digital form.
7. K. Schwab, The Fourth Industrial Revolution (New York, NY: Crown Business, 2017).
8. Industry 4.0 was initiated by the German Federal Ministry of Education and Research.
9. K. M. Eisenhardt and M. E. Graebner, “Theory Building from Cases: Opportunities and
Challenges,” Academy of Management Journal, 50/1 (February 2007): 25-32.
10. Note that not all efforts are related to quality and throughput. The metal firm Boliden is
digitalizing several of its mines (based on advanced positioning technology and monitor-
ing systems) to improve health and safety and energy efficiency as mine depths increase.
Nevertheless, the longer term goal is round-the-clock production based on machinery that
does not require a human operator—Boliden expects productivity increases of between 40%
and 80% after full implementation.
11. See also, M. E. Porter and J. E. Heppelmann, “How Smart, Connected Products Are
Transforming Competition,” Harvard Business Review, 92/11 (November 2014): 64-88.
34 CALIFORNIA MANAGEMENT REVIEW 62(4)
12. T. Baines, A. Ziaee Bigdeli, O. F. Bustinza, V. Gang Shi, J. Baldwin, and K. Ridgway,
“Servitization: Revisiting the State-of-the-Art and Research Priorities,” International Journal
of Operations and Production Management, 37/2 (January 2017): 256-278; H. Lightfoot, T.
Baines, and P. Smart, “The Servitization of Manufacturing: A Systematic Literature Review of
Interdependent Trends,” International Journal of Operations and Production Management, 33/11-
12 (November 2013): 1408-1434.
13. R. Wise and P. Baumgartner, “Go Downstream: The New Profit Imperative in Manufacturing,”
Harvard Business Review, 77/5 (September/October 1999): 133-141.
14. Michael Porter would argue that operational effectiveness (including efficiency) is not strat-
egy. Cf. M. E. Porter, “What Is Strategy,” Harvard Business Review, 57/2 (November/December
1996): 61-78.
15. O. E. Willamson, “Strategizing, Economizing, and Economic Organization,” Strategic
Management Journal, 12/S2 (Winter 1991): 75-94.
16. Oliver Williamson makes the distinction between economizing and strategizing to describe
strategy. Strategizing is described as deterring or defeating competitors with clever ploys and
positioning. Cf. Williamson (1991), op. cit.
17. Porter (1996), op. cit.; Teece et al. (1997), op. cit.; Williamson (1991), op. cit.
18. For some manufacturing firms, economizing (combined with quality improvements) is the
most important outcome. This is true especially for firms that compete mainly on their man-
ufacturing and not downstream (e.g., firms producing and selling steel sheet, metal powder,
and paperboard). Several of the firms in the study considered innovation and growth to be
less important than operational efficiency. Economizing is also important for systems integra-
tors that manufacture and sell bundles of products and services (e.g., firms producing and
selling trucks, telecommunication networks, compressors, and industrial robots); however,
for these firms, economizing weaknesses can be hidden in great business models, technolo-
gies, and products and services, especially for companies with strong market power.
19. Björkdahl (2009), op. cit.; Porter and Heppelmann (2014), op. cit.; D. J. Teece, “Profiting
from Innovation in the Digital Economy: Enabling Technologies, Standards, and Licensing
Models in the Wireless World,” Research Policy, 47/8 (October 2018): 1367-1387; World
Economic Forum, “Digital Transformation of Industries,” Report, 2016, https://www.wefo-
rum.org/reports/digital-transformation-of-industries.
20. Porter (1996), op. cit.
21. On business models, see for example, Björkdahl (2009), op. cit.; H. Chesbrough and R.
S. Rosenbloom, “The Role of the Business Model in Capturing Value from Innovation:
Evidence from Xerox Corporation’s Technology Spin-Off Companies,” Industrial and Corporate
Change, 11/3 (June 2002): 529-555; M. W. Johnson, C. M. Christensen, and H. Kagermann,
“Reinventing Your Business Model,” Harvard Business Review, 86/12 (December 2008): 50-59.
22. See also, for example, L. Caldwell, “How Digitalization Is Driving New Business Models
for Manufacturers,” Forbes, November 27, 2018, https://www.forbes.com/sites/lisa-
caldwell/2018/11/27/how-digitization-is-driving-new-business-models-for-manu-
facturers/#87d70df6aa66; O. Aguilar and J. Girzadas, “Save-to-Transform as a Catalyst for
Embracing Digital Disruption,” Deloitte, April 2019, https://www2.deloitte.com/content/dam/
Deloitte/us/Documents/process-and-operations/us-global-cost-survey-2019.pdf; Porter and
Heppelmann (2014), op. cit.
23. See also, for example, Forbes Insights, “How to Win at Digital Transformation: Insights from
a Global Survey of Top Executives,” Forbes, November 2016, https://images.forbes.com/for-
besinsights/hds_digital_maturity/HowToWinAtDigitalTransformation.pdf.
24. Some adaptations are more difficult than others. For example, improving product develop-
ment is considered more difficult and more firm-specific than integration of different systems
along the value chain or replacing production machinery, which often involves external
suppliers.
25. G. S. Day and P. J. H. Schoemaker, “Avoiding the Pitfalls of Emerging Technologies,”
California Management Review, 42/2 (Winter 2000): 8-33.
26. Björkdahl (2009), op. cit.
27. Teece (2018), op. cit.
28. See, for example, G. S. Day and P. J. H. Schoemaker, “Adapting to Fast-Changing Markets
and Technologies,” California Management Review, 58/4 (Summer 2016): 59-77; Schoemaker
et al. (2018), op. cit.; Teece et al. (1997), op. cit.
Strategies for Digitalization in Manufacturing Firms Strategies for Digitalization in Manufacturing Firms 35
29. C. M. Christensen and M. E. Raynor, The Innovator’s Solution: Creating and Sustaining Successful
Growth (Boston, MA: Harvard Business School Press, 2003).
30. Day and Schoemaker (2000), op. cit.
31. For example, Uber is the world’s largest taxi company but owns no vehicles; Facebook is
the world’s most popular media owner but creates no content; Alibaba is the second
most valuable retailer but has no inventories; and Airbnb is the world’s largest accom-
modation provider but owns no real estate. See, T. Goodwin, “The Battle Is for the
Customer Interface,” Techcrunch.com, March 4, 2015, https://techcrunch.com/2015/03/03/
in-the-age-of-disintermediation-the-battle-is-all-for-the-customer-interface/.
32. D. J. Teece, M. Peteraf, and S. Leih, “Dynamic Capabilities and Organizational Agility: Risk,
Uncertainty, and Strategy in the Innovation Economy,” California Management Review, 58/4
(Summer 2016): 13-35.
33. M. B. Lieberman and D. B. Montgomery, “First-Mover Advantages,” Strategic Management
Journal, 9/51 (Summer 1988): 41-58; F. Suarez and G. Lanzolla, “The Half-Truth of First-
Mover Advantages,” Harvard Business Review, 83/4 (April 2005): 121-127.
34. C. Markides and L. Sosa, “Pioneering and First Mover Advantages: The Importance of
Business Models,” Long Range Planning, 46/4-5 (August-October 2013): 325-334.
35. H. Hoppe, “Second-Mover Advantages in the Strategic Adoption of New Technology under
Uncertainty,” International Journal of Industrial Organization, 18/2 (February 2000): 315-338.
36. Delayed participation is one of the pitfalls of emerging technologies. Cf. Day and Schoemaker
(2000), op. cit.
37. S. Blank, “Why the Lean Start-Up Changes Everything,” Harvard Business Review, 91/5 (May
2013): 63-72; E. Ries, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to
Create Radically Successful Businesses (New York, NY: Crown Business, 2011).
38. See also, for example, L. DalleMule and T. H. Davenport, “What’s Your Data Strategy,” Harvard
Business Review, 95/3 (May-June 2017): 112-125; S. Gandhi, B. Thota, R. Kuchembuck, and
J. Swartz, “Demystifying Data Monetization,” MIT Sloan Management Review, November 27,
2018, https://sloanreview.mit.edu/article/demystifying-data-monetization/.
39. This can be considered a closed rather than an open paradigm. Cf. H. Chesbrough, Open
Innovation: The New Imperative for Creating and Profiting from Technology (Boston, MA: Harvard
Business Press, 2003).
40. N. Miloslavskaya and A. Tolstoy, “Big Data, Fast Data and Data Lake Concepts,” Procedia
Computer Science, 88 (2016): 300-305.
41. T. Felin and T. C. Powell, “Designing Organizations for Dynamic Capabilities,” California
Management Review, 58/4 (Summer 2016): 78-96.
42. Teece et al. (2016), op. cit.
43. Ibid.
44. R. Adner, “Ecosystem as Structure: An Actionable Construct for Strategy,” Journal of
Management, 43/1 (January 2017): 39-58; R. Adner, The Wide Lens: A New Strategy for
Innovation (London, UK: Penguin, 2012).
45. H. Chesbrough, “The Future of Open Innovation,” Research Technology Management, 60/1
(January 2017): 35-38; M. Holgersson, O. Granstrand, and M. Bogers, “The Evolution of
Intellectual Property Strategies in Innovation Ecosystems: Uncovering Complementary and
Substitute Appropriability Regimes,” Long Range Planning, 51/2 (April 2018): 303-319.
46. R. Adner (2017), op. cit.; D. Fasnacht, Open Innovation Ecosystems: Creating New Value
Constellations in the Financial Services (Cham, Switzerland: Springer, 2018).
47. Fasnacht (2018), op. cit.
48. J. H. Dyer and H. Singh, “Using Alliance to Build Competitive Advantage in Emerging
Technologies,” in Wharton on Managing Emerging Technologies, ed. G. S. Day, P. J. H.
Schoemaker, and R. E. Gunther (New York, NY: John Wiley, 2000); O. Granstrand and
M. Holgersson, “Innovation Ecosystems: A Conceptual Review and a New Definition,”
Technovation, 90-91 (2020): 102098.
49. P. J. Williamson and A. De Meyer, “Ecosystem Advantage: How to Successfully Harness the
Power of Partners,” California Management Review, 55/1 (Fall 2012): 24-46.
50. Given the sample firms in this study, the implications set out here are particularly for large,
well-established manufacturing firms in competitive markets.
51. See also, T. H. Davenport and A. Spanyi, “Digital Transformation Should Start with
Customers,” MIT Sloan Management Review, October 8, 2019, https://sloanreview.mit.edu/
article/digital-transformation-should-start-with-customers/.
36 CALIFORNIA MANAGEMENT REVIEW 62(4)
52. See R. Rumelt, Strategy, Structure, and Economic Performance (Cambridge, MA: Harvard
University Press, 1974).
53. Teece et al. (2016), op. cit.
54. See also, Schoemaker et al. (2018), op. cit.
55. Porter (1996), op. cit.
56. See also, F. Hacklin, J. Björkdahl, and M. Wallin, “Strategies for Business Model Innovation:
How Firms Reel in Migrating Value,” Long Range Planning, 51/1 (February 2018): 82-110.
57. M. Augier and D. J. Teece, “Dynamic Capabilities and the Role of Managers in Business
Strategy and Economic Performance,” Organization Science, 20/2 (March-April 2009):
410-421.
58. On leadership skills to navigate in uncertain market environments, see especially, P. J. H.
Schoemaker, S. Kupp, and S. Howland, “Strategic Leadership: The Essential Skills,” Harvard
Business Review, 91/1-2 (January-February 2013): 131-134.
59. See also, Schoemaker et al. (2013), op. cit.
Copyright of California Management Review is the property of California Management
Review and its content may not be copied or emailed to multiple sites or posted to a listserv
without the copyright holder's express written permission. However, users may print,
download, or email articles for individual use.