Digital Comprehensive Summaries of Uppsala Dissertations from the Faculty of Science and Technology 2058 The Digital Transformation of the Manufacturing Industry Metamorphic Changes and Value Creation in the Industrial Network VINCENT FREMONT ACTA UNIVERSITATIS UPSALIENSIS ISSN 1651-6214 ISBN 978-91-513-1258-3 UPPSALA URN urn:nbn:se:uu:diva-450154 2021 Dissertation presented at Uppsala University to be publicly examined in Polhemsalen, 10134, Ångströmslaboratoriet, Uppsala, Friday, 1 October 2021 at 13:00 for the degree of Doctor of Philosophy. The examination will be conducted in English. Faculty examiner: Associate Professor Cecilia Lindh ( School of Business Society and Engineering, Division of Marketing and Strategy, Mälardalen University). The Digital Transformation of the Manufacturing Industry.
Metamorphic Changes and Value Creation in the Industrial Network. Digital Comprehensive Summaries of Uppsala Dissertations from the Faculty of Science and Technology 2058. Uppsala: Acta Universitatis Upsaliensis.0 trend poses many challenges for the manufacturing industry and societies generally. The trend presents new challenges and opportunities related to industrial competitiveness and sustainability, as industrial firms adopt digital technologies to change how they interact and exchange data across their industrial network.
The introduction of digital technologies is resulting in a complex technological and organizational structural change process called digital transformation, which sees interfirm interactions, capabilities and identities changed across the industrial network. The digital transformation change process has remained relatively ill-defined, as most industries are yet to show the full potential of successful digital transformation. Firms within the manufacturing industry still have difficulties grasping the impact and costs of Industry 4.0 and of the digital transformation process. The prevailing assumption in the literature is that industries will achieve value creation simply by engaging with digital technologies, either in higher revenues, profitability or both if they are successful.
The change process affects all aspects of industrial network, from the single product functionality and production process efficiency to interfirm business interactions, thus affecting in many regards value creation in the industrial network. By employing an Industrial Marketing and Purchasing approach, the dissertation analyzes the issues of interaction, change and value creation in the resource context of two large industrial networks undergoing complex digital transformations. This article dissertation will present four qualitative studies of two large manufacturing industrial network undergoing complex digital transformations with the interaction approach. This dissertation presents several findings and contributions specific to the digital transformation change process, including the presence of metamorphic irreversible and interactive changes challenging the status quo of interactions and value creation in the resource context, creating conflicts, controversies, and friction effects.
It also underscores the importance of organizational elements of organizations for the digital transformation, and how a unique combination of changes across the resource context, from new roles to new ways of working allow the industrial network to create value beyond simple technological incremental innovations. The dissertation presents a theory of metamorphic change in the industrial network, to describe complex change processes like the digital transformation. Keywords: Industrial Networks, Industrial Marketing and Purchasing, Resource Interaction, Digital Transformation, Industry 4.0 Vincent Fremont, Department of Civil and Industrial Engineering, Industrial Engineering and Management, Box 534, Uppsala University, SE-751 21 Uppsala, Sweden. © Vincent Fremont 2021 ISSN 1651-6214 ISBN 978-91-513-1258-3 URN urn:nbn:se:uu:diva-450154 (http://urn.se/resolve?urn=urn:nbn:se:uu:diva-450154) He who has come only in part to a freedom of reason cannot feel on earth otherwise than as a wanderer-though not as a traveler towards a final goal, for this does not exist.
- Friedrich Nietzsche, Man Alone With Himself Acknowledgments Five years of thoughts are going into writing these words. Five years filled with many of the most humbling moments of my life. Five fulfilling years that would not have been possible without the support of many. Aihie, Jens, Lars-Johan, and Enrico, I feel immensely grateful for the super- vision that I have received.
The experience of being a doctoral student can be very confusing, and many don’t get to be as lucky as I have been to receive this amount of direction, clarity, support, and cold-headed feedbacks. I hope that we will continue to work together on the topic of digital transformation or another. This dissertation would of course not have been possible without the partici- pation of all the great people at Sandvik Manufacturing and Machining Solu- tions and the Cibes Lift Group. Both companies had such interesting stories to tell, which I hope I did justice to in here.
I miss the days when I spent all my time traveling to their respective sites to conduct my interviews. My thoughts go to all my colleagues at the Department of Economics at HiG. I have found at HiG more support than I could ever hope for, as well as great colleagues to teach or to chat at the coffee machine with. To the people of the Department of Civil and Industrial Engineering at UU, I really enjoyed my occasional visits to Ångström, the seminars, and the meetings.
To the IMP community, it has been a pleasure to be a member of the church. I hope that we will be able to resume our IRL events soon. My thoughts go especially to my family and friends for their indefectible sup- port during all these years, spanning beyond this doctoral journey, and to Sanna, for tolerating me working during our vacations and for being the kind- est person that I have ever met. Funding Part of this work has received support from the Knowledge Foundation (Stiftelsen för kunskaps- och kompetensutveckling), Sweden, under the grant agreement n° 20150221.
List of Papers This thesis is based on the following papers, which are referred to in the text by their Roman numerals. (2018), “Interaction through boundary objects: controversy and friction within digitalization”, Marketing Intelligence & Planning, Emerald Publishing Limited, Vol. (2019), “Digitalization efforts in liminal space – inter- organizational challenges”, Journal of Business and Industrial Marketing, Emerald Publishing Limited, Vol., “Opportunities and limitations for value Creation from digital transformation”, Submitted to Industrial Marketing and Management., “Friction and digital transformation in the industrial network”, Submitted to Journal of Business and Industrial Marketing. Reprints were made with permission from the respective publishers.
3 Narrowing Down the Phenomenon. 5 Background of Industry 4.0 in the Literature. 7 Cyber-Physical Systems. 10 Digitization and Digitalization.
13 Defining the Digital Transformation. 14 Factors of Digital Transformation. 17 Impacts of Digital Transformation. 20 Challenges of Digital Transformation.
24 The Theoretical Perspective. 27 IMP Research on Digital Technologies. 30 The Empirical Setting. 35 The ISNET Research Project.
35 Sandvik Machining and Manufacturing Solutions. 37 Cibes Lift Group. 39 The Theoretical Framework. 41 The Industrial Marketing and Purchasing Approach.
41 The Interaction Approach. 42 The ARA Model. 43 The Resource Interaction Approach. 45 Theory of Value Creation.
47 Resource Interaction and Value Creation. 48 Friction, Heaviness, Variety, and Path Dependence. 78 Implications for Interactions in the Industrial Network. 79 Coping with Changes of the Digital Transformation.
80 Implications for Value Creation. 86 Changes in the Rainforest. 89 Organizational Change Theories. 93 The Metamorphosis in Organizational Change Theories.
94 Metamorphosis, a Natural Sciences Analogy. 96 The Industrial Network Metamorphosis Change Theory of Digital Transformation. 97 Unit of Change. 98 Metamorphic Changes in the INM.
99 Conditions for the use of the INM. 101 The INM Change Cycle. 101 Contribution to IMP Theory. 106 Findings and Contributions.
107 Considerations for Practitioners. 110 Research Limitations and Avenues for Future Research. 117 Abbreviations AMT Advanced Manufacturing Technologies CODE Center of Digital Excellence CLG The Cibes Lift Group CPS Cyber Physical System ICT Information and Communication Technology IMP Industrial Marketing and Purchasing INM Industrial Network Metamorphosis Change Theory IoT Internet of Things ISNET Innovative Strategic Network in the Age of the Digitalizing Manufacturing Industry RIA Resource Interaction Approach SIMS Smart Inventory Management Systems SMMS Sandvik Machining and Manufacturing Solu- tions TDMS Tool Data Management Systems Prologue The research for this dissertation officially kicked off in 2016 at the headquar- ters of a large Swedish manufacturing firm. In an open discussion about digi- talization and Industry 4.0, managers described in very broad strokes, what the digital technology trend meant for their company, the company’s vision, their goals, the projects that the company had been pushing forward, and sev- eral challenges.
They depicted their company as a market leader. Their com- plex network of diverse organizations, a center of excellence, product areas, and subsidiaries included the largest brand in their industry. They also de- scribed a fragmented company, which included several large brand organiza- tions running their own affairs and projects. At the core of their concern was to increase the cooperation between these different organizations to drive in- novation on digital solutions.
They perceived themselves as “very strong,” as in very good with digital technologies. The company had been investing in developing multiple digital capabilities and solutions internally. The managers described what they understood digitalization to be and their expectations about the positive changes they could achieve with digital technologies re- garding their product offerings and their business relationships with their cus- tomers. They described a complex picture of multiple ambitious changes that could have the potential to fundamentally change their business if realized.
They understood that digital technologies could drive new opportunities, al- low them to retain their market leadership position, and that it would change what they would sell, their business models, and who they would interact with. They also perceived these changes as an opportunity to achieve several socio- environmental goals, to become more sustainable by becoming a more effi- cient and resilient company. Through several workshops with a top-tier management consulting firm, their business development and business strategy team, part of the organization's corporate apparatus, has devised several strategies to address these changes in a way suitable for their needs. These would require them to make significant investments in capabilities, technologies, and competencies.
It would possibly also require acquiring several companies with the resources that they needed. They understood that the road to achieving these changes would require nav- igating through the buzzwords, understanding what it meant for them to create value in the future, and, like an “oil tanker,” that it would take years for them xiii to move their large organization in the right direction. They also understood that one of the keys was to rethink their interactions with customers and their suppliers and partners and increase the amount of interaction within their large, fragmented organization, between the multiple different actors that con- stituted it. They also described several risks, such as the risk of killing inno- vation by using the wrong business models.
They were also invested in a tech- nology that they thought could bring in potentially radical changes and disrupt their industry. In total, we spent a couple of hours there listening to managers describing the multiple changes related to digital technologies, digitalization, and Industry 4.0 at their company. A couple of weeks later another meeting took place, at another Swedish man- ufacturing company’s headquarters. The main topic was also how the firm was dealing with digital technologies, the related changes, potential opportunities, and challenges they had envisioned with them.
The company was a market leader from a different industry, with a long-established history and know- how. They described their network of multiple foreign subsidiaries, distribu- tors, and suppliers. They presented their plans and previous international ex- pansion. In fact, following a change of ownership, the company focused on growing the business by entering new markets and acquiring other actors, dis- tributors, and competitors in their industry.
The managers explained that they understood digitalization to be a driver for their growth. It would allow changes in how they interact with other actors and create new relationships with new customers. In the technologies they saw several opportunities for creating value for their companies and their partners and customers. They also understood that they were responding to a greater industrial-technological trend and needed to address these changes to remain competitive.