management innovation and adoption of emerging technologies: the case of cloud computing

Management Innovation and Adoption ofEmerging Technologies: The Case of

Cloud Computing

Saeed Khanagha1, Henk Volberda1, Jatinder Sidhu1 and Ilan Oshri2

1Strategy and Entrepreneurship, Erasmus University, PO Box 1738, Rotterdam, the Netherlands2Loughborough School of Business and Economics, Technology and Globalisation, Loughborough, United Kingdom

This paper examines the effect of management innovation on a firm’s ability to effectively adopt an emergingcore technology. Organizing for technological change is often associated with structural dilemmas for incumbents:while structural contingent solutions such as spatially separated units and parallel organizations have beenfrequently discussed as enablers of handling contradictory requirements of existing and emerging technologies,there is empirical evidence that such solutions are likely to be either unfeasible or unsustainable in the cases ofcore technologies. Our analysis on the adoption process of a new core technology by a large telecommunicationfirm reveals the role of management innovation in fulfilling seemingly paradoxical structural requirements ofknowledge accumulation in a dynamic knowledge environment. We discuss how a novel structural approachenabled the organization to overcome rigidities in the existing routines and foster a favorable environment foradoption of cloud technology and to overcome organizational challenges, with which the firm’s conventionalpractices failed to commensurate.

Keywords: management innovation; technology adoption; organizational routines; organizational structure

Introduction

As unrelenting technological change and globalizationspawn new threats and opportunities, there is growingscholarly and managerial interest in the notion of man-agement innovation, that is, the conception and imple-mentation of novel management ideas which couldpotentially contribute to the strengthening of a firm’scompetitive position (Birkinshaw et al., 2008; Vaccaroet al., 2012). Birkinshaw et al. (2008) define manage-ment innovation in their seminal paper as a concept thatrelates to the introduction of new management practices,processes, or structures intended to further organiza-tional goals. This paper contributes to this emergingscholarly discourse by exploring the role of managementinnovation in aligning a firm with the contradictoryrequirements of a changing technological environmentin which predictable and routinized managerialresponses become less effective. In particular, we lookinto the effect of management innovation on the rela-tively under-researched adoption process of emerging

core technologies where, despite their severe conse-quences on the incumbents’ survival, associated organi-zational challenges (see Taylor and Helfat, 2009) are notfully explored and understood.

When an alternative core technology emerges, it maytake several years until the time that it completelyreplaces the old one and becomes the industry standard(Anderson and Tushman, 1990). The concurrency of thetwo technologies has important organizational implica-tions in established firms. In particular, in the absence ofprofitability expectations in the short term, experimen-tation and knowledge accumulation becomes central tothe exploratory activities on the emerging technology(Christensen et al., 1998). The co-existence of emergingand existing core technologies obliges alignment withboth stable (existing) and turbulent (emerging) knowl-edge environments. Considering the contradictory struc-tural implications of stability and turbulence (Van denBosch et al., 1999), structural differentiation of the twotechnologies seems to be effective in coping with thisrequirement (Tushman and O’Reilly, 1996; Gilbert,2005). However, resource constraints and the need forthe preservation of existing complementary assets oftenmandate close structural integration or close linksbetween existing and emerging core technologies

Correspondence: Saeed Khanagha, Rotterdam School of Management-Strategy and Entrepreneurship, Erasmus University, PO Box 1738,Rotterdam, the Netherlands. E-mail: [email protected]

European Management Review, Vol. 10, 51–67 (2013)DOI: 10.1111/emre.12004

© 2013 European Academy of Management Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UKand 350 Main Street, Malden, MA 02148, USA

mailto:[email protected]

(O’Reilly and Tushman, 2008; Taylor and Helfat, 2009)and makes for a paradoxical situation for the selection ofthe appropriate structural form. This study examines therole of management innovation in handling such ten-sions between emerging and established technologiesand in ensuring sufficient amount of learning in theemerging field while maintaining the ongoing busi-nesses of the organization intact.

Although a lot of studies, anchored in evolutionary(Nelson and Winter, 1982), behavioral (Levinthal andMarch, 1993), and technology-based (Tushman andAnderson, 1986) arguments, have inquired into factorsthat affect incumbents’ abilities to respond effectivelyto new technologies, the link between managementinnovation and the incumbents’ success in the adoptionof an emerging technology has been the subject of lessfrequent inquiry. Even so, past studies do suggest thatorganizational and administrative routines and, hencean innovative change in them, might have a bearing forthe adoption of emerging technologies and vice versa.For example, Benner and Tushman’s (2003) analysis ofroutinization associated with total quality managementpractices indicates that these might hamper a firm’sengagement with novel technologies (see also Bennerand Tushman, 2002). Schroeder et al. (2002) have dis-cussed the positive impact of organizational adapta-tions, such as the introduction of new organizationalresponsibilities, teams, and control systems, on thefirms’ ability to adopt a new technology. Fleming(2002) relates HP’s success with inkjet technology to anumber of novel managerial initiatives that helped theorganization to deal with the increased risk of failureduring the exploration of the new technology. Overall,prior work hence points to a possible relationshipbetween changes in the organization and the potentialto successfully embrace new technologies. Importantlythough, because factors such as managerial attentionand identification, internal competition and groupdynamics might impede alteration in routines (cf.Tripsas, 2009; Taylor, 2010), the re-orientation of afirm towards a new technology through the introduc-tion of management innovations is unlikely to bestraightforward process.

This paper examines the link between managementinnovation and technology adoption within the specificcontext of an emerging core technology, cloud comput-ing. With reference to the information technology (IT)sector, cloud computing circumscribes a variety ofevolving interconnected technologies that center ondelivering computing services (i.e., data storage, com-putation and networking) to users in the quantitiesneeded at a particular time and location (Kushida et al.,2011). The potential implications of cloud computingfor both customers and providers of information tech-nology hardware and software are enormous (Marstonet al., 2011). Virtually all sets of actors in the IT sector

including providers of access devices, providers of infra-structure, application and content services and providersof network connectivity are affected by the unfoldingcloud computing paradigm. As different IT-sectorincumbents re-orient themselves to take advantage ofopportunities afforded by cloud computing, telecominfrastructure vendors must also re-orient themselves toalign with the changing ecosystem and be prepared toadopt the cloud-based delivery model and its underlyingtechnologies. Against this general backdrop, the presentpaper reports an inductive case study of a leading Euro-pean telecom firm, Telco (pseudonym), to develop aricher understanding of the micro-dynamics of learningand absorptive capacity that link management innova-tions to the technology adoption and integration withthe firm’s existing knowledge base and technologyrepertoire.

The paper is structured as follows. In the next sectionwe present a review of the literature to which the exist-ing study relates. After discussions on the researchcontext and methodology, we present the findingsobtained from the empirical analysis of Telco’s adoptionprocess during the period of 2008–2012. We concludethe paper by presenting discussion, conclusion, and pos-sibilities for further research.

Management innovation andtechnology adoption

Management innovation (MI) is a relatively newterm in the management literature, but the concept hasbeen discussed for decades through somewhat inter-changeable terms such as ‘organizational,’ ‘managerial’or ‘administrative’ innovation (see Damanpour andAravind (2012) for a discussion on the distinctions andthe ideas behind each of these terms). Following thedefinition provided by Birkinshaw et al. (2008) and inline with Vaccaro and his colleagues’ (2012) clarifica-tion, we broadly define management innovation as theintroduction of ‘new to the firm’ structures, processes,and practices. The factor of novelty sets a distinctionbetween change and management innovation. Forexample, as Vaccaro et al. (2012) have exemplified,downsizing is a type of organizational change thatcannot be considered management innovation, becauseit is a predictable managerial response in certain circum-stances. In other words, a change is a management inno-vation only if it modifies the ‘regular and predictablebehavior patterns’ of the firm or ‘organizational rou-tines’ (Nelson and Winter, 1982: 14) that give gestalt tothe prevalent organizational structures, processes, andpractices (see Edquist et al., 2001).

In their seminal work, Damanpour and Evan (1984)have discussed the relationship between administrativeinnovations and technological innovations and have

52 S. Khanagha et al.

© 2013 European Academy of Management

elaborated the ways through which technological changemandates organizations to adapt their structures andpractices in order to maintain the balance between socialand technical systems. Arguing that technical systemsare ‘generated and controlled by social system[s]’(Damanpour and Evan, 1984: 397), the authors providedempirical evidence for the effects of administrative inno-vations on triggering the adoption of technological inno-vations. In the same line of thought, Birkinshaw and hiscolleagues (2008) have exemplified introduction ofnovel structures as a specific type of management inno-vation that large companies utilize in order to deal withcomplex situations (Chandler, 1962; Damanpour andAravind, 2012), and in particular, to increase their abilityfor technological innovation (Fleming, 2002; Hargadon,2003; Sanidas, 2004). Despite the unique insights thatthese studies offer on the relationship between manage-ment innovation and technology adoption, the scholarlyresearch is yet to inquire why management innovationsenable technology adoption and how (Lam, 2005).Given the prevalence of incumbents’ failure in the tran-sition to new core technologies (Gilbert, 2005; Taylorand Helfat, 2009), it is valuable to further explore therole of management innovation as a potential enabler forovercoming associated managerial challenges in estab-lished organizations.

Management innovations, according to the definition,are sought to provide novel solutions for unprecedentedmanagerial problems (Birkinshaw et al., 2008). Theadoption process of an emerging core technology isreplete with such problems, in part due to the tensionsbetween ‘stable and familiar’ and ‘dynamic and uncer-tain’ knowledge environments. A tendency to supportongoing businesses may result in persisting alignmentonly with the existing technologies and consequentlydeprive the organization of a favorable environment forexperimentation and knowledge accumulation in thenew field. The consequences can be serious because, asprior research indicates, experimentation is the primaryway through which organizations engage with an emerg-ing technology in the earlier phases of the technology

lifecycle in the absence of short-term financial incen-tives (Thomke, 1998, 2003; Day and Schoemaker, 2000;Edmondson et al., 2001; Fleming, 2002; Lavie, 2006;Crossan and Apaydin, 2010; Taylor, 2010). Before dis-cussing the incumbents’ possible responses to this chal-lenge, it is worthwhile taking a closer look at why andhow focus on the existing technologies negatively influ-ences experimentation and knowledge accumulation inthe emerging context.

Table 1 presents some organizational antecedents thatcast difficulties on the embrace of technological change.These factors are linked to the prior research on tech-nology adoption as an organizational learning processwhich emphasizes the need for having sufficientamounts of resources, motivation, and capability for anysuccessful technology adoption to happen (SeeWoiceshyn, 2000 for a detailed discussion). Some of theother research works that have looked into the effects ofthese factors on the adopting organization are listedin Table 1 and will be reviewed in the followingparagraphs.

First, existing learning routines tend to be efficiencyoriented and focused on the key strengths of the organi-zation which are not necessarily valid in the emergingcontext. The issue of inertia in the existing organiza-tional routines is a common theme in many studiesaround technological change (Hannan and Freeman,1977; Henderson and Clark, 1990; Tushman andO’Reilly, 1996; Tripsas and Gavetti, 2000; Gilbert,2005). Excessive attachment to the existing core com-petencies makes the learning and development of funda-mentally new capabilities extremely difficult forestablished organizations. Because of the codification oftechnological knowledge into the organizational rou-tines, a firm’s behavior becomes constrained and guidedby the learning around the local processes of search.Despite their helpfulness for evolutionary change andincremental innovations, such learning processes are,however, not effective for the development of radicallynew technological capabilities that a new core technol-ogy mandates (Tripsas and Gavetti, 2000; Taylor, 2010).

Table 1 Incumbent’s organizational challenges in the face of emerging core technologies

Organizational challenge Characteristic Impact Representing Sources

Learning routines – Local processes of learning – Inability to develop newcapabilities and routines

Tripsas and Gavetti(2000); Taylor (2010)

Resource allocationmechanisms

– Resource dependence on existingtechnologies

– Threat of cannibalization ofexisting technology

– Organizational dispersion andintensity of resource requirements

– Unwillingness to assign resources– Difficulties in coordination and

communication

Gilbert (2005); Taylorand Helfat (2009); Christensenand Bower (1996)

Incentive systems – Reward financial pay-back andshareholder value creation

– Limited motivation forexperimentation and learning

Woiceshyn (2000); Kaplan andHenderson (2005);Day and Schoemaker (2000)

Management Innovation and Adoption of Emerging Technologies 53


In particular, existing efficiency-oriented routines andcapabilities often do not accommodate experimentation(Eisenhardt and Tabrizi, 1995; Day and Schoemaker,2000; Eisenhardt and Martin, 2000). While existing rou-tines need to be preserved and strengthened until thetime that the new technology rises, the very differentlogic of experimental routines cannot be achieved whenefficiency is the main concern of the organization.

A second source of managerial challenges is related toa general unwillingness to allocate the required level offinancial and attention-based resources of the firm to analternative core technology. Gilbert (2005) puts forwardtwo reasons for the rigidity in the financial resources ofestablished firms in the face of technological change.First, financial dependence on the existing technologies,which are vital arteries of the organization, engenders ageneral hesitation in extensive resource allocation to theactivities that do not contribute to the revenues. Second,a strong market position in the existing technologicalcontext makes firms cautious in investing in and, there-fore, promoting an alternative technology in which theywill not necessarily be able to preserve the same posi-tion. Taylor and Helfat (2009) discuss yet another sourceof difficulties that is rooted in the organizational disper-sion of essential resources and complementary assets forexperimentation in the new technological field. This dis-persion results in a considerable amount of challenges inthe communication and coordination of activities in thenew technological context. Hence, resource allocationmechanisms (Christensen and Bower, 1996) become amajor issue in the way of allocating the requiredresources for learning and experimentation and result ina situation in which the incumbents’ attempts to explorethe emerging technology may remain to a large extentunder resourced.

A third managerial issue that confines the ability ofestablished firms in learning in an emerging technologi-cal field concerns incentive systems that, even in thepresence of the required learning capabilities andresources, may seriously reduce the motivation of theorganizations’ members to engage with the learningactivities (Woiceshyn, 2000). The nature of technologi-cal change mandates a different type of incentive struc-ture which, instead of contributing to the revenues,enables experimentation and learning. However, it isvery difficult for established firms to depart fromrevenue-oriented incentive structures (Kaplan andHenderson, 2005). The problem stems from the fact thatactivities on emerging technology are unlikely to fulfillthe criteria for pay-back or shareholder value creation(Day and Schoemaker, 2000). In the absence of account-ability and reward systems that measure the experimen-tations which are not necessarily paying off in the shortterm, employees tend to prefer remaining within thetraditional technological fields of the organization.However, dominance of the efficiency driven perform-

ance measures in established organizations casts a lot ofchallenges on the efforts to design and implementexperimentation oriented incentives (Kaplan andHenderson, 2005).

Technological change,knowledge accumulation, andmanagement innovation

Beyond simply arguing that management innovationscan generate solutions that enable organizations to over-come the discussed organizational challenges, it isimportant to understand why, despite availability of con-tingent managerial solutions, there might be a need forinnovative management initiatives. Existing scholarlyresearch (e.g., Cooper and Clayton, 1992; Tushman andO’Reilly, 1996; Gibson and Birkinshaw, 2004; Gilbert,2005; Raisch and Birkinshaw, 2008) recommends struc-tural differentiation of new technologies (for examplethrough cross-functional teams or parallel organizations)as the effective response to the prevailing organizationalchallenges which are caused by divergent requirementsof the two technologies. Such provisions are known tobe accommodating for development of a new knowledgebase that, according to the research findings (SeeChristensen et al., 1998), is essential for the firms’ com-petitiveness in the forthcoming stages of the techno-logical lifecycle. Nevertheless, development of suchknowledge base without close links to the existingknowledge repositories of the firm tends to cause impor-tant issues, especially in relation with the firm’s futureability to absorb and utilize knowledge, or its absorptivecapacity (Cohen and Levinthal, 1990). This is because ofthe fact that competitiveness of an established organiza-tion entails maximal preservation of expertise andknow-how that may remain valuable in the face of tech-nological change (Taylor and Helfat, 2009) and there-fore, precise evaluation of the impacts of emergingtechnology on existing complementary assets becomesessential. An upshot is the requirement for pervasiveinvolvement in the process of experimentation and learn-ing by organization members who influence the compli-mentary assets. This requirement is arguably betterfulfilled through structural integration of the technologyadoption initiative. However, as we discussed in the pre-vious section, structural colocation of emerging andexisting technologies engenders a large amount oforganizational challenges.

From the above discussion, one may infer that neitherstructural integration nor separation of the emergingcore technology is necessarily the ultimate solution forovercoming the organizational challenges of adopting anew core technology. Nonetheless, despite the men-tioned deficiencies, each of the generic structural solu-tions (and their variations) offers distinct advantages for



the process of knowledge accumulation and adoption ofthe new technology. Hence, in order to maximize thebenefits from structural choices, organizations may optto alternate between the two modes and their combina-tion in a cyclical manner (See Siggelkow and Levinthal,2003; Gulati and Puranam, 2009; Boumgarden et al.,2012). The selection logic for the structure would thenfollow the specific goal that the organization is pursuingat each time period. Since the degree of uncertainty hasan influence on the appropriateness of alternative organi-zational forms for learning and generation of newabsorptive capacity (Van den Bosch et al., 1999; Laneet al., 2006; Lewin et al., 2010), a possible scenario is tostart by reducing the uncertainty through a structurallydifferentiated approach that is, according to researchfindings (e.g., Gibson and Birkinshaw, 2004; Guptaet al., 2006), more appropriate for scanning the uncer-tain environment. Subsequently, in order to relate theacquired knowledge to the firm’s context, an integrativestructure may prove to be more helpful. The outcome ofeach cycle contributes to the generation of the requiredknowledge base in the emerging field and guides thenature of exploratory activities and the structural modein the next period of time.

Obviously, the above-mentioned scenario is only apossible way through which firms may respond to therelated organizational difficulties. Overcoming the para-doxical demands of the two technologies, as well asmanaging competing goals of revitalization and preser-vation of existing capabilities, necessitates avoidingconstraints that are posed by contingent managerial con-tingencies. Hence, analyzing the obstructs and require-ments at each point of time and designing an effectiveand efficient structure for technology adoption becomesa managerial problem-solving task that is succinctlycaptured by the notion of management innovation. Ourempirical analysis on the adoption process of cloudcomputing technology in Telco’s organization isintended to shed more light on the relationships betweenmanagement innovation and the incumbent’s responseto an emerging core technology.

Research context

We discuss the transition of a telecommunication infra-structure manufacturer towards currently emergingcloud computing technologies to explore the incum-bent’s response to managerial paradoxes caused by dis-ruption in core technologies. Cloud computing andrelated concepts are based on ‘service logic’ that isclearly distant from the comfort zone of Telco and othertelecom players who are basically manufacturers ofcomplex telecommunication equipment. In comparisonwith the existing telecommunication technologies,cloud-based technologies are known to be superior in

terms of efficiency, flexibility, and sustainability andtherefore, according to the industry analysts, the transi-tion seems to be inevitable. For the purpose of thisresearch, such a drastic shift in the architecture andunderlying logic of the core technologies provides anoptimum opportunity to explore the associated chal-lenges and responses of the established organization inmore detail. In order to increase the richness of data, weparticularly focus on the initial phases of technologyemergence, the period between 2008 and 2012, whenhigh levels of uncertainties associated with the nature,timing, and scope of impacts echoed the organizationalchallenges of Telco and its competitors.

Cloud computing represents a fundamentally differentway in invention, development, deployment, scaling,updating, paying for information and communicationservices (Marston et al., 2011). The United States’national institute of standards and technology (NIST)defined cloud computing as ‘a model for enabling ubiq-uitous, convenient, on-demand network access to ashared pool of configurable computing resources (e.g.,networks, servers, storage, applications, and services)that can be rapidly provisioned and released withminimal management effort or service provider interac-tion.’ (Mell and Grance, 2011) While cloud computinghas different implications in different parts of the ICTvalue network, it disrupts the technological subsystemsand complementary assets in the telecommunicationinfrastructure in several ways. In Table 2, we provide asummary of these disruptions according to the definitionof cloud computing, in contrast with the commonwisdom on the characteristics of the existing technolo-gies and complementary assets in the telecommunica-tion infrastructure sector. Despite the fact that the threatof the deterioration of core competencies of Telco and itscompetitors sounded alarming, the technology was notsufficiently matured to justify extensive commercial usein this sector of the industry and, as of 2012, still boththe architecture of the technology as well as the timingand scope of the impacts on the markets were to a highextent uncertain. We cover the early lifecycle of thetechnology between 2008 and 2012 (Figure 1) andinvestigate the organizational challenges of the adoptionand managerial responses in the context of Telco.

Data and methods

With the aim of providing a better understanding on therelationship between management innovation and tech-nology adoption, we used an inductive, longitudinal, fieldbase case study that is appropriate for grounded theorybuilding (Glaser and Strauss, 1967; Eisenhardt 1989).This methodology was particularly suitable for thepurpose of our study, because it enabled us to closelyinvestigate different stages of the less explored processes



of management innovation in connection with technol-ogy adoption. In line with the insights provided bySuddaby (2006) and further elaborations by Volkoffet al. (2007), we started our case study without definingany theoretical concepts or assumptions, but after eachround of data collection and analysis we repeatedlyreturned to the literature in order to relate the findings toexisting theories. Focus on a single case study limits thegeneralizability of the findings, but at the same time itprovides an opportunity for deepening our understandingon the enablers, process, and consequences of manage-ment innovation in Telco’s organization. The firm waschosen with consideration of the substantial organiza-tional challenges that the managers were experiencing inthe adoption process of cloud computing technology.Case selection was, therefore, in line with the expectationfor increased transparency in observation of theoreticalissues through ‘extreme cases’ (Eisenhardt, 1989).

In order to improve the validity and avoid commondisadvantages of retrospective data, we utilized a fewstrategies. First, we triangulated the data by the inclusionof three sources: interviews, document research, andobservations during different stages of the technologyadoption process (Eisenhardt, 1989; Yin, 1984). Second,we verified each individual story through asking similarquestions to the other respondents (Cardinal et al.,2004). Third, we collected data before and after eachmajor milestone in the adoption process and this enabledus to avoid much of the respondents’ bias by comparingthe answers at each stage.

The inevitable issue with the generalizability of singlecase studies persists but is less influential in this study.First, focus on a single case was necessary and morehelpful compared to the other options in the explorationof the complex adoption process over a long period oftime. Second, a main contribution of this study thatis providing more details on the co-existence andco-evolution of management and technological innova-tions in established firms is viable through a case study.

Four sources of data were used in this research: (1)semi-structured interviews, during the period between2010–2012; (2) focus group sessions with key stake-holders; (3) field study and observation by one of theresearchers in the period of September 2010 to Septem-ber 2012; and (4) searching internal and external archi-val data for the period of 2007–2011, includingintelligence reports, knowledge-sharing tools, minutesof meetings, and scientific databases. Therefore, a com-bination of external and internal perspectives towardTelco’s experience with cloud computing was utilized inorder to ensure the validity and reliability of theresearch.

Interviews, focus groups, and observation

Data collection started in September 2010 with a focuson the adoption process of cloud computing technologyin Telco. The research team had access to the company

Table 2 Disruptive effects of cloud computing on existing telecommu-nication technologies according to NIST (Mell and Grance, 2011)definitions

Essential characteristics ofcloud computing (Mell andGrance, 2011)

Existing telecommunicationtechnologies andcomplementary assets

1 “On-demand self-service –[Customer] can unilaterallyprovision computingcapabilities, such as servertime and network storage, asneeded automatically withoutrequiring human interactionwith each service provider.”

Customers usually buyoff-the-shelf productsand services that aredeveloped, marketed, sold,and implemented by thevendor

2 “Broad network access –Capabilities are available overthe network and accessedthrough standard mechanismsthat promote use byheterogeneous thin or thickclient platforms”

Functionalities are embeddedin the products that arepurchased by thecustomers

3 “Resource pooling – Theprovider’s computingresources are pooled to servemultiple [customers] using amulti-tenant model, withdifferent physical and virtualresources dynamicallyassigned and reassignedaccording to consumerdemand”

Resources are distributed andsold to each individualcustomer

4 “Rapid elasticity – Capabilitiescan be elastically provisionedand released, in some casesautomatically, to scale rapidlyoutward and inwardcommensurate with demand”

Capabilities are often beingsold to the customers forthe whole lifecycle of theproduct and even if thecustomers do not intend touse them, they need to payfor them

5 Selling offering as service –Service provider sells accessto the pool of resourceswithout selling any physicalproducts

Physical products are themain unit of sales andrevenue streams for thevendor

0

1000

2000

3000

4000

5000

2008 2009 2010 2011 2012

Filed Patents Published Papers

Figure 1 Rise of cloud computing according to the number of publishedpapers and filed patents on this technology Retrieved from Inspec engi-neering data base (published papers) and Google patent search (filedpatents)



premises and secured the opportunity to participate inrelated meetings and be involved in correspondences inthis period. The majority of the interviews took placein Telco’s headquarter premises. A total number of 33interviews and five focus group sessions took place inthis phase, mostly in person, except for eight interviewswhich took place over the phone. We selected interview-ees to cover different levels of managers as well asdifferent units that were participating in the cloud com-puting initiative. The duration of the interviews rangedfrom 45 to 90 minutes. Transcripts of the interviewswere communicated with the interviewees via email andany following comments and modifications were applied(see Table 3 for a list of interviewees). The format for thefocus groups was designed in a way to gather togetherpeople with knowledge about the same topic and presentthe intermediary data analysis to them in order to receivefeedback and comments. This approach was helpful invalidating and complementing our understanding on theinputs from individual interviews. In addition to thesesources, observation of the discussions in the internalmeetings and numerous informal talks with the peoplewho were dealing with the issue of technology adoptionprovided important inputs for the purpose of this casestudy research.

Archival records

During the whole period of data collection, researcherssystematically reviewed relevant internal intelligencerecords and internal reports and documentations. Fur-thermore, a large collection of external intelligence andanalysis reports through which it was possible to analyzeinternal and external events from the onset of the emer-gence of cloud computing to its adoption at Telco wasincluded in the analysis. These sources of data werecomplemented by engineering and academic databaseswhich were more likely to be unbiased in providinginsights for the involvement of different players thatwere involved in the development of cloud computing.External intelligence reports included Yankee reportseries, ABI research, Informa, Ovium, Inscope, and

more, all searchable through Telco’s business intelli-gence intranet. Engineering and academic databasesincluded Inspec, Compendex, and Scopus.

Data analysis

As we discussed earlier, grounded theory approachnecessitates iteration between data gathering and analy-sis. We transcribed all the interviews and subsequentfocus groups and assigned one (or several) code(s) thatwe perceived to be relevant to each paragraph. The codeswere selected in a way that reflects and summarizes thepassage in the best possible way. Then we grouped thecodes that were similar to one another and attempted torelate them to one another. Intermediate findings wereused in the focus groups and also informal discussions tosee the possibilities for improvement. At each interme-diary stage, we also referred to the literature in order tofind the substantive theories that better pertain to theconcepts that our data reveals.

With the aim of studying the adoption process ofcloud computing in Telco, we started the analysis ofinitial interviews with an illustration of key internaland external events in the time period between 2008and 2012 and identified major milestones. Figure 2provides a timeline of the key events in the externalenvironment and in Telco’s organization that will beexplained further in the forthcoming sections. Veryearly in the data collection process, it became apparentthat the organization experienced a lot of difficulty inprogressing with making sense of the technologicalchange and sending clear messages to the market thatwas expected and demanded by the major customers inthe later stages of the time span. The sense of frustra-tion that was repeatedly expressed by the key stake-holders of the cloud computing initiative guided thedata collection towards the investigation of the sourcesof difficulties in the technology adoption at each periodof time. As one of the opening questions in the inter-views, the interviewees were asked to talk about thestory of cloud computing in Telco from their own pointof view. In response, the respondents almost unani-mously started to spontaneously list the administrativeissues that they believed were the sources of perceivedslowness in progressing with experimentation of thetechnology and using the results to set the strategiesand send clear messages to the market. In order to geta more in-depth view on the nature of the statedadministrative issues, the interviewees were confrontedwith repetitive follow-up questions on ‘why’ suchproblems existed. The stated challenges and the under-lying reasons were coded and grouped. A summary ofthe key codes and their respective frequencies is pre-sented in Table 4. We present a synthesis of this data inthe following section.

Table 3 Overview of interview participants in Telco

Role Number ofinterviews

Senior VP strategy 1VP strategy and business development 1Director of Telco’s cloud program (from 2009 to

mid-2011)1

Director of Telco’s cloud program since mid-2011 1Product managers 6Product management staff 18R&D staff 11Technology intelligence experts 7



Technology adoption process at Telco

In the presentation of the results, we start by a briefintroduction to Telco’s structure in connection with theroles of each sub-unit in the adoption process of cloudcomputing. Telco is a large organization with more than100,000 employees in more than 100 countries. Figure 3provides an overview of Telco’s organization which issimplified for ease of presentation.

At the top of the organizational hierarchy are the CEOteam and a number of relatively small strategic teamswhich take care of corporate-wide activities such as stra-tegic planning, financial control and accounting, tech-nology monitoring, and so forth. Three business unitsare the main profit centers of the company and areresponsible for securing the profitability of their respec-tive organization. The majority of the organizationalpower and resources are assigned to these business units.The business units are respectively responsible for‘infrastructure equipment,’ ‘independent software,’ and‘services.’ The majority of the revenues come from‘infrastructure equipment’ and complementary servicesfor the deployment and maintenance of such equipment.The R&D organization is the driver of Telco’s ambitionin technology leadership through continuous technologi-cal innovation. In the following sections, we look into

Emergence of cloudcomputing - An industry-wide initiative by Google, IBM, & universities

2008

Initial screening of the technology by Telco

Data collection

2009 2010 2011 2012

Technology rise - significant increase in the number of scientificpublications and patents

3rd structural change, continuation with experimentation through newly developed routines

1st structural change, new resource allocation approach

2nd structural change, new incentive structures, development of experimental routines

2013

4th structural change, returning to initial structure after having experimental routines established

Figure 2 Timeline of cloud adoption in Telco and the field study, including the key stages of introducing management innovations to the organization

Table 4 Key codes and their frequency

Code group Code Frequencyof passages

Frequencyof sources

Learningroutines

Incompatibility/Ineffectiveness

19 12

Inefficiency 14 7

Resourceallocation

Intensity of resourcerequirements

23 17

Diversity and dispersionof resources

8 5

Unwillingness to allocateby managers

7 5

Resistance/threatperception

8 3

Incentivestructures

KPIs, targets,performance measures

14 9

Recognition 5 3

Managementteam

Strategicteams

R&DBU

SoftwareBU

ServicesBU

Infrastructure

Figure 3 Simplified representation of Telco’s organizational structure



the sequence of events in the period of 2008–2012 andillustrate the organization’s challenges and responses inconnection with the adoption process of cloud comput-ing technology.

2008–Q42010: Dispersed activities andorganizational challenges

With the rise of cloud computing in 2008, the technol-ogy intelligence units of the company spotted the emerg-ing trend very early and communicated their findingsthrough technology forecast reports throughout theorganization. The subsequent awareness, in turn,resulted in the formation of cross-functional teams todiscuss and plan for potential impacts of cloud comput-ing on Telco’s portfolio of offerings. In less than a year,the outcomes of these endeavors found their way intothe corporate technology strategy document which isendorsed by the senior management team. While noremarkable market demand was foreseeable for thecloud-based offerings in the short term, it was left tothe individual business units’ discretion to investigatethe implications of the new technology on their respec-tive products and services. A number of the organiza-tion’s members in the R&D unit, strategic teams, andbusiness units got engaged in these efforts because oftheir responsibility for technology strategy or merelydue to personal interest in cloud computing as a researchtopic. During the period 2009–2010, however, theseactivities failed to result in any tangible outcomes, interms of experimentation and technological innovationin accordance with Telco’s portfolio of offerings. In thefollowing subsection we will present the organizationaldifficulties that hindered experimentation in the newtechnological context during the period of 2009–2011according to the interviews and other sources of data.Subsequently, we explain the organizational measuresthat enabled Telco to overcome those difficulties fromearly 2011 and onwards.

Organizational routines and capabilities

According to the interviews and our observations, one ofthe very evident characteristics of Telco is known to beits long-lasting and influential routines and processes.There is virtually a process description for all of theactivities of the organization. A few of the processeswere referred to as corporate-wide directives amongwhich are the processes for the lifecycle management ofthe product, including innovation and product develop-ment processes. Perceived to be the source of Telco’scompetitive advantages, these processes are preservedand controlled by the highest levels of organizationalhierarchy. Such processes and similar, generallyaccepted routines and ways of working, both written and

unwritten, however, were stated to be a source of inef-fectiveness for experimentation in the cloud computingcontext.

One of the examples, according to the interviews, wasrelated to the tradition of the internal development ofprototypes and then testing them in the customer sites.As one of the senior engineers who pioneered the cloudinitiative in Telco stated:

Our innovation activities are extremely [. . .] based onprototypes, because that is our comfort zone. It’salways like when I have an idea, then I make a pro-totype but in the context of cloud when the prototypeis there, you don’t know what to do with it.

This issue with the prototype is a reflection of ageneral difference in the new technological context,where customers play a key role in innovation and devel-opment. When it is about selling on-demand services,the technology-push tradition of the industry by Telcoand its peer companies becomes less relevant. The newconcepts such as value co-creation and customer andfrontline involvement in the development were beingspeculated in different parts of the organization, but theexisting businesses and technologies were still followingthe conventional ways of working. Among the refer-ences to the problems with the existing routines, need for‘faster development processes,’ ‘adaptations in financialand support systems,’ and ‘new sales mentality andapproach’ were prevalent and each of these referenceswere related to a problem with experimentation andinnovation in the cloud context that stem from the verydifferent logic of the underlying technologies. Forexample, the need for faster development is, in part,related to the fact that cloud-based offerings are inessence services that require iterative feedback from thecustomers which mandates shorter development cycles.In short, interviewees consistently stated there was aneed for new capabilities and routines for handling cloudopportunities, and at the same time they believed it wasvery difficult to develop such new routines, because ofthe strong influence of long-lasting traditions and exist-ing best practices.

Resources and complementary assets

Working with emerging technologies is not unusualfor Telco. The research organization is designed toembrace such technologies by the formation of innova-tion teams and laboratory work that receives supportfrom business units in the later stages of product devel-opment. Very early in the process, researchers and tech-nology strategy teams realized that cloud computingrequired the engagement of the three business units,because it implied selling infrastructure equipment,software, and services as an integrated package of serv-ices through a different sales, delivery, pricing, deploy-



ment, and maintenance model. First and foremost wasthe fact that the development of new cloud-based offer-ings required engagement from the different productareas within each business unit. In addition, close coop-eration from the three business units was essential. Theneed for modifications in core and peripheral sub-systems was much more extensive than what smallteams that are routinely being formed to deal with newtechnologies are able to handle. Moreover, it was notonly the technical aspects that were important in thecontext of cloud computing. For example, some of theresearch teams realized that, due to the different natureof cloud-based offerings, many of the experimentationsshould be initiated with open discussions with thecustomers before conceptualization, whereas Telco’sresearch and development teams did not have (accessto) the competences and communication channels forthat sort of interaction with the customers. So, why wasit so difficult to secure the required resources forexperimentation with cloud computing while it wasalready part of Telco’s technology strategy?

One of the main reasons for such difficulties in theallocation of resources was stated to be related to the factthat the resource planning outside the research unit ofTelco is optimized to support the existing businesses ofthe firm. In other words, the exploration of future oppor-tunities is delegated to the research unit and the rest ofthe organization is focused on applying the outcomes inthe portfolio of the offerings whenever some benefits areassociated with such incorporations. Considering theglobal financial turmoil during the period of 2008–2012,business units were tightly resourced in order to maxi-mize the efficiency of the very large organization andthey could not afford the allocation of resources to long-term projects with no clear link to their existing portfolioof offerings. Another observation was related to the factthat resources in Telco are already tied to the existingproduct development plans well in advance and thoseplans are not being regularly reconsidered and revised.This situation generates a lot of difficulties in convincingmanagers to invest in a technology when its outcomesare not clear. As a senior researcher who pioneered thecloud discussions in Telco stated:

We also don’t have the data for the future and this isthe biggest problem, because for [the existing] busi-nesses that you have, you can easily get the data, butif we say [to the senior managers] that we think thatthe cloud will take over everything and this much[revenues] will be built on this, how can we confi-dently go and say we really believe in this?

In addition to the resource limitations, we understoodthat there was quite an amount of resistance in acceptingthat Telco needed to invest in cloud computing fromsome parts of the organization and mainly the businessunits. The cloud model was perceived to be disruptive

and a potential alternative to the way that Telco makesrevenues from selling very expensive and high-margininfrastructure products and turns it into selling services.Investing in cloud computing and collaborating withcustomers on that would endanger the sales of existinginfrastructure offerings from Telco by making customerswonder whether they should invest further on existingtechnologies or whether they should wait until cloud-based offerings touch the market. One of the key stake-holders of Telco’s cloud initiative formulated thisproblem as follows:

[We experienced] internal friction also, because thefuture technology will be replacing existing busi-nesses. Then there is [a tendency for] internal compe-tition [on the resources].

In other words, the threat of the cannibalization of theexisting offerings was a major argument that was repeat-edly expressed as a source of resistance against accept-ing extensive resource allocation to the new technology.

Incentive structures

Telco is a decentralized organization which is areflection of the size and geographical dispersionof the company. Decision-making power and authorityis, therefore, distributed across the organization inexchange for accountability for targets and performancemeasures that are assigned to each unit of the organiza-tion. Such targets and goals, especially in business units,are related to measures such as profitability, growth, andcustomer satisfaction requirements. According to a keystakeholder of the cloud initiative:

All the [existing] KPI [key performance indicators]are geared up for the short-term view. But with thedisruptive things [like cloud computing] we need tohave a long-term view based on what’s going to be inone or two years, or five years [that is not supportedby existing KPIs].

With the exception of the research organization and afew small strategic teams, the body of the organizationmainly focuses on short-term and mid-term profitabilitytargets of the organization. This leaves very limitedinterest for the business units to heavily invest on theareas that are unlikely to contribute to their own targets.In fact, cloud was not perceived to be a source of fun-damental change in the structure of the revenues in theshort run. Considering the intensified competition andthe effects of the global downturn on Telco, thisapproach seemed to be somewhat justifiable for theorganization’s members in the earlier phases of technol-ogy emergence. In other words, efficiency was a mainpriority of the organization during 2009 and 2010 andthis makes the consideration of different performancemeasures for experimentation on a potentially large area



such as cloud computing even more difficult. Recogniz-ing this issue during earlier phases of cloud adoption, anumber of interviewees discussed the need for theinvolvement of senior management in the experimenta-tion process. Such provisions were considered a solutionto the perceived unwillingness to release the resourcesthat were tied to existing projects and in line with short-term and mid-term measurement targets.

The combination of the above-mentioned difficultiesresulted in a situation where Telco had not achievedgoing beyond studying and planning for cloud comput-ing as a potentially important technology. We did notfind any evidence for the incorporation of cloud in theproduct plans of Telco, except for a couple of small-scale projects by individual researchers. The initialactivities, however, increased awareness of the cloud asa disruptive technology and this, together with the ever-increasing attention to the topic from customers andrumors about the activities of the major competitors,convinced Telco’s senior management to look into solu-tions for the slow progress of the cloud initiative.According to the insights from interviews and our obser-vations, a chronological representation of these activitiesis presented in the following section.

Q4 2010–Q1 2011: Initiation ofcloud program

The above discussion highlighted the failure of Telco’stechnology adoption routines in the face of an emergingcore technology. As we describe in the following pages,managers’ realization of these issues motivated intro-duction of new to the firm structural approaches anddevelopment of novel practices for handling cloud adop-tion. As the first step, in order to secure allocation ofnecessary resources and ensure development of newincentive systems and learning routines that supportexperimentation, management decided to form a crossfunctional team in the form of a program structure. Sincethe majority of revenues, and therefore the concentrationof financial resources, was related to the business unitfor infrastructure equipment, this unit was chosen as thehost of the new program. This setting reduced the diffi-culties with resource allocation to some extent andincreased the incentives for investment because of thedirect involvement of senior management.

Having the resources in place and starting withattempts to develop demo products based on the cloudtechnology, the teams were becoming more and moreaware of the technical and organizational challenges ofexperimentation with cloud. From organizational per-spective, two major issues were evident in this period:first, embedding the new technology within the mosttraditional business unit (infrastructure manufacturing)of Telco inevitably constrained the goals of the program

in the departure towards cloud technology and relatedbusiness models. Second, despite senior managementinvolvement, the securing and coordination of resourcesand complementary assets from different businessunits proved to be very challenging. Nevertheless, theprogram setting helped in speeding up the progress andenabled initial phases of experimentation with cloudcomputing to some extent and was referred to, by anumber of interviewees, as the turning point of Telco’sefforts to embrace the new technology. Increased under-standing about the fundamentally different requirementsof cloud, especially in terms of the profound organiza-tional implications of the technology, guided the nextround of managerial initiatives.

Q1 2011–Q4 2011: Program separationand expansion

With the aim of allowing experimentation without con-finement to the context of a business unit, managementdecided to take the program out of the business unit andstart a corporate-wide program under the direct supervi-sion of the senior management team. The number ofengaged personnel to the program increased consider-ably (from around 30 to around 100) and a lot of atten-tion was directed towards the program. This settingcreated a great momentum towards relaxing the ineffec-tive organizational routines and developing new ones. Inthis situation, the speed of development increased andTelco managed to successfully develop the planneddemo product for the industry event that they hadplanned for. A challenge was reaching a common lan-guage among the multidisciplinary participants of thecloud program, mainly because of the technologicaluncertainties that created different perceptions amongpeople with different backgrounds. The common goal,however, assisted the participants to synchronize andform a coherent understanding about their activities andthis proved to be a valuable outcome in the later stages ofthe initiative. Having a common understanding and animproved alignment enabled Telco to realize a fewdevelopments in the organizational challenges that welisted before as hindrances of cloud adoption. The mostimportant was the development of a set of new andunprecedented practices for working with the technol-ogy. Examples of such new practices that companyexplored to different extents in this period are directinvolvement of customers in the earlier phases ofproduct development process, new pricing and contract-ing approaches, supplier and competitor involvement indevelopment processes In the new setting, the teams hadthe opportunity to develop such new practices throughtrial and error and experimentation, whereas formerstructural settings proved to be incapable of accommo-dating such developments.



Despite all the advances, the program was not freefrom organizational difficulties. The growing size of theprogram proved to be a challenge in itself. Havingaround 100 employees coming from different disci-plines, without a well-defined structure and relationshipswith the other departments, was indeed troublesome interms of coordination and management and could not becontinued further. Therefore, the technical and organi-zational advancement with adoption of cloud were at thecost of reduced organizational efficiency to an alarmingextent.

Q4 2011–Q2 2012: Program shrinkageand delegation of tasks to thebusiness units

During late 2011, organizational challenges with thegrowing size of the program left two options for Telco’ssenior management team: either to create a new perma-nent organizational unit with all the required resourcesand administrative requirements or to shrink it to a man-ageable size. The latter approach was chosen by Telco’ssenior managers, because of two reasons: first, cloudcomputing proved to be still a bit far away from themarket rise and having a line organization without anybusiness was perceived to be too costly and inefficient.Second, the fact that the new technology would ulti-mately affect the existing businesses of Telco justified aclose link between the cloud initiative and ongoingactivities of the organization. Eventually, the programwas shrunk to a small project, with the involvement ofsenior steering members representing different organi-zational units. The activities were also divided to anumber of tasks, each of which was delegated to one ofthe organizational units.

Although similar to the structural setting before 2010,the new structure interestingly proved to be far lessproblematic in terms of resource allocation, incentivesystems, and rigidities in the routines. First of all, therequired resources were already identified and allocatedin the previous phases, so it was much easier to ensurecontinuation of their involvement throughout theupcoming phases of the technology adoption. Therefore,resource allocation mechanisms of the existing businesswere less influential on the activities on cloud technol-ogy. Second, the ways for motivating and measuringexperimental activities in an extensive scale wereexplored and identified to a good extent and it was stillpossible to follow the newly developed incentive struc-ture after delegating the tasks to existing businesses.Lastly, the need for development of new practices thatwere required for cloud context had been investigated toan extent that organization’s member was aware aboutthe mismatch between many of the existing practices,processes, and capabilities with the requirements of the

cloud. Therefore, unlike the first two first stages of cloudadoption, not only attempts to develop new practiceswere considered deviance from organizational direc-tives, but also an organizational group was designated toactively search for and assist development of such newpractices.

All in all, this new setting was perceived by therespondents positively, mainly because they believed itprovided the best possibilities to progress with the iden-tified areas in the previous forms while minimizing theorganizational frictions and challenges in the way ofexperimentation with the new technology. The steeringgroup served as a facilitator for the allocation ofresources and the operational groups within the businessunits had the possibility to experiment with the newtechnology and develop the required supporting proc-esses and practices.

Q2 2012: Program dissolutionand integration within theexisting organization

In the second quarter of 2012, the management decidedto dissolve the program and formally announce ‘execu-tion phase’ of the cloud by integrating the activitieswithin the agenda of different organizational units. Telcoreturned to the before-2010-structural form for drivingexperimentation with the new technology, as many ofthe organizational problems were no longer as intense.Cloud was already a strategic priority for the three busi-ness units and allocating resources and incentives toexperimental activities was not so challenging anymore.The new practices were becoming more mature andstandardization of such practices for replication wasalready started by relevant teams in the organization.While many technical and market-related challengeswere yet to be overcome, organizational hindranceswere to a good extent controlled by the second quarter of2012.

Figure 4 depicts the different structural modes thatassisted overcoming the challenges with resources allo-cation and incentive systems and enabled developingnew organizational practices for cloud computing duringthe period 2008–2012.

Discussion

This paper sought to explore the relationship betweenmanagement innovation and the adoption of an emerg-ing core technology. While prior work has shown theeffect of organization, and in particular structure, on afirm’s ability to cope with competing goals of the exploi-tation of old certainties and the exploration of newpossibilities, little emphasis has been devoted to under-



standing the role of adaptations in the structure as anenabler (and not just a consequence) of technologicalchange. Through the Telco story, we demonstrated that,when contingent structural forms, including hybrid ones,become ineffective or unsustainable, it becomes a mana-gerial problem-solving task to ensure a structural fit withthe organization’s goal at each point in time.

From the perspective of organizational routines, onewould expect a technology-driven company to be quiteadept in handling emerging technologies. Instead, wefind that the firm had remarkable amounts of problemsin the initial period because of a reliance on existingroutines that were not developed for changing the corebusiness of the firm. In fact, subsequent structural adap-tations were in essence aimed at overturning the organi-zational routines that hindered experimentation andknowledge in earlier stages. Lack of appropriate learn-ing routines, sufficient resources and competences, andrelevant performance measures were examples of theorganizational challenges that our theoretical andempirical analysis highlighted as hindrances of knowl-edge accumulation in the emerging field. Looking at thesources of such problems, we find reliance on routineorganizational responses, as opposed to searching for

novel solutions, as the root cause of initial difficulties inthe earlier phases of technology adoption. During 2011and onwards, recursive structural adjustments wereutilized in order to ensure allocation of sufficientresources and motivation, as well as capabilities androutines that are required for learning in the specificcontext of cloud.

The case of Telco is an example of managing contra-dictions that are caused by unprecedented changes in thebusiness environment. Such situations entail goingbeyond selecting the most appropriate available situa-tions and require a combination of different alternatives(See Smith and Tushman, 2005; Smith et al., 2010). Thisis mainly because the contingent solutions in responseto environmental dynamism usually assume a certaindegree of certainty about what is going to happen, whatwould be the consequences for a given firm, and whatare the best solutions to face such consequences (SeeMilliken, 1987). Whereas, such levels of certainty do notalways exist in the earlier phases of paradigm shifts. ForTelco, the consequence was the ineffectiveness of somebest practices in their managerial toolbox and they foundthemselves in need for inventing novel administrativestructures, processes, and practices. The notion of man-

1 2

3 4

5

2008-Q4 2010: Dispersed organizational activities Q4 2010 – Q1 2011: Initiation of cloud program

Q1 2011 - Q4 2011: Program separation and expansion

Q2 2012 and onwards: Program dissolution and continuation of delegated tasks

Q4 2011-Q2 2012: Program shrinkage and delegation of tasks to the business

The evolution of Telco’s structure for adoption of Cloud: Telco startedwith using existing structures for exploration through small and dispersed research teams throughout the organization (1).Dissatisfaction of management with the progress triggered differentforms of parallel organizations ranging from business unit dependentprojects (2), to extensive (3) or limited (4) independent programstructures. Despite satisfactory progress with experimentation activities, management decided to dissolve the program in order to ensure alignment of activities with the overall direction of the organization.

Figure 4 Chronological evolution of cloud computing initiative within Telco’s structure



agement innovation and the process framework that isprovided by Birkinshaw et al. (2008) concerns such aprocess.

From a knowledge absorption perspective, weobserved that the firm was dealing with two differentknowledge areas, one of which was known and certain,whereas the other was embryonic and unfamiliar.Without experimentation, Telco was not able to relatethe emerging body of knowledge to their context, and,therefore, was at risk of losing its capability to innovatewhen the technology became mature. Inasmuch as afirm’s ability to absorb and utilize knowledge is influ-enced by the organizational structure and its alignmentwith the knowledge environment that the company isdealing with (Van den Bosch et al., 1999; Lewin et al.,2010), a logical response seemed to be the creation of anew structure for the emerging knowledge area. Yet, forTelco, it proved to be a challenging managerial task todecide upon the characteristics and establish such astructure. Devising hybrid structures, for example bymeans of a spatially separated unit, was not viable fortwo main reasons: first, the extensive resource require-ments made it impossible for Telco to consider duplicat-ing the organization. Second, the requirement of relatingthe new core technology to the existing one was thesource of a great deal of interdependence that requiredclose integration with the existing structures. A parallelorganization and cross-unit collaboration also proved tobe unsustainable, because of coordination and otherorganizational challenges stemming from the size of theinitiative. The path that Telco took, in terms of moving todifferent possible structural modes for the new initiative,was aimed at addressing such contradictory require-ments for integration and separation. Introduced struc-tural innovations assisted the firm in reducing thenegative influence of organizational factors on experi-mentation and accumulating new absorptive capacity inpreparation for the forthcoming stages of the technologi-cal lifecycle.

In short, the case of Telco illustrated the need for andthe process of management innovations that enabledadoption of an emerging core technology. Throughrecursive structural adaptations and subsequent develop-ment of practices and processes which were appropriatefor cloud, Telco accomplished a collective experimenta-

tion process that eventually led to adoption and integra-tion of the technology. This relationship is illustrated inFigure 5.

Conclusion

Our analysis of Telco’s responses to these challengesprovides an empirical account of the role that manage-ment innovation plays in the process of technologyadoption. Damanpour and Evan (1984) questioned awidespread belief that technological innovations aredrivers of and hence superior to organizational innova-tions. The authors hypothesized and empirically dem-onstrated that innovation in administrative aspects ofthe organization can play an important role in fosteringa favorable ecosystem for technological innovation. Inthe quest for increasing our understanding of the under-lying mechanisms of this relationship in the specificcontext of adopting emerging core technologies, weshowed that the need for a continuation of existingbusinesses and at the same time the preservation ofexisting complementary assets creates an unfavorableenvironment for experimentation and knowledge accu-mulation in the emerging field. This, in turn, casts dif-ficulties on knowledge accumulation and generation ofabsorptive capacity that is crucial for competitivenessin the maturity phases of the new core technology. Thefailure of managerial contingencies, such as structuralseparation or integration, in overcoming these chal-lenges necessitated unprecedented and new-to-the-firmstructural adaptations to which we referred to as man-agement innovation. The case study revealed that suchmanagerial problem-solving initiatives can be an inte-gral part (and not merely a consequence) of the tech-nological change process and, therefore, should beconsidered by managers along with the technologicalaspects of the transition process.

This paper contributes to the growing body of litera-ture on management innovation by providing insightsinto its relationship with organizational routines. In thecontext of this case study, we discussed how unconven-tional structural adaptations replaced the routinizedbehavior of the organization in response to technologicalinnovations. In other words, management innovations in

Figure 5 The effect of management innovations on experimental learning and technology adoption



this study were in essence managerial interventions inthe organizational routines in order to overcome ineffec-tiveness of familiar practices of the organization fordealing with a new technology. An upshot is a distinctionbetween management innovation and routinized organi-zational adaptations in response to environmental trig-gers which are discussed, for example, by the literatureon dynamic capabilities (cf. Zollo and Winter, 2002;Teece, 2007; Lewin et al., 2010). Awareness and inten-sive involvement of senior management in the cycles ofstructural adaptations highlight another distinct featureof management innovation in this empirical analysis.

The findings have implications for the literature ontechnology adoption. While prior studies have discussedthe antecedents, processes, and consequences of thetechnology adoption process on peripheral (Rogers,2003) or process (Woiceshyn, 2000; Edmondson et al.,2001) technologies, the adoption process of core tech-nologies that we discussed in this paper is a relativelyoverlooked area. Although organizational structure waspreviously considered a contextual factor influencingtechnology adoption (Woiceshyn, 2000), our findingsindicate adaptations in the structure as an importantprecursor of technology adoption in emerging fields.The findings also revealed the adoption process of anemerging core technology as a gradual, step-wiseprocess that is aimed at maximal preservation of existingcomplementary assets.

The study raised some interesting questions forfurther scholarly inquiry. While we explored the role ofmanagement innovation in the technology adoptionprocess, we did not discuss the individual and organiza-tional enablers of management innovation. First, it isimportant to understand what factors influence the timebetween the generation of a managerial dilemma and theactual recognition of such an issue by the relevant man-agers. From the presented case study it would seem thatorganizational contextual factors (size, centralization,etc.), different organizational players (gatekeepers,middle managers, senior managers), and individualcharacteristics of senior management may potentiallyinfluence the firm’s ability for timely identification andresponse to the ineffectiveness of organizational-administrative routines. Further qualitative and quanti-tative research may provide a better view on thedynamics of the interplays between these factors andmanagement innovation.

This study reported adoption of a new structuralapproach as enabler of engagement with technologicalinnovations in an emerging field and provided detailedinformation about why such initiatives may prove to becrucial for adoption of a new core technology. Althoughthe results represent advancements to our understandingon management innovation in connection with techno-logical change, the findings may not be exhaustive. Thisis, in part, related to the limitation of the data, which

comes from a single case study. Further research couldinvestigate the incumbents’ responses from multiplesources of data, including firms with dissimilar size orwith different initial structure for handling emergingtechnologies. Such observations may increase ourunderstanding on the conditions in which managementinnovation becomes effective and on the nature of inter-action mechanisms that influences the technology adop-tion process.

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management innovation and adoption of emerging technologies: the case of cloud computing

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