The Institutional Logic of Digitalization

Abstract Digital technologies have fundamentally changed organizations, industries, and even the society. Although institutional theory provides rich array of perspectives to both content dynamics such changes, research at intersection scholarship digitalization has remained scarce. In this essay, I draw on logics perspective elaborate as involving a new set interconnected managerial beliefs norms, organizational practices, diverse material social structures that together complement challenge established in organizations fields. attention two central organizing principles logic digitalization: pursuit digital omniscience – efforts represent conceive world through data omnipotence bring activities inside outside under control information systems. conclude essay by elaborating how can help understand organization-level leverage incumbent corporations digital-native companies. Keywords Institutional Digitalization transformation Information technology Practice-driven institutionalism Data-driven management Citation Schildt, H. (2022), "The Logic Digitalization", Gegenhuber, T., Logue, D., Hinings, C.R.(B). Barrett, M. (Ed.) Transformation Theory (Research Sociology Organizations, Vol. 83), Emerald Publishing Limited, Bingley, pp. 235-251. https://doi.org/10.1108/S0733-558X20220000083010 Publisher: Limited Copyright © 2022 Henri Schildt License Published Limited. These chapters are published Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate create derivative works these (for commercial non-commercial purposes), subject full attribution original publication authors. The terms licence be seen http://creativecommons.org/licences/by/4.0/legalcode. This volume Research Organizations is highly welcome addition study digitalization. uniquely positioned explain theorize complex large-scale change processes, those brought about contemporary technologies. theorists only recently begun attend societal business impact ubiquitous data, algorithms, platforms (Faik, & Oborn, 2020; Greenwood, 2018). early contributions, was conceived an exogenous shock institutionalized created revolutionary products services, often called “digital innovations” (Berente Seidel, 2022; Hinings et al., 2018; Nambisan, Wright, Feldman, 2019). Yet, definition depicts less process than outcome. While concept implies which companies come develop utilize technologies, researchers define merely increasing use (e.g. Balsmeier Woerter, 2019) or more broadly (but vaguely) “the ways life organized around technologies” (Leonardi Treem, 2020, p. 1602). By conceiving shock, we may, however, fail fully changes thinking recursively contribute development application (Zuboff, argue ought broader involves cognitions, structures. short, best explained emergence triumph logic. To begin with, propose broad extends far beyond diffusion exploitation technology. Nearly all observers identify distinctive characteristic particularly “artificial intelligence,” their effects human work (Brynjolfsson McAfee, 2014; Cepa Murray, Rhymer, Sirmon, 2021; Raisch Krakowski, 2021). capture management, following definition: represents organizations’ reliance software-based automation grounded algorithms over expertise work. Thus conceived, not but also infrastructures, norms beliefs. Such conception helps elucidate larger examine they contradict existing firms suggest processes usefully understood growing conformity individuals, fields with spread legitimizes inherently uncertain bets enables prospective coordination initiatives within across organizations. discussing competes complements logics, now appear markedly centric. us powerful framework for explaining ongoing specifically paths followed “born digital” founded incumbents strongly entrenched human-centric logics. An Perspective Once reconceive systemic replacement routines automated (cf. 2018), clearly see just trigger itself entails adoption replace observations automate involve widespread organizing, Moreover, transition represented observed meaningfully level societies, individual routines. How then should theorist approach digitalization? fruitful elements constitute digitalized trace related belief, innovations pre-digital ones. Seen lens, practices spurred supported associated beliefs, habits managers investors. suggests radical transformations require adapt bundles deeply (Smets, Aristidou, Whittington, 2017) relate concerning desirability various (Lounsbury, 2007). appreciate change, need recognize least four “elements” (1) expert knowledge skills, (2) artifacts infrastructures organization its environment, (3) (4) services developed focal competitors. along examples summarized Fig. 1. first intrinsically linked practices. Opens window.Fig. 1.Four Core Elements Digitalization. Organizational Practices: Knowledge, Skills, Material Artifacts, infrastRuctures Scholars long noted tend reshape (Jarvis, Eden, Burton-Jones, 2022), industries (Nambisan, Siegel, Kenney, public sphere (Etter, Illia, Meggiorin, Colleoni, Faik Gümüsay, Raynard, Albu, Etter, Roulet, 2022). embedded sociomaterial “assemblages” “ensembles” (Glaser, Pollock, D’Adderio, Orlikowski Iacono, 2001; Scott, 2008). Automated tools, regulatory structures, relationships, abstract knowledge, embodied skills. it trendy emphasize intrinsic elements, there obvious reasons distinguish skills humans “material” side latter category incorporates software code cloud institutions slightly sense, technical standards programming interfaces. forms rooted specific contexts (Glaser Loscher Bader, Software engineers scientists switch effortlessly; many analysis tasks carried out rather superficial understanding domain. Whereas traditional professions relied mandates, scientists, computer derive legitimacy from “transformative contributions” (Croidieu Kim, ability construct effective non-digital Like any group, once professionals establish foothold organization, likely apply problem areas (Loscher At times, form company culture (Canato, Ravasi, Phillips, 2013; especially add data-centric roles, Chief Officer (CDO) (Firk, Hanelt, Oehmichen, Wolff, includes foremost rapidly developing hardware. role technological advances discounted; impressive experts. past decade so, biggest taken boundaries generic computing tools.1 machine learning approaches used been available decades, enable cheaper, faster, easier, secure implementation parts processes. diffuse extremely geographic industry boundaries, typically made globally infancy. significant cadre experts postgraduate degrees geographically concentrated. increasingly free Internet, shown still slowly (Tambe, 2014). capabilities depend assets held Hitt, Ireland, 2007), systems, talent customers partners (Cepa 2019, primary event enabled Uber launch ride hailing service 2010 had place iPhone 2007. success meant sufficient number potential drivers Internet-connected global positioning system (GPS) device pocket. insightful influential article, Yoo, Henfridsson, Lyytinen (2010) elaborated layered modular architecture allows continuous distributed innovation, where creatively firm boundaries. Managerial Norms Beliefs do passively absorb tools nor automatically into advanced our lived reality (Orlikowski 2008), ignored changing govern investment (Bodrožić Adler, Adopting tends resources allocated management. settings entirely kinds practice preceded (Dalpiaz, Rindova, 2016; Lounsbury, 2007; Spicer Sewell, 2010). my recent book (Schildt, 2020), suggested driving centrally include ideals principles. First, pursue what call seek “understand” organization’s internal customers, partners, environment collection data. analyses inform nonroutine deliberations, generated high frequency support Second, real time, so optimally insights omniscience. redesign optimization models, order employees, machines, customer experience. am suggesting explicit consciously follow, idealized synthesis attitudes evident discourse propagated consulting advocates (see, e.g., McAfee Brynjolfsson, 2012). According mindset, failure analyze streams operations perceived bad Managers further adopted (or if you prefer) cultures, operating models. stories (of, Amazon, Google, Netflix, Spotify), materials, providers’ whitepapers AWS, Microsoft, Salesforce). More recently, schools universities jumped in, launching somewhat belatedly own strategy, transformation, science courses. reflected shared concepts, “DAU” “MAU” (daily monthly active users), make sense present future opportunities. host guiding principles, including value pursuing agility, centricity, modularity, connect ecosystems (Jacobides, Cennamo, Gawer, Schilling, 2000). Some explicitly normative attributed team-based belief structure mirror architecture. Societal meta-narratives important factor shaping attractiveness investments organizing. There certainly consensus will located (including “edge cloud”), mobile devices, accessible other systems via interfaces (APIs). Specific narratives visions “programmable world,”2 industrial Internet,” “Industry 4.0,” well accounts 5G augmented reality/virtual (AR/VR) Bitcoin, categorized parallel provide opportunities flexible appropriation entrepreneurial strategic (Vergne Swain, 2017). critically analyzing contributing elaboration. path exemplified theorizing decentralized (Vergne, 2020). regarding prospective. efficacy rely analogies projections (Garud, Lant, borrow heavily discourses entail projections, hopes, commitments lack direct grounding evidence widely cadres popular fame interest giants “unicorn” start-ups. Not ago, investors poured money WeWork hopes exploiting “scalable model” attain profits exceeding estate companies, prompting ill-fated networking app (Brown Farrell, As self-managed gaining prominence, employees autonomy hold decision-making powers, becoming carriers organization. Data-centric aesthetic motivate among non-managers (Saifer Dacin, irrespective unpredictable challenges gathering, learning, general. Products Services final element customer-facing offerings technology, innovation” (Hinings culminations depend, some extent, preceding three New quickly previous sources revenue profit obsolete, thus upending entire (Kumaraswamy, Garud, Ansari, manifestation digitalization, key catalyst process; clear feedback loops exist discussed above. disruptive commonly receive extensive media coverage, garnering front-line successful introductions promote data-related expertise, greater fields, society large. Particularly Europe, envy US-based “big tech” fueled education infrastructure European Union (EU)’s “Digital Europe” program worth €7.6 billion). Commercial successes most source times: money. nature might able (Friedland Alford, 1991; Thornton, Ocasio, helpful capturing mindsets because “adopts practice-theoretical … focusing symbolic intertwined arrangements” Steele, Wang, Toubiana, 2021, 262). case follow common as: socially constructed, historical pattern assumptions, values, rules individuals produce reproduce subsistence, organize time space, meaning reality. (Thornton 1999, 804) seems fit bill, arguably equal footing previously identified structuring goes mere algorithmic workers (Frenken, Vaskelainen, Fünfschilling, Piscicelli, prescribes knowing flows, calculation, It cultural consisting ideals, identities, enact calculable, optimized, adaptable. prevailing shape (Berente, Lyytinen, Maurer, 2019; Burton-Jones Qiu, Gopal, Hann, several values evaluation criteria span experts’ Many originate domain engineering: objectivity (the ideal evaluations independent observers), modeling task domains constant measurements, modularization tasks, preoccupation optimization. Over become idea instantaneous controllability everyday software, world” observation venture capitalist Marc Andreessen famously 2012 “software eating world.” above, engrained reinforce, legitimize, give identities above prescriptions numerous omnipresent (pun intended) instrumental leading Amazon’s obsession (Stone, 2013), spreading large government agencies. reinforce each field levels (Alaimo, Analyses models based real-time lucrative implement automation. same increases usefulness flows algorithms. remarking none 1 itself. Technological remail disconnected acting external force core (Kallinikos Hasselbladh, 2009) nodes web meanings, like spurns worn famous cocks (Geertz, 1972). Likewise, remain compartmentalized top team culture. But suggest, aspects converge objects no longer forces field-level 2021), Empirical investigation theoretical mutually reinforces, captured arrows 1, promising line van Rijmenam Complexity A stream literature relates complexity plurality (Greenwood, Kodeih, Micelotta, 2011; Kraatz Block, coexistence multiple conflicting demands actors. stands contrast tensions why respond Table Comparison Established Logics With Digitalization, Focusing Their Effects Within Organizations. Professions Bureaucracy Finance Market Central Pursuit Loyalty toward profession Impersonality predictability Maximizing net Improving market position Root metaphor Simulacrum Meritocratic community Machine Portfolio Trader Sources authority Analysis Mandate Role hierarchy Power allocation capital Relative performance Key Real-time metrics Expertise, Reliability, Return investment, cost Revenue, margin, growth Iconic Modeling, optimization, Peer-review, authoring reports statements Performance review, goal-setting, Financial calculations, accounting, investor relations Marketing, product development, sales Conception employee roles Supervising Applying relevant Carrying predetermined policies chosen Identifying meeting needs demand Coping uncertainty Agility perceiving reacting them Field-level collusion, maintenance maintenance, conforming Diversifying ventures, products, Developing minimizing costs preposterous attempt summarize historically accumulated cover whole few cells table, done exactly focused consider for-profit operate, drawing particular Fligstein’s (1990) For example, bureaucracy, markets, finance seem fine-grained manner sometimes corporate logic.” case, discussion detached national crude characterizations foolish assume strong commonalities family resemblance instances “bureaucracy” globe. Despite reservations, believe table approximately captures different older managing uncertainties, concern leadership prescribe reasserting tradition conserving solutions uncertainty, proactive stance prescribing agility rapid adaptation. predicting outcomes (digital omniscience), whereas allow optimal adjustments omnipotence) conditions. relationships “incumbent” escaping simplistic characterizations. Consider, conflicts financial prioritizes generation generative resource innovation (Nambisan Thomas Tee, 2021) exploited long-term envisions deep interconnectedne