Mapping digital transformation activities to the ISO ......comprises both external environment, e.g. PESTLE analysis and strategic foresight, and internal factors, e.g. interested

Mapping digital transformation activities to the ISO-56002 innovation management standard: A literature review

Rangsan Kiatpanont

King Mongkut’s University of Technology Thonburi (KMUTT) 126

Pracha Uthit Rd., Bang Mod, Thung Khru, Bangkok 10140, Thailand

E-mail: [email protected]

Abstract: While there are many innovation management standards published

during the last decade, only a few pieces of literature discussed their practical

implication. Digital innovation, on the contrary, is a very active field for both

scholars and practitioners. There is no well-defined framework to guide the

transformation journey. Empirical cases show many digital products, processes

or services are created as a result of innovation projects. Therefore, the guide for

innovation management should be able to navigate the digital transformation

journey. This article confirms the idea above by mapping digital transformation

(DX) literature into the framework provided by ISO-56002 innovation

management standard.

Keywords: Digital Transformation (DX); Innovation Management standard;

ISO-56002; innovation management system (IMS); innovation strategy;

transformation strategy; digital capability; digital leadership; digital culture;

digital transformation process

1 Introduction

Innovation management standards, such as BS-7000 (British Standard, 2008), CEN/TS-

16555 (European Committee for Standardization, 2013) and ISO-56002 (ISO, 2019),

provide a guideline for companies to encourage and evaluate innovation development

starting from ideation to implementation. Surprisingly, scholars did not interest much to

discuss their implication in the practical context (Cerezo-Narváez et al., 2019). For

instance, by looking for the keyword “innovation management standard”, table 1 shows

less than 100 research articles during the last 10 years.

Table 1 The number matched articles in major search engines (result as of 28/01/2020)

Search engine for academic articles The number of matched articles

Google scholar 56

Microsoft academic 23

Web of Science 3

Sciencedirect 3

This paper was presented at ISPIM Connects Bangkok – Partnering for an Innovative Community, Bangkok, Thailand on 1-4 March 2020. Event Proceedings: LUT Scientific and Expertise Publications - ISBN 978-952-335-465-4

On the other hand, the concept of digital transformation (DX) is perceived as an

unavoidable process for organisations to stay in their business; both scholars and

practitioners are very active to develop concepts within this field. However, the field itself

is relatively new, and no well-defined framework was established yet, thus, practitioners

are struggling to find their way for the transformation journey.

As a result, the main research objective of this paper is to map current literature in the field

of DX to the latest ISO-56002 innovation management standard by wishing to leverage the

guideline provided by ISO-56002 for implementing DX. For example, how to start their

transformation activities? What kind of systems should be put in place for driving

transformation?

Practitioners would benefit from this study due to they would have a systematic approach

for implementing DX. Moreover, by relying on innovation management standards,

companies would also benefit from mastering the innovation development process and

implementing the innovation management system (IMS) in place.

Besides, the integration of theoretical concepts between innovation management standards

and DX is currently limited within the academic literature. Researchers from both fields

could benefit different granularity provided by both topics.

2 Previous Work

Digital Transformation

Digital technologies are the main driver for disruption by disrupting the competitive

landscape, altering the consumer behaviour and expectation as well as increasing

availability of data (Vial, 2019). As a result, DX is perceived as an unavoidable process for

organisations to stay in their business by innovating value proposition, customer

experiences and internal process automation. However, while DX is a topic in favour

among practitioners. Reis et al. (2016) revealed that it has received little attention from the

scholar, at least until 2014. This statement is partially true because similar concepts were

previously developed, IT-enabled transformation since 1994 (Venkatraman, 1994) and

ICT-enabled transformation since 2009 (Weerakkody et al., 2009), although they rather

focus on business integration and automation.

To understand what is DX, many researchers have conducted systematic literature review

(Beck et al., 2018; Bockshecker et al., 2018; Morakanyane et al., 2017; Reis et al., 2016;

Schallmo et al., 2017). Nevertheless, there is no consensus among them yet. For example,

while some researchers consider it as a continuously evolutionary process, others also

consider it as a radical paradigm-shifting for companies. However, some agreement still

can be noticed as the use of digital technologies to cause changes in either business

operation, customer engagement or value realisation.

Also, Bockshecker et al. (2018) reviewed the differences among three keywords:

digitisation, digitalisation and DX. Digitisation referred to the technical aspects of

changing analogue signal into digital information. Digitalisation, on the other hands,

focused on how digital technologies affecting the organisations. Finally, DX rather focused


on the processes of organisational change driven by the development of digital

technologies.

However, while DX implies the process of change, very limited literature contributes to

suggest the practical guideline to perform the transformation. For example, Hess et al.

(2016) explored DX options by providing a set of strategic questions. Sebastian (2017)

mentioned three critical success factors for DX comprising a digital strategy, an operational

backbone and a digital service platform. As a result, even if companies are well aware of

the necessity of transformation, the implementation might not be straight forward because

it is not very clear regarding how to start and what are the steps and implementation

milestones.

Innovation Management Standards

Innovation is widely recognised as a critical factor for organisation survival (van der Panne

et al., 2003). Innovative companies are confirmed to be better in terms of both financial

performance and the resilience level (Carvalho et al., 2016). However, a very limited

number of companies are successful to innovate themselves. Stevens & Burley (1997) analysed patent activity and proposed a success curve. It illustrates the survival rate during

new product development (NPD) starting from 3,000 raw ideas to only four major

development and only one commercially successful. Even though many empirical research

articles subsequently confirmed the actual failure rates are within the range of 35 to 50 per

cent (Asplund and Sandin, 1999; Castellion and Markham, 2013; Cozijnsen et al., 2000),

the number is still considered very risky for business. As a consequence, the business needs

a systematic approach to manage innovation development (Timmerman, 2009).

Cerezo-Narváez et al. (2019) compile a list of innovation-management-related standards.

The list illustrated that non-European countries including the United State, Japan, Korea

and China do not have their standards for innovation management yet while European

countries are very active in this topic. For examples, The BS7000-1, a British standard

guide for managing innovation, was published since 1989. Next, other European countries

including Spain, Portugal and Ireland published their standards during 2010, before the

European standard, CEN/TS 16555, in 2013. Recently, the International Organisation for

Standardisations published its ISO 56002, the ISO standard guide for innovation

management system in 2019.

ISO56002 (ISO, 2019) provides a standard guideline for managing innovation within an

organisation. Figure 1 illustrates the core components suggested by the standard. First, the

context of the organisation should be analysed by considering both internal and external

issues. For example, the organisation has to review its vision, strategic direction and core

competencies as well as to scan external environments that possibly affect the organisation

direction. Next, the innovation management system (IMS) requires a high level of

leadership and commitment from organisation leaders. In other words, the leaders need to

establish both innovation vision, strategy and policy which are translated into innovation

objectives for each organisational unit. Moreover, the leaders need to establish the IMS to

drive organisational units archiving their innovation objectives. The IMS mainly comprises

of the innovation portfolio, the innovation process, to transform innovation initiatives to

value realisation, and other supporting activities. Last but not least, ISO56002 considered


IMS as an evolving system. The performance of IMS itself has to be evaluated for planning

further continuous improvement.

Figure 1 An illustration of ISO56002 innovation management system guideline

3 Methodology

Firstly, according to ISO-56002 in Figure 1, four groups of activities have been extracted:

(1) Analyse Context of Organization, (2) Establish Innovation vision, strategy and policy,

(3) Establish an IMS and (4) Continuously Improve the IMS. Secondly, topics under each

step and the relevant search keywords are listed as shown in Table 2. Next, I used these

search keywords to find relevant DX literature from Google scholar with a preference on

those papers with high citation count. Finally, I have reviewed these literature one at a time

to check their alignment with ISO-56002 innovation management standards. As a result,

by linking these two concepts together, organisations should be able to visualise the whole

journey of DX more systematically.


Table 2 The search keywords derived from ISO-56002

Steps Topics Keywords = “digital transformation”

AND

Literature Review Literature Review “Literature review”

1. Analyse Context

of Organization

External environment “external”

Internal factors “digital capability” OR

“digital leadership” OR

“digital culture”

2. Establish

Innovation vision,

strategy and policy

Innovation Vision “vision”

Innovation Strategy “strategy”

Innovation Policy “policy”

Innovation Objectives “KPI”

3. Establish an

Innovation

Management

System

Innovation Portfolio “portfolio”

Innovation Process “process”

Supporting Resources “resources” OR “enabler”

4. Continuously

Improve the IMS

Improvement “metrics” OR “maturity”

4 Results

Step 1:Analyse Context of Organisation

Similar to Mintzberg’s (2003) strategic management framework, the ISO-56002 standard

suggests to start the process by analysing the context of the organisation. This step

comprises both external environment, e.g. PESTLE analysis and strategic foresight, and

internal factors, e.g. interested parties, their needs and expectations, vision, strategic

direction, core competencies innovation performance in the past projects and innovation

competencies of its people. For examples, OECD (2020) published a strategic foresight

report to suggest policymakers to be aware of future challenges. Also, the stakeholder

register is a typical tool for tracking whether all interested parties have been approached

and for planning how to engage each stakeholder individually (PMI, 2017). The objective

of this step is to prepare an organisational culture that supports innovation activities. For

example, the desired culture is characterised by openness, curiosity, user focus,

collaborative, encouraging experimentation and learning from mistakes. To enhance this

step for DX, two groups of activity are expatiated: scanning external environments and

assessing internal capabilities.


External environment

Zhu et al. (2006) classified external players in the competitive landscape into two groups:

horizontal competitors and vertical trading partners. In other words, if more competitors

use new digital technologies, more competitive pressure will drive the firms to also adopt

new technologies. On the other hands, the digitalised operations presumably require more

or less support from partners either up and down the value chain, their digital readiness

will unavoidably affect the firm’s digital readiness. Moreover, the world economic forum

(2020) also published several reports to summarise data transformation insights within

specific industries. Last but not least, due to the use of digital technologies is pivotal for

DX, technology foresight is inevitable. For examples, Sebastian (2017) mentioned the key

digital technologies by using the acronym SMACIT, pronounced “smack it”, standing for

social, mobile, analytics, cloud and Internet of things. Schallmo et al. (2017) illustrated a

digital radar containing digital enablers and their applications in four transformational

areas. UNIDO (2003) suggested using expert and stakeholder panel for technology

foresight while Turovets et al. (2019) combined the classical expert validation with

advanced text-mining to identify the most promising technologies.

Digital capability

Nadeem et al. (2018) conducted a systematic literature review to compile ten organisational

capabilities needed for DX. Briefly, organisations have to shift from silo-based operations

to collaborate with cross functions or even external partners. Specifically, dynamic

capabilities, reflecting the ability to learn and the ability to change, were considered the

most critical (Warner and Wäger, 2019). Mihardjo and Rukmana (2018) confirmed this

idea and conceptualised it as cultural intelligence (CQ). Therefore, the teams should have

a diverse skill set (Li et al., 2018), and prepared for a high degree of turbulence. To

effectively create digitally-enabled customer experiences, organisations are obligated to

deeper analyse their value propositions, with the help of data analytics capabilities, so IT

capability is also crucial (Nwankpa and Roumani, 2016). As a result, operational processes

have to be agile, flexible and continuously developed.

Digital Leadership

Leadership is crucial in times of changes. As a result of reviewing the literature, Mihardjo

and Rukmana (2018) defined digital leadership as “a combination of transformational

leadership and the use of digital technology to create value to the firms”. Schuchmann and

Seufert (2015) highlighted the digital leader role to act as convincing visionaries and to

create the driving forces for transformation. Moreover, due to high degree of uncertainty,

the VUCA environment (Lawrence, 2013), becomes a new norm, leaders must

acknowledge failure as an opportunity to learn and a prerequisite for success (Kane et al.,

2015). Mihardjo and Rukmana (2018) complemented the concept by adding a role to foster

a digital culture that embraces technology as well as harness value from investment by

promoting data-driven decision-making. In addition, Rüth and Netzer (2019) have

compiled a list of digital leadership competencies including (1) successfully communicate

with people from various cultures, (2) create ideas being attractive to stakeholders, (3)

choose the right managers to drive changes and (4) persuade employee to better deal with

heterogeneity and uncertainty.


Digital culture

Kane et al. (2015) mentioned technology does not drive transformation, leadership and

culture do. On the other hand, selecting the right people is necessary for cultural changes

(Schuchmann and Seufert, 2015). Henrich (2001) acknowledged their ideas; by relying on

Rogers’s (1995) diffusion of innovations theory, he explained that not only choosing the

right early adopters is critical, but creating a biased cultural transmission also significantly

contribute to cultural changes.

In addition, similar to the agile manifesto (2001), Hemerling et al. (2018) defined five core

elements of a digital culture consisting of (1) Look outside, not inside, (2) prize delegation

over control, (3) encourage boldness over caution, (4) emphasizes more action and less

planning and (5) values collaboration over individual effort.

Step 2:Establish Innovation vision, strategy and policy

According to ISO-56002, leadership and commitments are critical for implementing an

innovation management system, and innovation policy is a tool for top management to

articulate and communicate those commitments (ISO, 2019). In other words, after

analysing both internal setting, stakeholder requirements, experiences from previous

innovation initiatives and external environment in the previous step, organisations should

be able to address opportunities and to draw their innovation vision representing a future

desired state. Kane et al. (2015) confirm this idea by suggesting to start formulating DX

strategy by working backwards from the future vision rather than current capabilities.

Next, top management has to establish an innovation policy and strategy to show their

commitment to satisfying applicable requirements. The digital strategy provides strategic

direction to realised innovation vision. For examples, The BCG (2020) suggest four pillars

of DX comprising digitising customer relationship, building digital talent and organisation,

harnessing data and advanced technology, and Digitizing Operations and Automating

Processes. Similarly, Nadeem et al. (2018) have also summarised six digital business

strategies by including exploring new potential technologies, building dynamic capabilities

in response to environmental turbulence, focusing on business integration and leveraging

the digital ecosystem to collaborate with external partners.

Last but not least, these innovation vision, strategy and policy will later be translated into

specific innovation objectives at relevant organisational units. The KPI-driven approach is

a common management practice for monitoring innovation progress (Sawang, 2011). For

instance, Kotarba (2017) has collected key metrics for monitoring DX activities in both

macro and micros levels. However, due to innovation management encouraging the

organisation to learn from mistakes, the KPIs should be used as a tool for tracking progress

rather than punishing failures.

Step 3:Establish an Innovation Management System

Innovation Portfolio

The ISO-56002 (ISO, 2019) suggests to establishing innovation portfolio for balancing risk

and return, ensuring consistency between initiatives, confirming alignment with the


innovation strategy, optimising resource utilisation and communicating the overall

progress and achievement to management and interested parties.

Likewise, Bonnet (2016) suggest managing DX activities as a strategic portfolio over time

in order to balance the need for short-term improvement and longer-term strategic changes.

Also, the portfolio improves the risk profile of the system by mixing initiatives from four

groups with different risk levels, namely, digital reengineering, value-chain

transformation, digital value proposition and business model reinvention.

Innovation Process

The ISO-56002 (ISO, 2019) has illustrated the innovation process as a bottom-up non-

linear process. For examples, everyone in the organisation is encouraged to proposee

innovation initiatives. Organisation units should determine a plan to achieve their

innovation objectives by asking the following key questions: What will be done? Who will

be involved? What will be required? Who will be responsible? When it will be completed?

How the result will be evaluated? The management, on the other hand, has a role to

establish decision-making structure and to provide resources and supporting service, such

as coaching. Next, innovation initiatives are developed through several states, namely,

identify opportunities, create concepts, validate concepts, develop solutions and deploy

solutions. Moving among these states is flexible in a non-linear fashion. Similar to the

concept of the minimum viable product (MVP) from the lean startup approach (Ries, 2011),

the ISO-56002 standard suggests starting concept validation with the most critical

uncertain assumptions by conducting experiments to reduce uncertainty. Also, making

mistakes is considered acceptable, but the lesson learned should prevent the organisation

from having the same mistake repeatedly.

Comparing with the DX process, on the other hand, ideas from scholars regarding the

transformation process are far from the consensus. For examples, Bonnet (2016) introduced

four implementation options based on the buy-make decision and the implementation

speed. Hess et al. (2016) proposed another set of options based on eleven strategic

questions. Schallmo et al. (2017) presented a roadmap for DX by including the steps of

‘digital potential’ and ‘digital fit’ for generating solution options and evaluating the options

respectively. Fuchs and Hess (2018) employed agile concepts for the large-scale

transformation by phasing the transformation activities into episodic multiple agile phases. Issa et al. (2018) classified four levels of implementation according to organisational scope

ranging from ad-hoc project to inter-organisational level. Bondar et al. (2017) leverage the

Zachman framework (Zachman, 2008) to align DX activities with enterprise architecture.

Supporting Resources

The ISO-56002 (ISO, 2019) mentions several transformation enablers as supporting

factors. For examples, similar to typical projects, time, money and people are critical for

project execution. In other words, organisations have to set up approaches to ensure these

resource fulfilment according to the requirements of the projects. Besides, due to

innovation projects normally deal with changes affecting both intra-organisations and

external partners, stakeholder management and communication management, including

both verbal and documented information, are also pivotal for innovation projects.


Moreover, since a long-term goal of the innovation management system is to build

organisation innovation capabilities, strategic intelligence management, knowledge

management and organisational competency management are still unavoidable.

By considering organisation structure, to establish a dedicated organisational structure for

driving IMS is possible, especially in the case that they expect radical changes to their

current offering, or they require different organisational setting for driving projects. Also,

the standard suggests allocating dedicate financial resources (e.g. fixed percentage of

annual revenue) and establish funding principle to balance investment across different time

horizons, different degrees of risk and different types of projects. Last but not least, unlike

typical projects, organisations have to concern intellectual property management as a tool

for either business protection or business exploitation.

The above guideline conforms with DX literature. For instance, Küng (2008) mentioned

people as one of the most challenging factors for DX. Her suggestions for the management

is to incrementally insert digital technologies into the organisational DNA. Active culture

management, again, is a critical success factor. For instance, people in the organisation

should have ‘pro-digital culture’ to consider the digital arena as an opportunity rather than

treat. To build milestone oriented agile teams with cross-functional members and a degree

of autonomy is proven to increase agility and innovation.

Step 4:Continuously Improve the Innovation Management System

The ISO-56002 (ISO, 2019) considers the IMS as an evolving system by following the

Deming’s (2000) PDCA cycle. Both the effectiveness and efficiency of the IMS should be

reviewed, such as the consistency among innovation objectives and innovation initiatives,

the number of accomplished innovation initiatives and the utilisation or adequacy of the

supporting resources. Practically, the organisation should identify relevant innovation

performance indicators as well as the methods to monitor, measure, analyse and evaluate

these metrics. The standard classifies indicators into three groups: input-related,

throughput-related and output-related. Similarly, Kotarba (2017) collects innovation

metrics in both macro and micro levels.

Furthermore, To set up a formal structure to evaluate IMS performance, internal audit and

regular management review are recommended. The Valdez-de-Leon’s (2016) seven-

dimensions instrument to measure the digital maturity of an organisation can contribute to

these evaluation activities because it can inform management if some dimensions are

ignored or underperform. Moreover, to visualise improvement roadmap in the long run,

Solis (2016) proposed a roadmap for improvement by defining six levels of

transformational magnitude ranging from doing nothing to innovating or die. Berghaus and

Back (2016) presented five levels of digital to guide organisational move starting from

organisation-wide transformation campaign to data-driven enterprise.


5 Discussion

Healthy alignment

Most, if not all, of typical strategy management, recommends starting the strategic projects

by scanning both internal context and external environment, then to draw a vision

representing the desired future state. These step above are well-addressed by both ISO-

56002 and DX literature. Moreover, I am aware of several healthy alignments between

ISO-56002 guide and DX literature, and the same activities should benefit both innovation

and DX projects. For example, the heart of digital culture, by promoting engagement with

customers and learning from mistakes, perfectly aligns to the desired culture for the

innovation management system. The agile and creative characteristics of digital leaders are

also preferable or innovation projects. In both cases, the portfolio is considered to balance

risks and benefits as well as investment in many strategic projects. Last but not least, time,

money and people are mentioned as critical enablers in both groups of literature.

Independent divergence

The DX process is the area where have many various ideas. By considering just within DX

literature, there was no agreement regarding how the DX process should be looked like.

This might imply that not enough successful transformation cases were studies, so the

common patterns cannot be extracted.

Moreover, regarding the definition of both DX and innovation management standard, there

is one big misalignment between them. In other words, the innovation management

standard suggests creating an IMS system to facilitate innovation development within the

organisation. This system is designed to work iteratively, project-by-project; thus, in

theory, it never stops working and also continuously evolving. On the other hand, DX is

defined as an endeavour to transform an organisation from a current state into the future

digital version, so its definition implies that the transformation process should be finished

when the digitally transformed organisation has been archived.

Helpful complement

DX requires digital leadership to insert digital technologies into organisation DNA. For

examples, people within an organisation should be aware of the potential of digital

technologies. They should also be skilful in IT capability. The organisation should rely on

data-driven decision making. Digital collaboration platform contributes to sharing

knowledge and building organisational capabilities. While these concepts are never

specifically mentioned in ISO-56002, it clearly contributes to creating a suitable culture

for innovation development. Moreover, the idea of the digital maturity model is interesting

whether it can be extended for measuring the maturity of the IMS.

Hidden gaps for further research

To align DX literature with the framework suggested by ISO-56002 reveals many research

gaps. For instance, as mentioned earlier, the digital transformation process is a mysterious


area where practitioners have to fumble their way themselves. Moreover, even if the idea

of using the ISO-56002 framework for both innovation projects and DX project sounds

convincing, it is not very clear how the implementation result would look like? Will people

in the organisation confuse from having two kinds of project executing together within a

common framework, not even yet considering the different nature of both project types as

mentioned earlier. Last but not least, to distribute DX literature into boxes of ISO-56002

reveal many topics which require more research work. For example, no systematic

literature review was conducted for digital capability, digital leadership and digital culture.

In fact, this paper itself can also be improved by using a systematic literature review

approach.

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Mapping digital transformation activities to the ISO ......comprises both external environment, e.g. PESTLE analysis and strategic foresight, and internal factors, e.g. interested