Information Systems Frontiers (2023) 25:1017–1037

https://doi.org/10.1007/s10796-021-10112-0

Pathways to Digital Service Innovation: The Role of Digital

Transformation Strategies in Established Organizations
David Soto Setzke 1 & Tobias Riasanow 1 & Markus Böhm 1 & Helmut Krcmar 1

Accepted: 25 January 2021 / Published online: 12 March 2021

# The Author(s) 2021

Abstract
Digital technologies are radically changing how established organizations design novel services. Digital transformation (DT)
strategies are executed to manage the transition from product-centric to service-centric business models based on digital tech-
nologies. However, little is known about what configurations of DT strategies lead to successful digital service innovation (DSI)
in established organizations. We employ fuzzy-set Qualitative Comparative Analysis on a set of 17 case studies of DT strategies
from established organizations with different industry backgrounds. We identify several distinct configurations of DT strategies
that lead to successful and unsuccessful DSI. Based on these configurations, we deduce that the threat of digital disruption
negatively impacts an organization’s innovation activities. Furthermore, we find that strategic partnerships can be leveraged by
organizations that face an imminent threat of digital disruption while organizations with competitive advantages may rely on “do-
it-yourself” approaches. Lastly, we find that the involvement of a C-level executive is a necessary requirement for successful DSI.
Our results contribute to theory by integrating research on DSI and DT, providing a perspective on DSI failure, and employing a
configurational research approach that allows us to highlight interdependencies between factors as well as insights into the
individual factors. Furthermore, we provide actionable recommendations for executives.

Keywords Digital transformation . Digital service innovation . Radical service innovation . Digital transformation strategies .
Qualitative comparative analysis

1 Introduction These advancements enable higher accuracy and efficiency

to meet economic needs, and also tackle worldwide challenges
Service innovation plays a decisive role in our society. The and pave the way for sustainable societies (Pappas et al.
continuous refinement and development of radically new ser- 2018). This comprises a multitude of sectors and use cases:
vices have brought substantial advances to the individuum, for example, platform-based service concepts such as
companies, and society as a whole (Miles 2005). The wide- crowdsourced delivery have the potential to significantly re-
spread availability of digital technologies such as in-memory duce traffic and pollution in densely populated areas
databases, cloud computing, or distributed ledgers enables (Paloheimo et al. 2016). In developing economies and rural
organizations to radically transform value propositions. areas, financial services offered by so-called mobile money
operators enable financial access and inclusion for disadvan-
taged communities (Economides and Jeziorski 2017). In the
* David Soto Setzke health care sector, novel devices such as wearables or smart
david.soto.setzke@tum.de glasses improve the quality of treatments and patient care
(Klinker et al. 2020). To effectively design and develop these
Tobias Riasanow new services, established organizations need to embrace dig-
tobias.riasanow@tum.de
ital technologies and integrate them into their processes, orga-
Markus Böhm nizational structures, and working models, a process known as
markus.boehm@tum.de digital transformation (DT) (Vial 2019). While information
Helmut Krcmar systems (IS) research and organization/management theory
helmut.krcmar@tum.de (OMT) have a long history of exploring the relationship be-
1
tween technology and organizational change, the phenome-
Chair of Information Systems, Technical University of Munich,
non of DT is novel concerning the use of digital technologies
Boltzmannstr. 3, 85748 Garching bei München, Germany
1018 Inf Syst Front (2023) 25:1017–1037

(Besson and Rowe 2012). They differ from earlier technolo- degree of success (Berghaus and Back 2017; Matt et al.
gies in their inherent characteristics such as programmability, 2015). Against this background, we argue that combining
the homogenization of data, and their self-referential nature DT strategies and service innovation enables the filling of a
(Yoo et al. 2010). Thus, the transformational abilities of digital theoretical research gap as well as providing actionable guide-
technologies go further than merely automating processes and lines for practitioners. Thus, we investigate the building
satisfying information needs to enable fundamental changes in blocks of a DT strategy that lead to successful DSI. Since
a company’s business model (Besson and Rowe 2012). This these elements may depend on each other and contextual or
also implies that DT is not merely “old wine in new bottles” environmental factors, we employ configuration theory. As a
and learnings from earlier schools of thought may not neces- result, the research question that guides this paper is as
sarily apply to the logic of DT (Vial 2019). follows:
Extant research on service innovation acknowledges the
importance and game-changing nature of DT (Goduscheit RQ: What configurations of digital transformation strat-
and Faullant 2018; Barrett et al. 2015; Lusch and Nambisan egies lead to successful and unsuccessful digital service
2015). So far, research on DSI and DT has highlighted process innovation?
models for agile co-creation (Sjödin et al. 2020), organization-
al enablers in established companies with data-rich environ- To address this question, we first carried out exploratory,
ments (Troilo et al. 2017), and design frameworks for service in-depth case studies with 17 established organizations that
innovation in the context of smart product-service systems have recently formulated and launched a DT strategy. To sys-
(Zheng et al. 2018). Furthermore, there are articles about the tematically compare these cases and to derive configurations,
importance of digital service innovation (DSI) for including we chose the set-theoretic method of fuzzy-set Qualitative
service-disadvantaged communities (Srivastava and Shainesh Comparative Analysis (fsQCA) (Ragin 2008). Our analysis
2015), archetypes of service innovations in the sharing econ- yields two configurations for successful and three configura-
omy (Frey et al. 2019), and scaling contact-intensive services tions for unsuccessful DSI. Our study makes several contribu-
through the use of IT (Kleinschmidt et al. 2019). Various tions. First, we integrate the literature on DSI and DT strate-
scholars have explored the formation and execution of DT gies to paint a more complete picture of these complex and
strategies as well as the emergence of new executive roles, interrelated phenomena. Second, we add a perspective on DSI
such as the Chief Digital Officer (CDO), and their integration failure to the predominant focus on DSI success. Third, we
into the organization (Chanias et al. 2019; Hanelt et al. 2020; employ a configurational viewpoint to investigate our re-
Singh et al. 2019). search question, following recent calls for both DT research
However, little is known about how the building blocks of (Riasanow et al. 2019; El Sawy et al. 2010) and service
DT strategies impact service innovation. IS research has ex- (innovation) research (Goduscheit and Faullant 2018;
plored the characteristics of DT strategies and their impact on Kohtamäki et al. 2019). This enables us to highlight the inter-
innovation processes mostly through conceptual works and dependencies between the different DT strategy building
single or multiple-case studies (Matt et al. 2015; Hess et al. blocks and shed light on the individual factors and explore
2016; Chanias et al. 2019). We argue that these case studies their contributions to DSI at the same time. Fourth, we provide
are highly context-dependent, with limited generalizability. actionable insights for practitioners regarding the design of
Companies such as SAP or Siemens have successfully man- DT strategies.
aged to transition from a product-centric to a service-centric
business model using digital technologies. Both companies
designed and executed large-scale DT strategies to manage 2 Conceptual Background
this transition. However, the mere existence and formulation
of a strategy do not guarantee its success. Although General 2.1 Digital Service Innovation
Electric (GE) equipped many of its products with sensors,
built its own Internet of Things platform, and developed new The concept of service innovation emerged recently and as a
digitally-enabled services, its stock price continued to lan- result, it is still far from having an established common under-
guish which eventually led to the departure of its former standing among scholars (Goduscheit and Faullant 2018).
CEO. This suggests that the success of DSI depends on dif- Service-dominant (S-D) logic is a frequently used conceptual
ferent factors, which may not be uncovered through a single- framework that interprets service innovation as “the creation
case study alone. As can be observed in the mentioned case of of new value propositions by means of developing existing or
GE, a strategy that may have worked effectively for one orga- creating new practices and/or resources, or by means of inte-
nization may not easily be transferable to another. Research on grating practices and resources in new ways” (Skålén et al.
DT strategies, however, has so far mainly investigated how 2014). Concerning its degree of change, service innovation
DT strategies are formulated and executed, but not their can be categorized as either incremental or radical
Inf Syst Front (2023) 25:1017–1037 1019

(Goduscheit and Faullant 2018). While incremental innova- frameworks for DSI (Goduscheit and Faullant 2018; Troilo
tion is associated with only minor changes to the already et al. 2017; Sjödin et al. 2020), so far it has not shed light on
existing characteristics of a service’s value proposition, radical the role of DT strategies in achieving radical innovations.
innovation refers to an entirely new set of characteristics
(Johansson et al. 2019). For example, a tracking system for 2.2 Digital Transformation Strategies
door-to-door deliveries adds value through the use of digital
technologies to an already existing service and can, therefore, DT is “a process that aims to improve an entity by triggering
be classified as incremental service innovation (Cheng 2011). significant changes to its properties through combinations of
On the other hand, providers such as Amazon are information, computing, communication, and connectivity
implementing radical innovations through the use of internet technologies” (Vial 2019, p. 118). For the remainder of this
technologies by changing how the benefits of their services paper, we use organizations as the entity of interest.
are delivered (Cheng 2011). In highly competitive environ- Significant change refers, among other things, to the “creation
ments, pursuing radical service innovation has been identified of new value propositions that rely increasingly on the provi-
as a critical success factor for achieving high performance and sion of services” (Vial 2019, p. 125). To trigger or to enable
service quality (Sok and O'Cass 2015). Recently, the wide- DSI, established organizations (so-called brick-and-mortar
spread availability of different digital technologies has led to a firms) design large-scale DT strategies (Matt et al. 2015;
multitude of startups disrupting traditional markets and, there- Hess et al. 2016). This type of strategy has appeared relatively
fore, increasing competition. Thus, established organizations recently and complements an organization’s existing reper-
are challenged to engage in radical service innovation that toire of IT and digital business strategies. While these strate-
builds on the distinctive features of digital technologies gies focus on managing a firm’s internal IT infrastructure with
(Lusch and Nambisan 2015; Yoo et al. 2012; Sklyar et al. little to no impact on innovation or potential future business
2019). opportunities based on digital technologies, DT strategies fo-
Several scholars have highlighted the role of digital tech- cus on the transformational steps needed to realize future op-
nologies in service innovation (Lusch and Nambisan 2015; portunities (Matt et al. 2015). In this paper, we suggest DT as
den Hertog 2000; Goduscheit and Faullant 2018). Extant re- an appropriate antecedent for DSI in established organiza-
search has also demonstrated that technology is a fundamental tions. In particular, we focus on DT strategies that aim to
enabler of service innovation (Troilo et al. 2017), and, in par- induce the process of DT at an organizational level (Matt
ticular, a major driver for achieving radical service innovation et al. 2015). Research on DT strategies is still in its infancy,
in established organizations (Goduscheit and Faullant 2018). due to its relatively recent emergence and focuses mainly on
A major focus of extant research is the process of DSI. The the formation and execution of strategies (Vial 2019; Hanelt
challenge of managing efficient value co-creation can be tack- et al. 2020). DT strategies are often initially shaped by sepa-
led by using an agile micro-service innovation approach rate sub-communities in an organization (Chanias and Hess
(Sjödin et al. 2020). To ensure successful cooperation and 2016). Management then tries to align these efforts to the
governance, relational teams that integrate knowledge from already existing strategy, leading to a highly dynamic process
both providers and customers are required. To connect data- that iterates between learning and doing (Chanias and Hess
rich organizational environments with opportunities for ser- 2016; Chanias et al. 2019). In the initial stage of the transfor-
vice innovation, data density processes need to be implement- mation, companies may choose a centralized or a
ed (Troilo et al. 2017). To make these processes more effec- decentralized approach for implementing the strategy
tive, companies are required to design a customer-centric, (Berghaus and Back 2017; Singh et al. 2019). This often in-
data-oriented organizational culture, and to implement strong volves a Chief Digital Officer (CDO) who leads and initiates
support from senior management (Troilo et al. 2017). Various the transformational endeavor (Haffke et al. 2016). Depending
articles have also investigated the characteristics and benefits on the organization’s strategic focus, the specific tasks of the
of DSI. In particular, it can be used to include service- CDO and their anchoring in the organization may vary. For
disadvantaged communities, for example, in the context of example, CDOs that fulfill the role of change agents may
healthcare or finance (Srivastava and Shainesh 2015; predominantly rely on formal coordination mechanisms, such
Economides and Jeziorski 2017). Depending on the specific as cross-functional steering committees (Singh et al. 2019).
context, there are also distinct archetypes of innovation (Frey Innovation-focused CDOs, on the other hand, may focus more
et al. 2019). While DSI provides various benefits for organi- on informal coordination mechanisms, such as brainstorming
zations, it also comes with serious challenges since it “requires or ideation sessions (Singh et al. 2019). When designing DT
a change in managing provider-customer relationships by strategies, organizations often have a wide range of options to
adopting new and innovative co-creation approaches” choose from (Hess et al. 2016). These include questions of
(Sjödin et al. 2020, p. 479). While extant literature provides leadership (who is in control of DT), organizational structures
multiple insights into organizational enablers and process (how should organizational structures adapt), and outsourcing
1020 Inf Syst Front (2023) 25:1017–1037

(what needs to be done by the organization itself and what can organization due to a decrease in information decay, caused
be done by partners/service providers). by the exchange of information between different levels of
The transformative nature of digital technologies poses the hierarchy (Mihalache et al. 2014). Thus, this may also enable
question of how to adapt organizational structures, i.e. the a higher degree of local control over IT systems since these
concept of structural separation. Several scholars posit that can more easily be adapted to the individual needs of different
existing organizational structures are often not an adequate internal stakeholders (Huang et al. 2010). Furthermore, for
environment to explore digital innovation and exploit its busi- locally organized customer relationships, centralization leads
ness potential (Teece 1996; Yoo et al. 2012). What changes to corporate dissonance which is often resolved by shifting the
should be made and how is heavily debated in different liter- responsibility to lower-level managers since they are closer to
ature streams (Dixon et al. 2017; Haffke et al. 2016; Markides the customer (Sklyar et al. 2019). On the other hand, IS
2013). Separating different parts of the organization not only scholars oftentimes recommend centralized decision-making,
from an organizational structure point of view but also phys- especially for DT strategies (Horlacher et al. 2016). Recently,
ically likely favors innovation-related activities (de Visser there is increasing evidence of the effectiveness of introducing
et al. 2010). On the other hand, organizations may choose to CDOs (Singh and Hess 2017). They are usually part of the
fully incorporate new activities into existing corporate struc- management board since they need sufficient opportunities to
tures either without or with only minor organizational chang- influence DT-related decisions. However, in organizations in
es, resulting in lower restructuring efforts. Close integration which business departments are in charge of innovation man-
with the core business can lead to increased collaboration agement, CDOs may not be needed or may even have a det-
between business units and thus favor synergies between old rimental effect (Leonhardt et al. 2018). Oftentimes, DT strat-
and new parts of an organization. Matt et al. (2015) suggest egies are also managed by a cross-functional steering commit-
that for smaller changes in products or processes, integration tee of key executives, sometimes called a “digital committee”
into existing corporate structures may be favorable. For sub- (Haffke et al. 2016; Chanias et al. 2019). This committee often
stantial changes, however, separate subsidiaries such as new replaces the role of the CDO, sharing the responsibilities
business units or spin-offs should be chosen. New organiza- among the members, but may also be formed in parallel
tional units are often implemented as so-called digital innova- (Haffke et al. 2016). A smaller number of people who are
tion labs (DILs). These are separate units, intended to bundle involved in decision-making is associated with an increase
an organization’s innovation activities and capabilities (Hund of decision-making speed and decisions that challenge the
et al. 2019). Spin-offs, however, are entirely separated from status quo and therefore lead to higher innovation perfor-
the main organization’s corporate structure and are often mance (Teece 1996). Furthermore, a centralized approach also
completely autonomous entities. This may increase decision- enables stricter global control over IT systems (Brown and
making speed as well as response times to market changes. As Grant 2005). This, in turn, leads to a reduction of uncertainty
an additional benefit, separation also prevents spillovers of through earlier planning, without the need to involve several
corporate culture, policies, and systems that hinder innovation decision-makers or to follow decision processes that may be
activities (Sklyar et al. 2019). Still, spin-offs pose new chal- too complex (Reynolds et al. 2010). In the context of DT,
lenges to the main organization. Embedding them may result centralized decision-making may also lead to higher digital
in difficulties, especially when trying to integrate them again innovation performance when an organization is faced with
in the future (Dixon et al. 2017). Furthermore, separating in- a highly turbulent environment (Leonhardt et al. 2018). In
novation activities from the main organization may also lead summary, while extant research agrees that the locus of
to failure in synergy exploitation and a risk of missing collab- decision-making is a success factor for organizational trans-
oration between the spin-off and relevant business units from formation, it differs in how centralized it should be.
the main organization (Markides 2013). Typically, established organizations will have exten-
Furthermore, when designing a DT strategy, organizations sive know-how on their existing products and processes,
need to decide on the locus of authority to plan concerning the but their capabilities for executing DSI will vary. Equally,
execution of such decisions. Following Mihalache et al. they have different options for acquiring these capabili-
(2014) and Wong et al. (2011, p. 1210), the centralization of ties: they may opt to acquire these capabilities internally
decision-making “occurs when decision-making power re- (“insourcing”) or engage in strategic outsourcing through
sides in the hands of a selected few at the upper levels of an alliances and partnerships to externally acquire the neces-
organization, whereas decentralization occurs when decision- sary innovation capabilities (Vial 2019). To insource, or-
making power involves individuals at various organizational ganizations may choose to train their established work-
levels”. Various organizational science scholars highlight the force to turn them into co-creators of DT (Müller and
advantages of decentralized decision-making (Mihalache Renken 2017) or they may extend their workforce by
et al. 2014; Jansen et al. 2006). Such an approach may hiring employees that bring the required capabilities into
strengthen the responsiveness and flexibility of an the organization (Teece 1996). Additionally, acquiring
Inf Syst Front (2023) 25:1017–1037 1021

other organizations may have a positive effect on innova- analysis does not consider other factors such as outsourcing
tion processes if the acquired companies have relevant or structural separation.
digital innovation capabilities (Hildebrandt et al. 2015).
However, the importance of outsourcing and building 2.3 Research Framework
strategic partnerships for DSI has grown over the last
few years since building up capabilities internally may In this paper, we focus on explaining what combinations of
not be feasible for many organizations. Diverse entities DT strategies lead to successful and unsuccessful DSI. As DT
such as “competitors, suppliers, customers, end-users, strategy building blocks, we choose three different elements
universities, or public research institutions” may serve as building on the presented literature review: structural separa-
partners for DSI (Hottenrott and Lopes-Bento 2016, p. tion, strategic outsourcing, and the centralization of decision-
778). Engaging in partnerships leads to higher dynamic making. Furthermore, we include a contextual variable: the
adjustability and scalability of a firm’s assets and compe- threat of digital disruption for a specific company by new
tencies (Bouncken and Fredrich 2016; Hottenrott and market-entrants (Skog et al. 2018). DT strategies are formu-
Lopes-Bento 2016). Strategic outsourcing played a signif- lated and executed to counter this threat which is why we
icant role in LEGO’s digital strategies by complementing expect these strategies to be different depending on how
their existing capabilities (El Sawy et al. 2016). threatened companies are in their respective industries (Skog
Furthermore, collaboration helps to reduce internal resis- et al. 2018; Leonhardt et al. 2018). For instance, retailers are
tance to innovation as well as creating an agile mentality already suffering the consequences of digital disruption
and working culture (Piccinini et al. 2015). Still, a high (Gilbert 2015). However, other industries such as highly spe-
collaboration intensity may also lead to a negative impact cialized manufacturing might not perceive any digital disrup-
on innovation performance (Hottenrott and Lopes-Bento tion because they are subject to a low level of competition. We
2016). In particular, long partnership durations affect per- argue that due to the complexity of DT, there may not be only
formance negatively since they “might drive misalign- one path to success. Furthermore, there may be multiple inter-
ment of partners, breed strong conflicts, or opportunism dependencies between the building blocks of a DT strategy:
tactics about value capture” (Bouncken and Fredrich for example, a high degree of strategic outsourcing might
2016, p. 3588). Furthermore, organizations disclose inter- require better and stricter control through centralized
nal knowledge to external parties, which carries certain decision-making to keep track of the different implementation
risks with it. Therefore, the decision of how and to what efforts. On the other hand, a low degree of structural separa-
extent to engage in strategic outsourcing and how this tion may favor a decentralized approach that allows better
affects innovation performance depends on different local control.
factors. To answer the research question at hand, we adopt config-
So far, the literature has hardly investigated the effective- uration theory as our theoretical perspective. Configuration
ness of DT strategies and their influence on the desired theory proposes that “organizational phenomena can best be
outcomes, such as the effectiveness of service innovation, understood by identifying distinct, internally consistent sets of
at all. This limitation is also acknowledged by scholars: firms and their relationships to the environment and perfor-
Berghaus and Back (2017, p. 14), for example, state that mance outcomes” (Ketchen et al. 1997, p. 224). Traditional
they “cannot make any remarks on one approach being variance-based theories postulate that predictor variables are
more successful than another”. Matt et al. (2015, p. 342) both necessary and sufficient conditions for predicting a cer-
noted that research on DT strategies would benefit from tain outcome (Liu et al. 2015; El Sawy et al. 2010).
“comparing digital transformation strategies across differ- Furthermore, they assume that the relationship between the
ent industries […] in order to increase success rates”. DT outcome and a predictor variable is always symmetric (Liu
strategies are often regarded as successful if they are imple- et al. 2015). Configuration-based theories allow for asymmet-
mented as planned, but without measuring the results (Singh ric relationships between predictors and the outcome since
and Hess 2017; Hess et al. 2016). A notable exception is the they “view phenomena as clusters of interconnected elements
work of Leonhardt et al. (2018), who use a quantitative that must be simultaneously understood as a holistic integrated
measure for assessing digital innovation performance. pattern” (El Sawy et al. 2010, p. 838). In particular, this means
Their results highlight the importance of centralized that a predictor could be sufficient for a specific outcome, but
decision-making in turbulent environments and the poten- not necessary. It also means that the interplay of different
tially detrimental effects of CDOs when business depart- predictors leads to a specific outcome and that this interplay
ments are responsible for digital innovation. Furthermore, can be depicted through different configurations of predictors.
they show that turbulent environments generally favor in- This follows the concept of equifinality, which states that a
novation performance, which may suggest a positive effect system can reach a specific state through different paths and
of competitive threats in the context of DT. However, the different initial conditions (Gresov and Drazin 1997). The
1022 Inf Syst Front (2023) 25:1017–1037

characteristics of configuration-based theories make them es- aimed to find established companies to which we refer as
pecially suited to build middle-range theories in specific con- companies whose key products and services were established
texts (El Sawy et al. 2010; Park et al. 2017). While variance- at the latest shortly after the dot-com bubble and who are still
based approaches require the researcher to formulate specific active in this market. Second, the company needed to already
hypotheses regarding the relationships of the variables in have launched a DT strategy. Third, this strategy needed to be
question beforehand, configurational theories allow for a more aimed at developing DSI and offering digital services in addi-
exploratory research design. The researcher can identify po- tion to existing products and services. We identified initial
tentially relevant theoretical constructs based on relevant lit- candidate companies through an internet search and contacted
erature, distill patterns leading to a specific outcome, and af- representatives with the request to carry out a case study.
terward return to the literature by theorizing based on the Eventually, we were able to carry out exploratory, in-depth
identified patterns (Park et al. 2017). We propose that this case studies with 17 organizations from different industries.
approach is especially well-suited to the context of our re- Table 5 in the appendix provides an overview of the cases
search question since recent literature on the relatively new with additional information. The interviewees included posi-
field of DT strategies provides plenty of avenues for explor- tions such as executives (CEO, CIO, CDO, and others), pro-
atory research designs. Figure 1 summarizes our proposed ject managers, or business unit leaders. In most of the cases,
research framework. By using a Venn diagram, we denote top executives at the organization provided us with a set of
the configurational perspective that we adopt to answer our interviewees who were involved in the respective DT strate-
research question. On the left side, we show the different gies. These interviewees, in turn, oftentimes suggested follow-
antecedents that interact with each other to account for the up interviews with other employees. We employed semi-
outcome on the right side of the figure. structured interview guidelines covering the central issues of
the respective DT strategies. At the same time, we gained
insights during the interviews through follow-up questions
3 Research Approach that were not directly covered by the initial guideline. As an
initial data source, several organizations granted us access to
3.1 Data Collection their confidential materials such as internal reports, strategy
presentations, or market analyses, or anonymized or aggregat-
We employed a comparative case analysis approach to answer ed customer data. Finally, we consulted publicly accessible
our research question to benefit from advantages such as being material such as company websites to triangulate our findings
able to use additional data from the cases during and after from the interviews and document analyses.
analysis in an iterative way (Ragin 2008). We selected a pur- Our data analysis approach followed both an inductive and
posive theoretical sampling strategy based on certain criteria a deductive approach. First, we engaged in open coding of our
since our goal was to investigate cases “that exhibit the phe- data sources to identify potential antecedents of successful or
nomenon at hand in order to look for commonality (i.e. the unsuccessful DSI (Corbin and Strauss 1990). The coded ma-
presence or absence) of the outcome in the configurations of terial was then clustered following an axial coding approach,
conditions across cases” (Tóth et al. 2017, p. 194). First, we resulting in higher-order themes. Afterward, we performed

Fig. 1 Research framework

Inf Syst Front (2023) 25:1017–1037 1023

backward coding to cover potentially overlooked themes by Procedures for calibration typically vary with the sample
engaging in an iterative coding process. Finally, we linked our size. Analyses with large samples are most prevalent in IS
higher-order themes to our eventual research framework. We and business and management research and are typically
used the qualitative data analysis software Atlas.ti during our combined with questionnaire-based surveys or other
coding process. Furthermore, we carried out respondent vali- quantitative data (Soto Setzke et al. 2020; Wagemann
dation of our findings from the case organizations. We per- et al. 2016). Calibrating this data is often straightforward
formed a member-check procedure by presenting our insights and includes choosing appropriate thresholds for Likert
and interpretations of the cases to selected interviewees (Lee scales or quantitative data. Smaller sample sizes, on the
and Baskerville 2003). Usually, this was followed by valuable other hand, typically involve a considerable amount of
exchanges of perception that led to additional knowledge and qualitative, unstructured data. Calibration of this data is
insights used in our main analysis. quite challenging since few guidelines can be followed
and the results may suffer from subjectivity (de Block
3.2 Fuzzy-Set Qualitative Comparative Analysis and Vis 2019). Therefore, several methodological articles
providing guidelines regarding the calibration of qualita-
To derive DT strategy configurations, we employed fsQCA, a tive data have been published over the last years (see,
set-theoretic configurational approach. While fsQCA is well e.g., Basurto and Speer (2012); Tóth et al. (2017);
suited for small to medium-sized samples (11–50 cases) as Nishant and Ravishankar (2020)).
well as for large samples (>50 cases), its aims and potential For this paper, we adopted the methodological guidelines
contributions may vary (Greckhamer et al. 2018). When per- proposed by Basurto and Speer (2012) and closely followed
formed on large samples, it can be used for both theory build- an exemplary application by Iannacci and Cornford (2018).
ing and testing with the possibility to draw statistical infer- To calibrate data collected through interviews, they suggest
ences (Greckhamer et al. 2013). Small samples, on the other the use of “theoretical ideals” as “the best imaginable case in
hand, are particularly well-suited for inductive reasoning and the context of the study that is logically and socially possible”
theory building due to a higher familiarity with the cases (Basurto and Speer 2012, p. 166). We defined two ideal cases
(Greckhamer et al. 2013). It should furthermore be noted that per condition: a “fully in” case that represents definite full
fsQCA uses an approach known as “modest generalization” membership in the set and (fuzzy value of 1) a “fully out” case
(Berg-Schlosser et al. 2009, p. 12). This means that a research- that represents definitive non-membership (fuzzy value of 0).
er can build propositions based on an fsQCA and then apply Based on these ideal types, we defined a threshold condition
them to cases sharing similar characteristics (Berg-Schlosser that served as our indicator for deciding for or against inclu-
et al. 2009). On the one hand, this may be a more limited sion in the set. Lastly, we defined how much a case could
approach than the one used by regression-based methods since deviate from a “fully in” or “fully out” case without passing
it is more difficult to generalize based on a whole population. the threshold. Based on these definitions, we assigned fuzzy
On the other hand, this approach is also more robust than values 0.33 and 0.66, thus using a fuzzy 4-value scheme (Tóth
drawing generalizations from multiple-case studies with even et al. 2017). Based on the summary statements of the cases,
smaller datasets. In our study, we opted for a small-sized sam- each case can be calibrated according to the previously pro-
ple since we were mainly interested in theory building due to posed ideal types. In the following, we explain our rationale
the scarcity of previous research. FsQCA consists of three for creating “fully in” and “fully out” cases as well as the
subsequent steps: assignment of fuzzy-set membership scores threshold conditions.
to cases (also known as calibration), identification of neces- Structural separation: as our ideal “fully in” case, we
sary conditions, and identification of sufficient defined an organization that completely separated its innova-
configurations (Ragin 2009). We used the fsQCA R package tion activities into one or more spin-off organizations. To dis-
to complete all three steps (Duşa 2019). Table 1 provides an tinguish the relationship between the main organization and
overview of our causal conditions and the outcome along with spin-offs from partnerships with external organizations, we
definitions and selected key sources based on the framework account for the fact that these innovation activities may still
derived in the preceding section. Although the threat of digital partly be coordinated by the main organization. For our “fully
disruption cannot be actively controlled by an organization, out” case, no new structures should have been created, neither
we include it as an element of potential configurations since in the form of spin-offs nor internal units. As a threshold, we
we expect them to vary depending on the degree of the threat. chose the condition that spin-offs were created since they de-
FsQCA uses fuzzy-set membership scores ranging be- mark a major structural separation from the core business
tween 0 and 1 to determine the degree to which a case is a (Corley and Gioia 2004). Therefore, smaller structural chang-
member of a set (Ragin 2008). For each case and each es such as creating new digital business units were counted as
dimension/outcome, a fuzzy-set membership score is being more out than in, while creating spin-offs that were still
assigned during the calibration phase (Ragin 2008).
1024 Inf Syst Front (2023) 25:1017–1037

Table 1 Overview of coding elements

Element Theoretical construct Definition Key sources

Causal conditions Structural separation Separation of innovation-related activities in- Matt et al. (2015), Corley and Gioia(2004),
to distinct organizational units Teece (1996)
Centralization of decision-making “Decision-making power resides in the hands Jansen et al.. (2006), Mihalache et al. (2014),
of a selected few at the upper levels of an Wong et al. (2011), Guadalupe et al.
organization” (Wong et al. 2011, p. 1210) (2014)
Strategic outsourcing Reliance of an organization on external Hottenrott and Lopes-Bento (2016), Teece
partnerships to carry out service innovation (1996), Vial (2019), Bouncken and
Fredrich (2016)
Threat of digital disruption Threat to the core business of an organization Skog et al. (2018), Matt et al. (2015),
posed by new/established market entrants Leonhardt et al. (2018)
using digital technologies
Outcome Digital service innovation Successful introduction of new services based Barrett et al. (2015), Goduscheit and Faullant
on digital technologies (2018)

mainly controlled by the main organization were calibrated as Digital service innovation: Our “fully in” case represents
more in than out. radical service innovations that are new to the respective in-
Centralization of decision-making: in our ideal “fully in” dustry while our “fully out case” represents cases where ulti-
case, decision-making is entirely centralized in one executive mately, no new services were launched. Since we are interest-
at the highest management level, i.e. the “C-suite”. Our “fully ed in radical innovation, we decided to use the notion of rad-
out” case is characterized by a team lead or no specific role at ical innovation as our threshold. If new services had been
all. Building upon these cases, we defined the threshold to introduced but they represented mostly incremental improve-
indicate whether decision-making is done in the C-suite or at ments of already existing service concepts, they were coded as
a lower management level (Guadalupe et al. 2014). Therefore, more out than in. On the other hand, if the organization intro-
cases, where a manager or a business unit leader is responsi- duced rather radical services, we classified them as more in
ble, were coded as more out than in. Accordingly, cases where than out. Accordingly, for our outcome, we define radical
a team of different C-level executives and, potentially, man- innovation as successful and incremental innovation as
agers were responsible, were coded as “more in than out,” unsuccessful.
since these are part of the C-suite but represent a lower degree To facilitate the coding process, we prepared summary
of centralization. statements for each case along with relevant quotes for each
Strategic outsourcing: Our “fully in” case represents or- dimension. It should be noted that some distinctions may seem
ganizations that rely completely on external partnerships subjective and difficult to code, particularly the fine-grained
while our “fully out” case represents organizations that do edge cases between fully and more out than in as well as fully
not rely on external partnerships at all. Since partnerships in and more in than out. To mitigate this potential imprecision
are very common for implementing DT strategies (Vial introduced by subjectivity, two authors and another researcher
2019), we concluded that, apart from the “fully out” case, independently calibrated each condition and the outcome for
partnerships would very likely be a part of the majority of each case, using the ideal types and the respective fuzzy
DT cases. Thus, we decided to let the threshold indicate to values. Afterward, we assessed interrater reliability for each
what degree partnerships are used. We coded cases as more dimension among all cases by using Krippendorff’s alpha, a
out than in if partnerships were used only to implement certain measure that checks for chance coincidences (Krippendorff
key aspects, but the main effort was still done by the main 2018). After coding, interrater reliability exceeded the most
organization. Accordingly, if the effort was distributed differ- conservative threshold of 0.8 for all dimensions. Still, differ-
ently, we coded the case as more in than out. ences in assigned membership scores remained. The re-
Threat of digital disruption: In the “fully in” case, orga- searchers then resolved these differences through oral discus-
nizations face an imminent threat of being disrupted while in sion (Krippendorff 2018). For the case Kappa and the condi-
the “fully out” case, they do not face any considerable threats tion “Centralization of decision-making”, for example, two
of disruption in the foreseeable future. We decided to use the researchers assigned a fuzzy value of 0.33 and one assigned
timeframe of potential disruption as a threshold: organizations a value of 0.66. The discussion then revolved around a quote
that may face disruption in the long term (5–10 years) were in which the project lead of the DT strategy stated that he
coded as more out than in, while organizations, where disrup- reports to the executive board of Kappa to ensure support
tion may be relevant in the short term (3–5 years), were coded for the strategy. During coding, the third researcher concluded
as more in than out. that therefore, at least one C-level executive was responsible
Inf Syst Front (2023) 25:1017–1037 1025

for the strategy (i.e., a fuzzy value of 0.66). However, the two described before, raw consistency assesses the degree of
other researchers argued that the project lead was merely how reliably a configuration results in the outcome and can
reporting and ensuring support to secure resources for strategy roughly be compared to the notion of significance in regres-
implementation, but the main responsibility was still assigned sion analysis (Park et al. 2017). PRI consistency is an alterna-
to the project lead (i.e., a fuzzy value of 0.33). Eventually, the tive consistency measure that “eliminates the influence of
third researcher was convinced and all three agreed on using a cases that have simultaneous membership in both the outcome
fuzzy value of 0.33. and its complement” (Park et al. 2017). While there is current-
To provide transparency, we provide additional informa- ly no widely accepted threshold of PRI consistency, we
tion on the coding process in the appendix. Appendix Table 6 followed the guidelines from Schneider and Wagemann
provides a detailed overview of our ideal cases and the condi- (2012) and apply a threshold of 0.65. Having reduced the truth
tions that were used to assign fuzzy values based on extant table by applying thresholds of frequency, raw consistency,
literature along with the value of Krippendorff’s alpha for and PRI consistency, we applied the Quine-McCluskey algo-
each dimension. An illustrative example of how fuzzy-set rithm to further reduce and simplify the remaining truth table.
membership scores were assigned to the condition “strategic Afterward, we were left with configurations of conditions that
outsourcing” is shown in Appendix Table 7. Furthermore, lead to our outcome in question (Ragin 2008).
Appendix Table 8 shows an example of how case Rho was Finally, researchers should test for predictive validity,
calibrated. A full overview of membership scores for all cases which “examines how well the model predicts the outcome
and dimensions can be found in Appendix Table 9. All other in additional samples” (Pappas et al. 2017, p. 674; Woodside
data is available upon request from the authors. 2014). While a model may exhibit high values of consistency
Necessary condition analysis reveals conditions that are and coverage for a given sample, this does not necessarily
present in every case; thus, resulting in a specific outcome. mean that it is also able to make good predictions. To perform
More specifically, this means that the fuzzy-set membership the test, the sample is first divided into a subsample and a
score of the outcome in each case is less than the score of the holdout sample. The researcher then runs the analysis against
necessary condition (Schneider and Wagemann 2012). To be the subsample and recodes all resulting configurations as a
considered a necessary condition, a consistency threshold of at new variable. Each configuration variable is then plotted
least 0.9 should be reached (Schneider and Wagemann 2012). against the outcome of interest using the holdout sample. To
Consistency refers to the degree to which cases with the same guarantee high predictive validity, the resulting consistency
conditions share the same outcome (Ragin 2008). and coverage should not contradict the values from the solu-
Furthermore, the coverage value (i.e., the proportion of the tion (Pappas et al. 2017).
outcome covered by a specific condition) should be assessed
for each necessary condition to determine its empirical rele-
vance (Schneider and Wagemann 2012). While necessary 4 Results
conditions are always present when a specific outcome occurs,
the condition could also be present while the outcome is not 4.1 Necessary Condition Analysis
(Ragin 2008). Thus, we proceeded to identify sufficient
configurations. The results of our necessary condition analysis (Table 2)
Sufficiency analysis reveals configurations of conditions reveal that centralization of decision-making is the only
that guarantee a specific outcome if present in a case (Ragin necessary condition for achieving DSI since it exceeds
2008). Unlike necessary conditions, however, a specific con- the consistency threshold of 0.9 and, with a coverage level
figuration does not always have to be present to produce the of 0.7, explains a considerable part of the outcome (Ragin
outcome. Thus, there can be multiple configurations leading 2008). Apart from this, no other condition reaches the min-
to the same outcome. We first constructed two truth tables imum threshold of 0.9. We thus conclude that centralized
showing all 16 (2k, where k equals the number of conditions) decision-making needs to be part of a DT strategy to suc-
possible configurations of conditions for both outcomes (see ceed and that it is the only necessary condition from our set
Tables 10 and 11 in the appendix). Afterward, we reduced the of candidate conditions. However, even if centralized
table by applying the threshold of frequency, raw consistency, decision-making is in place, DT strategies can still fail.
and PRI consistency. Since our sample of 17 cases can be Thus, we now proceed to present the results of the suffi-
classified as medium-sized, we employed a frequency thresh- ciency analysis.
old of one (Greckhamer et al. 2013). Thus, configurations that
are represented by at least one empirical observation are kept 4.2 Sufficiency Analysis
in the truth table. For the raw consistency threshold, we chose
a value of 0.85, exceeding the widely accepted conservative Our sufficiency analysis yielded an intermediate solution with
threshold of 0.75 (Schneider and Wagemann 2012). As five configurations that explain successful and unsuccessful
1026 Inf Syst Front (2023) 25:1017–1037

Table 2 Necessary conditions for digital service innovation

Conditions Successful digital service innovation Unsuccessful digital service innovation

Consistency Coverage Consistency Coverage

Structural separation 0.61 0.71 0.65 0.63

Centralization of decision-making 1.00 0.70 0.86 0.50
Strategic outsourcing 0.71 0.67 0.78 0.60
Threat of digital disruption 0.39 0.65 0.56 0.77
~Structural separation 0.68 0.70 0.70 0.60
~Centralization of decision-making 0.29 0.72 0.48 1.00
~Strategic outsourcing 0.58 0.76 0.57 0.62
~Threat of digital disruption 0.86 0.70 0.74 0.50

~ logical NOT; Necessity consistency threshold: 0.9

DSI. When deriving the intermediate solution, we employed considered acceptable in QCA research (Ragin 2008).
the simplifying assumption that centralized decision-making Similarly, our solution coverage levels of 0.75 and 0.52 show
has a positive impact on the outcome and a negative impact on that we can explain a considerable share of both outcomes.
the negative outcome. All five resulting configurations are As Table 3 shows, we identified two configurations for DT
displayed in Table 3. Following the fsQCA convention, black strategies that lead to successful DSI. The first configuration (A1)
circles denote the presence of a condition while crossed-out represents organizations that achieve DSI by organizing innova-
circles indicate its absence. Blank spaces indicate that the tion activities in spin-offs, involving C-level executives in
condition is not relevant for explaining the outcome. governing their strategy, and relying on partnerships to imple-
Furthermore, large circles denote core conditions with high ment the strategy. For this configuration, it does not matter
empirical relevance while small circles represent peripheral whether the organization is facing a threat of digital disruption.
conditions that surround core conditions (Fiss 2011). Our pro- The second configuration (A2) depicts organizations where C-
posed solutions show consistency levels of 0.91 and 0.92, level executives are involved in DT strategy governance.
which are well above the level of 0.8 which is commonly However, they implement aspects of the DT strategy mostly on

Table 3 Sufficient configurations for digital service innovation

Successful digital service innovation Unsuccessful digital service innovation
Causal conditions
A1 A2 B1 B2 B3

Structural separation

Centralization of decision-making

Strategic outsourcing

Threat of digital disruption

Consistency 0.87 0.99 1.00 0.89 1.00

Raw coverage 0.46 0.54 0.17 0.34 0.26

Unique coverage 0.21 0.29 0.04 0.21 0.13

Solution consistency 0.91 0.92

Solution coverage 0.75 0.52

Black circle presence of a condition, Crossed-out circle absence of a condition, Empty row may be either present or absent, Large circle core condition,
Small circle peripheral condition; Raw consistency cut-off: 0.85; PRI consistency cut-off: 0.65; Frequency cut-off: 1
Inf Syst Front (2023) 25:1017–1037 1027

their own and are not facing any imminent threat of digital dis- 5 Discussion
ruption. Here, it does not matter whether the organization orga-
nizes its innovation activities in spin-offs. 5.1 Observations and Patterns across Configurations
We found three distinct configurations for unsuccessful DSI.
The first configuration (B1) shows organizations where team/ Our analyses reveal that centralization of decision making is a
business unit leads or managers are mostly responsible for necessary condition for successful DSI and that there are mul-
governing the strategy as opposed to C-level executives. tiple configurations of DT strategies that lead to either suc-
Additionally, these organizations face an imminent threat of dig- cessful or unsuccessful DSI. We will now highlight certain
ital disruption and conduct innovation activities in spin-offs. The particularities and patterns that can be observed across the
second configuration (B2) depicts organizations that also face an identified configurations and compared them with observa-
imminent threat of digital disruption and additionally implement tions from previous research. Throughout our discussion, we
key aspects of the DT strategy mostly on their own as opposed to will refer to the configurations by using the codes introduced
relying on partnerships. As in B1, these organizations have a in Table 3 (A1, A2, B1, B2, and B3).
high degree of structural separation. The third configuration Interestingly, our results show that an imminent threat of
(B3) combines the core conditions of B1 and B2: low degrees digital disruption is a decisive element leading to both success
of centralized decision-making and strategic outsourcing and a and failure. While the absence of this threat is associated with
high degree of threat of digital disruption. success in one configuration (A2), the threat’s presence is a
Furthermore, we tested for predictive validity to identify part of all three configurations associated with failure (B1, B2,
whether our model can be used to predict the outcome in and B3). Previous research shows that the threat of disruption
additional samples (Woodside 2014; Pappas et al. 2016). To or competitive pressure can impact an organization’s ability
do so, we randomly divided the sample into a subsample and a both positively (Amabile et al. 2002; Sheremata 2000) and in
holdout sample. We then performed the analysis for the sub- an ambivalent way, depending on the context of the compet-
sample and tested the result against the holdout sample. itive situation (Beneito et al. 2015; Ismail 2015; Amabile et al.
Table 4 demonstrates that the patterns obtained from the first 2002). The results from our analysis depict competitive pres-
analysis consistently indicate successful and unsuccessful sure in a rather negative way. For instance, case company Rho
DSI. We then plotted all four models against the outcome states that they are under a high amount of pressure since their
variable. Figure 2 illustrates the findings for testing model 1 “current business is stopping in a few years” and their “biggest
against the outcome of successful DSI with the holdout sam- worry” is whether they can transform their core business fast
ple and exhibits high degrees of consistency (0.966) and cov- enough. However, their DT initiative has been focused rather
erage (0.47). Similarly, Fig. 3 illustrates the results of plotting on internal process innovation and less on developing and
model 3 against the negation of the outcome and shows high introducing new business models and services, thus increasing
consistency (0.75) as well as coverage (0.21). We, therefore, pressure. Case company Kappa, a traditional business-to-
conclude that the highly consistent models from the subsam- business hardware seller, is also facing severe competition
ple are consistent predictors for the holdout sample. Detailed resulting in drastically reduced turnover due to rival online
results are available upon request. platforms. However, their online platform is focused on

Table 4 Complex configurations indicating successful and unsuccessful digital service innovation

Consistency Raw coverage Unique coverage

Models from subsample for successful DSI

SSE*CDM*~TDD 0.89 0.61 0.23
CDM*~SOS*~TDD 0.99 0.54 0.16
Overall solution consistency 0.91
Overall solution coverage 0.77
Models from subsample for unsuccessful DSI (negation)
SSE*~CDM*~SOS*TDD 1.00 0.49 0.39
~SSE*~CDM~SOS*TDD 1.00 0.30 0.20
Overall solution consistency 1.00
Overall solution coverage 0.69

SSE structural separation, CDM centralized decision-making, SOS strategic outsourcing, TDD threat of digital disruption, DSI digital service innovation.
1028 Inf Syst Front (2023) 25:1017–1037

supporting existing sales processes and suffers from poor

adoption by both customers and sales employees. Still, we
propose that even companies under pressure can succeed at
DSI given the right circumstances since the absence of the
threat of digital disruption is not a necessary condition for
success in the results of our analysis nor is the presence of
threat a necessary condition for failure. A possible solution is
depicted in configuration A1: companies that implement an
approach based on spin-offs, centralized decision-making,
and strategic partnerships succeed irrespective of the amount
of external pressure.
The role of partnerships in implementing DT strategies
warrants further discussion in the context of the threat of dig-
ital disruption. The results show that organizations under
threat fail at DSI when they do not (or only partly) engage in
strategic implementation partnerships (B2). On the other
hand, a “do-it-yourself” approach seems appropriate when
organizations perceive no or very little threat and employ a
centralized decision-making approach (A2). We thus con-
clude that organizations that are not under pressure have
enough time to experiment and build up their resources such
as information technology infrastructure or software devel-
opers. Case company Pi, for instance, is a world leader in
industrial manufacturing. Given its excellent competitive po-
Fig. 2 Predictive validity test of Model 1 from subsample using data from
the holdout sample for successful digital service innovation sition in the market, the threat of digital disruption is very low
for Pi. Consequently, Pi had enough time to build a spin-off
and hire a lot of software developers who designed and im-
plemented an industrial Internet of Things (IoT) platform,
with little external assistance. If Pi had been under higher
pressure to transform itself in a short amount of time, it may
not have been possible for the company to take its time and
implement its strategy mostly on its own. It is important to
note that the decision to engage or not engage in partnerships
in consideration of impending pressure is sometimes also tak-
en due to this pressure. Case company Iota, for example, finds
itself in a competitive environment and does not engage in
partnerships. In the results, Iota is covered by configuration
B2. An interviewee at Iota stated his belief that “Iota does not
dare to engage in partnerships yet” because “Iota does not dare
to trust that someone else can bring us benefits and not dam-
age us in some way”. Thus, we propose that organizations
need to learn how to engage in healthy partnerships that do
not threaten the organization’s core business but rather benefit
both sides. Recent research on DT highlights the importance
of ecosystemic thinking and strategizing, especially when it
comes to service innovation (Lusch and Nambisan 2015).
While organizations that are well-positioned on the competi-
tive field may succeed in innovation-related activities on their
own for now, it is unclear whether a rather egoistic perspective
will also succeed in sustaining this position.
The necessary condition analysis shows that centralization of
Fig. 3 Predictive validity test of Model 3 from subsample using data from decision making is a prerequisite for successful DSI. In particu-
the holdout sample for unsuccessful digital service innovation lar, this means that organizations need a C-level executive to
Inf Syst Front (2023) 25:1017–1037 1029

govern the DT strategy or form a digitalization committee where investigate the interplay of different DT strategy building blocks
at least one C-level executive is involved. This confirms previous and provide a fine-grained view of their interdependencies. Still,
research that highlights the importance of top management team it also allows us to highlight insights into individual factors and
(TMT) energy in organizational change processes, especially in thereby contribute individually to each DT strategy building
IS-enabled change projects (Park et al. 2017; Tronvoll et al. block. For example, we confirm the importance of centralized
2020). Case company Kappa is an illustrative example of an decision-making in the context of DSI (Tronvoll et al. 2020) and
organization where the TMT is not heavily involved. In Kappa, highlight the role of DT committees. So far, this concept has
the DT strategy is mainly steered by a business unit leader who received relatively little attention (Chanias et al. 2019) compared
reports to the top management board that approves, for example, to the more common CDO role (see, for example, Haffke et al.
budget requests, but is not as heavily involved in leading the (2016); Horlacher et al. (2016); Singh and Hess (2017)).
strategy. Similarly, in the case of company Rho, a business unit Lastly, this paper contributes to the methodological variety
leader is responsible for the DT strategy, stating that the “man- in the field of IS. While configurational perspectives are slow-
agers who approve our business cases typically do not know in ly gaining popularity, studies with samples of smaller sizes are
detail what is actually needed for them”. Furthermore, he stated still an exception (Soto Setzke et al. 2020). Still, we argue that
that he “need[s] to make the management aware of every step small-N analyses offer several advantages such as familiarity
that is needed to, get features live which can be monetized in the with the cases and more targeted theory building. Adding to
end for Rho”. Thus, we propose that a DT strategy requires top the work of Iannacci and Cornford (2018), we show how
management attention and needs to be governed by C-level ex- QCA can be used to calibrate qualitative data, especially
ecutives to be successful. semi-structured interviews, to provide insights into novel phe-
nomena, where large samples may be difficult to acquire.
5.2 Theoretical Contributions
5.3 Practical Contributions
This paper contributes to theory in several ways. First, it adds to
the growing literature on DSI and DT and is one of the first For practitioners, our study offers implications for established
studies that integrate these two perspectives to paint a more com- organizations that want to successfully engage in DSI. First, as
plete picture. As outlined in the theoretical background to this a general implication, our configurations can be used as a tem-
paper, the literature on DSI has mainly focused on effective pro- plate by executives. They represent different choices that lead to
cesses, use cases, or the characteristics of innovations. By regard- the same outcome and can, therefore, serve as a basis for deci-
ing DT strategy building blocks as antecedents of DSI, we add a sions regarding the DT strategy, depending on the context of the
new perspective to explain how effective DSI can be established. organization. They can also be used to identify gaps between a
On the other hand, the literature on DT strategies has rarely ex- failing and a succeeding strategy. For example, if the organiza-
plored the actual outcome and effectiveness of these strategies. tion’s DT strategy currently resembles configuration B1 and may
Therefore, we add an outcome-oriented perspective to this rela- thus be on a path to failure, they can make the respective changes
tively young literature stream. We also contribute individually to to reach configuration A1 (i.e., centralizing decision-making and
each research stream, addressing research gaps such as effective adapting their outsourcing approach).
organizational changes for service innovation (Biemans et al. The second implication relates to decisions regarding the
2016) or the success patterns of DT strategies (Matt et al. 2015). locus of authority. Our configurations reveal that centraliza-
Second, we provide a perspective on the ways DSI can fail. tion of decision-making is a necessary condition for achieving
While current literature focuses predominantly on successful ser- DSI. Established organizations should, therefore, ensure that
vice innovation, only a few studies have explicitly investigated their DT strategies are governed by C-level executives. Our
innovation failure (see, for example, Dudau et al. (2017); Weber case studies show three general options: linking the responsi-
et al. (2011); Dörner et al. (2011); Goduscheit and Faullant bilities with an existing role such as the CEO or CIO,
(2018)). Furthermore, while some of these studies note the im- installing a dedicated role such as a CDO, or implementing a
portance of digital technologies, they focus on other enablers DT committee that consists of multiple executives or man-
such as individual attitudes and behavior or other units of analy- agers. Since these decisions appear to work equally well, the
sis such as entire industries. Our results provide the first insights organization may select their option considering its individual
into the characteristics of DT strategies that lead to DSI failure as context. If, for example, the organization currently does not
well as different avenues for future research. have sufficient resources to promote or hire a dedicated CDO,
Third, we employed a configurational research approach to they can take their first steps by building a DT committee with
answer our research question. By doing so, we follow several C-level executives and managers from their established work-
calls for research from both DT literature (Riasanow et al. 2019) force. Gradually, the organization could then start shifting the
as well as service innovation (Kohtamäki et al. 2019; Goduscheit responsibilities to a dedicated role or may even keep the DT
and Faullant 2018). Configuration theory enables us to committee if it proves to be successful.
1030 Inf Syst Front (2023) 25:1017–1037

Third, our results demonstrate the different options for strate- guidance provided by scholars such as Basurto and Speer
gic outsourcing. Engaging in strategic outsourcing is part of one (2012) and de Block and Vis (2019) and accounted for interrater
recipe for success and our configurations show that its absence reliability, calibrating interview data to fuzzy sets can still raise
can, under certain conditions, lead to failure. A closer analysis of valid concerns in terms of the interpretability of the results we
our cases reveals that organizations may avoid outsourcing or obtained. However, we carefully explained our coding scheme
engaging in partnerships due to a fear of letting others inside and provided transparency regarding decisions throughout the
the organization or even due to believing that they can do every- calibration process. Additionally, we may have left out dimen-
thing on their own. While this may be a viable approach for large sions that could be useful in explaining differences in outcome in
organizations that possess a lot of resources, smaller or medium- our research framework. Although consistency and coverage
sized organizations, in particular, should aim to build a healthy values in our analyses are relatively high, there might be other
ecosystem of partners that provide the missing capabilities. causal conditions that could allow a different or even more in-
Ideally, the organization may also learn from this process and sightful interpretation of the differences that can be observed in
build up its own DT capabilities over time. the cases.
Furthermore, each of our chosen conditions deserves fur-
ther investigation. For example, for centralization of decision
6 Limitations and Future Research making, we did not distinguish between the effects of different
C-level roles such as CIOs or CDOs (Haffke et al. 2016), nor
Our approach has limitations that we will now address. Due to did we account for different leadership styles such as transfor-
the lack of previous research on the influence of DT strategies on mational or transactional leadership. Future research could
DSI, we employed a configurational perspective using fsQCA. thus include these strategy elements to test them for effective-
We used a relatively small sample of 17 cases, which limits the ness. Also, here, configuration theory could be applied to
generalizability of our findings. However, we were mainly inter- identify configurations of strategy elements where, for exam-
ested in providing a first theoretical exploration of the mentioned ple, CDOs are more effective than CIOs. Lastly, owing to the
relationship by using rich, in-depth qualitative data. Future re- exploratory nature of our analysis, we invite fellow re-
search could further validate our findings by applying regression- searchers to validate our results using, for example, surveys
based methods to a larger, representative sample. In this context, combined with econometric techniques to test the patterns that
the use of qualitative interview data for fsQCA might raise some we proposed in the results section.
concerns as well. Although we followed the methodological

Appendix

Table 5 Case company overview

Code Industry Founded in Number of employees Number of interviews

Alpha Entertainment 2000 – now >100 2

Beta Consumer goods 1950–1999 >10,000 6
Gamma Sports Before 1900 >100 3
Delta Manufacturing 1900–1949 >10,000 6
Epsilon Industrial manufacturing 1900–1949 >1000 5
Zeta Industrial manufacturing 1950–1999 >10,000 5
Eta IT services 1950–1999 >50,000 18
Theta Industrial manufacturing Before 1900 >10,000 5
Iota Information security Before 1900 >10,000 10
Kappa IT services 1950–1999 >10,000 8
Lambda Sports 1900–1949 >100,000 12
My Logistics 2000–now >1000 7
Ny Industrial manufacturing Before 1900 >50,000 6
Xi Entertainment Before 1900 >100 7
Omikron Industrial manufacturing 1950–1999 >10,000 9
Pi Industrial manufacturing Before 1900 >100,000 12
Rho Consumer goods manufacturing Before 1900 >10,000 9
Inf Syst Front (2023) 25:1017–1037 1031

Table 6 Coding procedure for causal conditions and outcome

Fuzzy value/ 0 (fully out) 0.33 (more out than in) 0.66 (more in than out) 1 (fully in) Krippendorff’s
dimension alpha

Structural No new structures were Digital innovation activities Digital innovation Digital innovation 0.90
separation created to carry out take place in newly activities partly take activities mainly take
digital innovation created digital business place in spin-offs while place in spin-offs while
activities units the main organization the main organization
coordinates these activi- may partly coordinate
ties these activities
Centralization of A team lead or no specific A manager or business unit A team of C-level execu- A C-level executive (CEO, 0.80
decision-- role is responsible for leader is responsible for tives and/or managers is CDO, CIO, …) is main-
making governing the DT governing the DT responsible for ly responsible for
strategy strategy governing the DT strat- governing the DT strate-
egy gy
Strategic Implementing the DT External partnerships are Implementing the DT Implementing the DT 0.83
outsourcing strategy does not rely on used to implement strategy relies mostly on strategy relies
any external partnerships certain key aspects of the external partnerships, predominantly on
DT strategy; the main the organization external partnerships
implementation effort is implements certain
done by the organization aspects on its own
Threat of digital The organization’s core The organization’s core The organization’s core
The organization’s core 0.84
disruption business does not face business might face a business faces a business faces an
any considerable threats considerable threat of considerable threat ofimminent threat of being
of being disrupted in the being disrupted by rival being disrupted by rival
disrupted by rival
foreseeable future by products/services based products/services based
products/services based
rival products/services on digital technologies in on digital technologies
on digital technologies
based on digital technol- the next 5–10 years in the next 3–5 years
ogies
Digital service No new services based on Services based on digital Services based on digital Services based on digital 0.81
innovation digital technologies technologies were put technologies were put technologies were put
services were put onto onto the market, but they onto the market and onto the market, they are
the market are mostly based on they are mostly based based on radical
incremental innovation on radical innovation, innovation, entirely
of already existing partly departing from departing from the
services the service concepts of service concepts of
already existing services already existing services
and they are new to the
organization’s industry
1032 Inf Syst Front (2023) 25:1017–1037

Table 7 Exemplary coding procedure for the construct strategic outsourcing

Fuzzy Illustrative quote(s) Reason for assignment

value

1 “We found service providers who work for us. We have one for the At Xi, virtually all the innovation activities are carried out by service
entire back-end. We have one for the entire front-end” providers and freelancers. Xi partly coordinates these activities
(“juggling”), but does not implement any activities on its own
“Then there is the backend provider […] But I also have the front-end
provider, and all those app providers, and the streaming providers”
“We juggle with 50 freelancers. Both on the programming side as well
as on the production side of things. The directing team, they are all
freelancers”
All quotes from case Xi
0.66 “We work a lot with external consultants” My’s DT strategy depends a lot on partnerships and external
consultants. However, My also has its own digitalization department
that coordinates these activities and they have fundamental
know-how about their own applications
“We care a lot about working with partners. We do not have the
know-how for all topics. We know how our business works and we
also have the know-how for the applications that we use daily and a
bit more. For a lot of topics though, it is very helpful to get
know-how from the outside”
“Usually, during such an innovation process we include the
digitalization and the IT department. We also do a lot with external
consultants”
“We do not have any in-house software developers and the things that
we implement are actually always custom software, this means that
we need to get help from external developers”
All quotes from case My
0.33 “We did not [engage in acquiring targeted partnerships]. […] This is Kappa has engaged in partnerships to acquire building blocks for its
also because, due to our organization’s diversity in that area, we can service innovation. However, these partnerships are limited and due
do everything on our own. That’s why there has not been any to the organization’s mentality of do-it-yourself, the organization
partner where we said, okay, now we go with that one regarding this has not engaged in further partnerships
topic. But these are things we need to do in the future […] This is a
part, where we still have difficulties. Until now, we used to be the
champion and could always do it on our own, “we can do
everything”, and engaging strongly in partnerships has not been part
of the organization’s political agenda.”
“We wanted to profit from partners who could provide the software
and a part of the digital platform. We arrived at two partnerships:
one is actually Anonymized, […] and there is the content
management system, which is Anonymized2, a Swiss provider. And
building upon these two and an Anonymized3 tool we composed
what you can now see on the open online shop”
All quotes from case Kappa
0 “Basically, we would like to engage in cooperation and partnerships, As of now, Iota has not engaged in any partnerships to implement its
but we are coming from a very low baseline” DT strategy
“I believe that there are many out there who would be interesting for us.
Iota is just starting to look for partners and to understand that this is
not necessarily something bad”
“I believe Iota is too afraid. Iota does not dare to trust that someone else
can bring us benefits and not damage us in some way. I believe it’s
simply because we are afraid to let someone else into the
organization”
All quotes from case Iota
Inf Syst Front (2023) 25:1017–1037 1033

Table 8 Exemplary coding procedure for case Rho

Dimension Fuzzy Reason for assignment Illustrative quote/description

value

Structural 1 Innovation activities are mainly conducted in startups that are “What we do at Rho is create, when we have new ideas like
separation independent of the main organization 3D printing etc., we create ventures that stand alone. They
are basically startups and they have the freedom to show
their business value over the next 2 years”
Centralization of 0.33 The DT strategy is mainly led and governed by the head of “I’m the head of digital manufacturing and since I am the
decision-- digital manufacturing (HDM). While the HDM reports to program manager responsible for designing, building, and
making the COO, they coordinate all strategy activities deployment of the digital backbone as well as the IT part
and the business part and I report to the COO as the head of
manufacturing. So, in Rho the whole digital transformation
is part of operations, so they report to the COO while you
have some companies where the digital program reports to
CIO but in this case, we chose to report to the operations
function for a specific reason”
Strategic 0.66 Rho is focused on implementing its strategy through “What we see is that the area is becoming too big to only [be]
outsourcing partnerships, while some innovation activities are still handle[d] by Rho so we have quite a lot of strategic
carried out by the main organization partnerships over there”
Threat of digital 1 The core business of Rho is under an imminent threat of “I think we are running ahead because we have to. Our current
disruption digital disruption business is stopping in a few years. The biggest worry is,
can we do it fast enough?”
Digital service 0 As of today, no services based on digital technologies have
innovation been introduced to the market by Rho

Table 9 Fuzzy-set membership score assignment table

Case Structural separation Centralization of decision-making Strategic outsourcing Threat of digital disruption Digital service innovation

Alpha 0 1 1 0 0.33
Beta 0.33 0.66 0.66 0.33 0.66
Gamma 0.33 0.66 1 0 0.33
Delta 0.33 0.66 0.66 0 0.66
Epsilon 0 0.66 0.66 0.33 0.33
Zeta 1 0.33 0.66 1 0
Eta 0.66 1 0.33 0.33 1
Theta 1 0.66 1 0 0.33
Iota 0.33 1 0.33 0.33 0.66
Kappa 0.33 1 0 0.33 0.66
Lambda 0.66 0.66 0 0.66 0.33
My 0.33 1 0.66 0.33 0.33
Ny 0 0.33 0.33 1 0.33
Xi 0 1 0.66 0 1
Omikron 1 0.66 0.66 0 0.66
Pi 0.66 1 0.33 0.33 0.66
Rho 1 1 1 0.66 1
1034 Inf Syst Front (2023) 25:1017–1037

Table 10 Truth table for successful digital service innovation

Structural Centralization of Strategic Threat of digital Successful digital service Number of Raw PRI
separation decision-making outsourcing disruption innovation cases consistency consistency

1 1 0 0 1 2 1.00 0.99
0 1 0 0 1 2 0.99 0.96
1 1 1 0 1 2 0.92 0.75
1 1 1 1 1 1 0.88 0.75
0 0 0 1 0 1 0.79 0.00
1 1 0 1 0 1 0.78 0.33
0 1 1 0 0 7 0.72 0.50
1 0 1 1 0 1 0.33 0.00

Table 11 Truth table for unsuccessful digital service innovation

Structural Centralization of Strategic Threat of digital Unsuccessful digital service Number of Raw PRI
separation decision-making outsourcing disruption innovation cases consistency consistency

0 0 0 1 1 1 1.00 1.00
1 0 1 1 1 1 1.00 1.00
1 1 0 1 1 1 0.89 0.67
1 1 1 0 0 2 0.75 0.25
1 1 0 0 0 2 0.73 0.10
0 1 1 0 0 7 0.67 0.40
0 1 0 0 0 2 0.67 0.02
1 0 1 1 0 1 0.63 0.25
Inf Syst Front (2023) 25:1017–1037 1035

Funding Open Access funding enabled and organized by Projekt DEAL. Corley, K. G., & Gioia, D. A. (2004). Identity ambiguity and change in
the wake of a corporate spin-off. Administrative Science Quarterly,
Open Access This article is licensed under a Creative Commons 49(2), 173–208.
Attribution 4.0 International License, which permits use, sharing, adap- de Visser, M., de Weerd-Nederhof, P., Faems, D., Song, M., van Looy,
tation, distribution and reproduction in any medium or format, as long as B., & Visscher, K. (2010). Structural ambidexterity in NPD process-
you give appropriate credit to the original author(s) and the source, pro- es: A firm-level assessment of the impact of differentiated structures
vide a link to the Creative Commons licence, and indicate if changes were on innovation performance. Technovation, 30(5–6), 291–299.
made. The images or other third party material in this article are included Dixon, J., Brohman, K., & Chan, Y. (2017). Dynamic ambidexterity:
in the article's Creative Commons licence, unless indicated otherwise in a Exploiting exploration for business success in the digital age. 38th
credit line to the material. If material is not included in the article's International Conference on Information Systems, Seoul, Korea.
Creative Commons licence and your intended use is not permitted by
Dörner, N., Gassmann, O., & Gebauer, H. (2011). Service innovation:
statutory regulation or exceeds the permitted use, you will need to obtain
Why is it so difficult to accomplish? Journal of Business Strategy,
permission directly from the copyright holder. To view a copy of this
32(3), 37–46.
licence, visit http://creativecommons.org/licenses/by/4.0/.
Dudau, A., Kominis, G., & Szocs, M. (2017). Innovation failure in the
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Skålén, P., Gummerus, J., von Koskull, C., & Magnusson, P. R. (2014). David Soto Setzke is a PhD student at the Chair of Information Systems
Exploring value propositions and service innovation: A service- at the Technical University of Munich (TUM), Germany. He holds a
dominant logic study. Journal of the Academy of Marketing Master of Science in Informatics from TUM. His research interests in-
Science, 43(2), 137–158. clude large-scale digital transformation projects and digital platform eco-
Sklyar, A., Kowalkowski, C., Tronvoll, B., & Sörhammar, D. (2019). systems. His research has been published in journals such as Electronic
Organizing for digital servitization: A service ecosystem perspec- Markets and the Journal of Competences, Strategy and Management as
tive. Journal of Business Research, 104, 450–460. well as all major IS conference proceedings.
Skog, D. A., Wimelius, H., & Sandberg, J. (2018). Digital disruption.
Business & Information Systems Engineering, 60(5), 431–437. Tobias Riasanow is working on strategy and business development at
Sok, P., & O'Cass, A. (2015). Achieving service quality through service SAP Labs Munich with the goal of building and growing an innovation
innovation exploration – Exploitation: The critical role of employee ecosystem around SAP. He holds a PhD from TUM about how platform
empowerment and slack resources. Journal of Services Marketing, owners can manage the transformation of complementors in their respec-
29(2), 137–149. tive ecosystems. He graduated in finance and information management
Soto Setzke, D., Kavılı, M. C., & Böhm, M. (2020). On the use of from TUM and Universität Augsburg with a Master of Science with
qualitative comparative analysis in information systems research - Honors. His practical and academic interests include digital transforma-
a critical review. 28th European Conference on Information tion and platform ecosystems. His work has appeared in Business
Systems, Marrakesh, Morocco. Research, Electronic Markets, the Journal of Competences, Strategy
and Management, and leading IS conferences.
Srivastava, S. C., & Shainesh, G. (2015). Bridging the service divide
through digitally enabled service innovations: Evidence from
Markus Böhm is an interim Professor of Information Systems and
Indian healthcare service providers. MIS Quarterly, 39(1), 245–267.
Business Process Management at TUM. He graduated in Business &
Teece, D. J. (1996). Firm organization, industrial structure, and techno-
Information Systems Engineering from Friedrich-Alexander University
logical innovation. Journal of Economic Behavior & Organization,
Erlangen-Nürnberg (FAU) and holds a doctoral degree in Information
31(2), 193–224.
Systems from TUM. Markus has profound industry experience as a pro-
Tóth, Z., Henneberg, S. C., & Naudé, P. (2017). Addressing the ‘quali- ject manager, analyst, and software developer at fortiss, Siemens, Bosch,
tative’ in fuzzy set qualitative comparative analysis: The generic and BMW among others. His research focus is on mergers & acquisitions,
membership evaluation template. Industrial Marketing business model innovation, and digital transformation. Markus has co-
Management, 63, 192–204. authored more than 100 research papers published in all major IS confer-
Troilo, G., De Luca, L. M., & Guenzi, P. (2017). Linking data-rich envi- ence proceedings as well as IS, informatics, and business journals includ-
ronments with service innovation in incumbent firms: A conceptual ing the European Journal of Information Systems (EJIS), Electronic
framework and research propositions. Journal of Product Markets (EM), MIS Quarterly Executive, the Journal of Systems and
Innovation Management, 34(5), 617–639. Software, the Journal of Business Economics, and Business &
Tronvoll, B., Sklyar, A., Sörhammar, D., & Kowalkowski, C. (2020). Information Systems Engineering.
Transformational shifts through digital servitization. Industrial
Marketing Management, 89, 293–305. Helmut Krcmar is a Professor Emeritus of Information Systems with the
Vial, G. (2019). Understanding digital transformation: A review and a Department of Informatics, TUM, with a joint appointment with the School
research agenda. The Journal of Strategic Information Systems, of Management, where he is currently the Founding Dean and Delegate
28(2), 118–144. Officer of the President – TUM Campus Heilbronn. He has been a
Wagemann, C., Buche, J., & Siewert, M. B. (2016). QCA and business Postdoctoral Fellow with IBM Los Angeles Scientific Center, and an
research: Work in progress or a consolidated agenda? Journal of Assistant Professor of Information Systems with the Leonard Stern School
Business Research, 69(7), 2531–2540. of Business, NYU, and Baruch College, CUNY. From 1987 to 2002, he was
Weber, A., Haas, M., & Scuka, D. (2011). Mobile service innovation: A the Chair of Information Systems, Hohenheim University, Stuttgart, where he
European failure. Telecommunications Policy, 35(5), 469–480. was the Dean of the Faculty of Business, Economics, and Social Sciences.
Wong, E. M., Ormiston, M. E., & Tetlock, P. E. (2011). The effects of top From 2002 to 2020, he was the Chair of Information Systems with the
management team integrative complexity and decentralized decision Department of Informatics, TUM, where he was the Dean from 2010 to
making on corporate social performance. Academy of Management 2013. His interdisciplinary work incorporates areas such as accounting, me-
Journal, 54(6), 1207–1228. chanical engineering, and health care. He has co-authored a plethora of re-
Woodside, A. G. (2014). Embrace•perform•model: Complexity theory, search papers published in major IS journals including Management
contrarian case analysis, and multiple realities. Journal of Business Information Systems Quarterly, Journal of Management Information
Research, 67(12), 2495–2503. Systems, Journal of Information Technology, Information Systems Journal,
Journal of Strategic Information Systems, European Journal of Information
Yoo, Y., Henfridsson, O., & Lyytinen, K. (2010). Research commentary—
Systems, IEEE Transactions on Engineering Management, Business &
The new organizing logic of digital innovation: An agenda for informa-
Information Systems Engineering, Communications of the ACM,
tion systems research. Information Systems Research, 21(4), 724–735.
Information and Management, MIS Quarterly Executive, Information
Yoo, Y., Boland, R. J., Lyytinen, K., & Majchrzak, A. (2012). Systems Frontiers, EM, ACM Transactions on Computer-Human
Organizing for innovation in the digitized world. Organization Interaction, and Communications of the Association for Information
Science, 23(5), 1398–1408. Systems. In Germany, his book Information Management is now in its 6th
Zheng, P., Lin, T.-J., Chen, C.-H., & Xu, X. (2018). A systematic design edition (2015). He collaborates in research with a wide range of leading global
approach for service innovation of smart product-service systems. organizations. His research interests include information and knowledge man-
Journal of Cleaner Production, 201, 657–667. agement, engineering, piloting, and management of innovative IT-based ser-
vices, computer support for collaboration in distributed and mobile work and
Publisher’s Note Springer Nature remains neutral with regard to jurisdic- learning processes. Prof. Krcmar is a Fellow of the Association for
tional claims in published maps and institutional affiliations. Information Systems (AIS), (cf. https://aisnet.org/) and a Member of
Acatech National Academy of Science and Engineering.