Martin Sköld

Digital innovation work is typically driven by short, rapid, and iterative development cycles involving flexible recombination of digital assets. While digital innovation often involves drawing on external assets, the literature is surprisingly silent on the role of sourcing relationships in this context. Interestingly, the IT outsourcing (ITO) literature, including recent work on strategic innovation and sourcing, predominantly understands sourcing relationships as evolving from transaction-based towards collaborative and innovation-oriented, with long-term relationship development a prerequisite for collaborative innovation between providers and their customers. This apparent temporality mismatch leads to the question of whether and how firms pursuing digital innovation through flexibility, speed, and scaling can innovatively leverage more dynamic sourcing relationships. We pursue this topic through an in-depth case study of an incumbent firm integrating dynamic and flexible sourcing practices into its digital innovation work. We identify a set of dynamic sourcing activities that allow onboarding sourcing partners directly into collaborative innovation work and then transitioning the collaboration to efficiency-focused deployment and contract-based scaling. Our study thus articulates the role of dynamic sourcing in digital innovation and disconfirms core assumptions about ITO relationship evolution.

Firms developing smart and connected products and service systems face challenges related to coordination and integration of multiple design, technical and organizational arrangements. Specifically, the co-existence of and coordination between several different design paradigms become salient when embedded software, sensors, and connectivity are employed to connect the firm’s products, services and operations with databases, application platforms and the firm’s product cloud. This study aims to explore and theorize integration and coordination of design, development, and production paradigms in response to organizational tensions arising in this context. We do so through a case study of a large global incumbent firm developing complex mechanical products engaged in creating integrated product and service systems enabled by digital innovation processes. Specifically, we identify the change of work practices relating to IT and digital services resulting in the emergence of new forms of organizational and technical arrangements that diverge from established firm-wide organizational structures and technical design principles. This divergence is counteracted by bridging the gap between bounded product arrangements and new emerging unbounded digital services in the pursuit to form new organizing logics of smart and connected products and service systems.

Firms in various industries experience how smart products that are based on digital technologies are changing the basis for competition and competitiveness. Particular challenges arise when established mechanical technologies are integrated with digital technologies to create new offerings. As firms increasingly embrace the challenge of smart product development, this particular challenge materializes as not only a product design and integration problem but also a technology-sourcing problem. To investigate a situation in which managers face challenges in leading smart product development, we conducted a case study of four global enterprises, drawing on internal and external documents, as well as in-depth interviews with managers and senior professionals in different positions. We found that established management models that are characterized by vertical relationships within industries need to be supplemented with a horizontal perspective. Based on these findings, we suggest that two established models for sourcing and integration of mechanical technologies need to be supplemented with two others for the integration and sourcing of digital technologies. Thus, management needs to handle four parallel models to succeed with smart product development. The article concludes with identified challenges and suggestions for how managers combine the two models.