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Situation faced: ABB faced four decades of successive digitization of core technology in the process automation business, i.e., platform technology for process control. The infusion of digital technology into the physical production environment generated recurrent disruptions of the business model calling for drastic adjustments that lead to an emergent transformation process. Digitization of ABB’s business scaled and traversed multiple social and technical settings whereby the platform evolved from product-focused into sustaining a digital ecosystem comprising a complex system of actors and value generation processes.
Action taken: Successive digitization with four distinct strategic foci; (1) replacement of analogue equipment for digitally enabled efficiency in restricted and well defined products and processes, (2) internal integration of information systems for efficiency in maintenance and engineering, (3) open and semi-open boundary resources for improved data integration and information services with critical partners, and (4) orchestration and adaptation of externally induced technical innovation on the platform to enable data-driven operations.
Results achieved: ABB transformed their operations and successfully adapted to digital disruption by adopting new business models. The company managed the threat of digital disruption by newcomers and incumbents in the software industry, despite the constant dissolution of product boundaries and the risk of unbundling of value creation. ABB is now a global leader in the process automation industry, and the digital agenda and capabilities have been integrated into the mission and business model.
Lessons learned: (1) Physical and digital architecture enables different dynamics (episodic change vs. emergence), hybrid architecture is subject to clashes between these logics. (2) Digitalization is cumulative and emergent. In this case, it happened across four phases categorized by shifts in functional levels, decision rights, combinatorial options, boundary configurations and value propositions. (3) Since digitalization inverts the organization’s strategic emphasis, collaboration across boundaries becomes a pivotal capability to succeed. (4) Through new functionality and more sophisticated responses, digitalization increases organizational capacity to deal with complexity, but also triggers new types of stimuli. (5) When faced with significant tensions, signals from management generate amplifying deviation loops with unexpected consequences (butterfly effect).
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- Digital Transformation of ABB Through Platforms: The Emergence of Hybrid Architecture in Process Automation
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