Organizing for digital innovation – why is it so tough?

Innovation labs, accelerators, incubators, corporate venturing - so many companies spare no expense and still struggle with digital innovation. But why is that the case? A team of researchers around Corinna Bertling and Professor Martin Hoegl from the LMU Munich Institute for Leadership and Organization is currently investigating this question within a research project on Digital Innovation Units (DIUs).

Corinna Bertling 

But let's start at the beginning: What are DIUs?
DIUs are corporate entities, which are created to enable the development of innovative digital business models or processes that are supposed to be implemented in the core business organization. They typically aim to drive the digital transformation of the company across functional departments. DIUs can develop, test, and implement new processes quickly as they are not part of the core business operations. They are characterized by a trial-and-error culture and usually work in an agile manner. These special characteristics make them particularly appealing to digital talents. Accordingly, DIUs are facing high expectations regarding their innovative strength.

Do DIUs keep what they promise?
The track record of DIUs seems to be mixed. Although they enjoy a high reputation within the organization and positively impact the company's image, producing radical innovations and scaling them is difficult, even for DIUs. Consistent to this, half of the DIUs in the sample of a survey conducted by Infront (2020) expressed dissatisfaction with the commercial success of their work.

So, what are the secrets to success for DIUs?
For Corinna Bertling, research associate at the Institute for Leadership and Organization at LMU Munich, the key to success for DIUs lies in their successful integration with other corporate units relevant to digital transformation, such as the IT department.

“We interviewed staff from four different DIUs, with a particular focus on collaboration between DIUs and IT departments and found that a major barrier to successful integration of these departments is the nature of the DIUs themselves",

Bertling explained in our interview. DIUs are often intentionally located outside the main organizational roster, she noted. They are physically and structurally separated to establish a protected space for exploration, creativity and even failure. In contrast, IT departments tend to follow fixed processes and clear structures to reduce uncertainty. This can give rise to cultural conflicts between the business units that are responsible for digital innovation. To achieve successful integration, these boundaries between DIUs and IT departments must be consciously broken down again and again. If companies manage to build DIUs within protective barriers, but break through these barriers as required, DIUs can be an important driver of digital innovation. But how can we achieve this?

“We are currently analyzing the role that individual boundary spanners and brokers play in this process and whether there is an optimal boundary design for DIUs with respect to other critical organizational units for digital innovation, such as R&D and IT”,

Bertling described the status of the research project. In this regard, she is collaborating with an increasing number of companies to collect empirical data, exchange experiences and get deep insights in the daily organizing for digital innovation.

Where can you learn more about the drivers of successful DIUs?
Great sources of information are the Bavarian Research Institute for Digital Transformation (bidt) and the PDMA Knowledge Hub. For those looking for scientific community exchange, Bertling recommends the annual PDMA Virtual Innovators Conference and JPIM Research Forum.

Furthermore, interested companies are warmly invited to contact the Institute for Leadership and Organization to learn more about the research project and potential engagement opportunities (bertling@lmu.de).

We are looking forward to the see results of this innovation research project!