RaCE: Managing Radical Technology-Driven Change in Established Firms

Technological development is triggering fundamental changes across industries. Leaders of established firms express a need to rapidly respond to a changing landscape in fierce competition with agile start-ups on the one hand and large-scale global technology platform providers on the other. There is a clear sense of urgency for change in established firms, yet substantial uncertainty on how to effectively respond to such shifts in the external environment. During the time span of this research project, the world faced an external shock in the form of a global pandemic (2020-2021) and Europe experienced an energy crisis (2022-) as well as war (2022-). Each of these external shocks have increased the need for fundamental change. Whether triggered by strategic plans or external shocks, radical change involves uncertainty and ambiguity. It alters the existing power balance and tends to trigger resistance, both within and around the firm. Established firms with a legacy of good performance face particular challenges, as they tend to develop cultural and structural inertia. Yet, faced with new technology and fierce competition, established firms will need to develop new business opportunities that potentially cannibalize existing ones, while simultaneously improving their current business. In contrast to start-ups, established firms must successfully balance these two seemingly contradictory processes. This can create tensions and dilemmas. There are several well-known solutions to the challenge in renewing while maintain the existing business, such as: designing an ambidextrous organization (which refers to organizing existing and new business in separate in-house units), acquiring firms that are innovative or possess novel capabilities, spinning-off innovative units, or adopting an ecosystem approach to radical change. We base our research on these well-known organizational solutions while remaining open also for other ways to respond to external pressure for change. The book "Innovation Capacity" (published in Norwegian in 2022 and in English in 2023) summarizes the knowledge generated within the project on organizational solutions for radical change and innovation. We present a number of different organizational solutions that can contribute in developing capacity for innovation and illustrate the solutions with contemporary cases from Norway and the Nordics across industries. For each organizational solution, we present benefits, challenges and conditions needed to develop innovation capacity. Our findings suggest that several different organizational solutions for radical change and renewal often co-exist. Many established firms are currently also adopting agile ways of working in an effort to accelerate innovation and implementation of change, and while this appears to show a number of benefits (as well as challenges), agility does not in and of itself result in radical change. However, when agility is combined with other solutions (e.g. ambidexterity), radical change may occur. Covid19, with its implications on social distancing and working from home, has accelerated adoption of technology and triggered radical change and innovation, but it has also diverted attention from other ongoing radical changes in some firms. While technological development was a key driver for change early in the project, environmental and social sustainability as well as geo-political challenges have emerged as increasingly important drivers for change.

Realized (and expected) results based on project findings: - Increased awareness among leaders on how to renew the established firm. A conceptual framework illustrating various organizational solutions for and leadership approaches to radical technology-driven change has been developed along with theoretical explanations and identification of the contingencies involved. This has been communicated broadly at industry conferences, in top management meetings and in the traditional and social media. - More effective team work with improved collaboration. A practical tool for effective teams "Start smart" has been developed. The tool is available online and has been adopted by a number of firms, including partnering firms, AFF, University of Bergen and many others. - Change management skills at middle management level. An app is currently under development to increase awareness and change agency skills at middle management level. - Partnering firms have collaborated closely in the research process and benefits include immediately drawing insights from research (e.g. on complex partnerships, agility) in their ongoing strategic decision-making at top management and board level and thereby increased the organizational change capacity. - Young full-time students and senior executive scholars have and will learn from the research through the development of a number of teaching cases - People at large learn about research findings through active involvement in media chronicles and participation in podcasts.

Technology has always been a key driver of organizational change and development. Currently digitalization is triggering changes across industries. Firms respond in various ways. While some use it to increase efficiencies, others use it to connect and collaborate with their customers in novel ways or to change the rules of the game altogether by redefining the industry and the firm's role within it. In this project, we move beyond purely effciiency-related responses and study radical change that also involves some aspects of innovation, such as rethinking organizational boundaries, customer collaboration, business partnerships and/or introducing novel business models. The need for radical change and innovation appears well acknowledged among Norwegian leaders; what is lacking is research-based knowledge on strategic and organizational solutions by which established firms can efficiently respond and adapt to, and perhaps even proactively shape, radical changes in the external environment. Facing radical change, established firms will need to develop new business opportunities that potentially cannibalize existing businesses and at the same time may be even initiate work to improve them. Not changing is not an option. This requires an ability to exploit the existing business while simultaneously exploring new opportunities. Because of the fragmented nature of research on how established firms successfully respond to and manage radical technology-driven change, the project will in collaboration with the industrial partners, Deloitte, DNB, Laerdal Medical and Telenor, carry out research addressing four different solutions to this dilemma, which all involve re-designing organizational boundaries. In addition to (a) rethinking firm boundaries, successfully managing radical change requires (b) an understanding of process dynamics, (c) effective leadership across shifting boundaries, and (d) the ability to renew capabilities within the firm.