ICT-Related Intangibles and Organizational Innovation: Indicators for Improving Connectedness and Flexibility

This is an electronic reprint of the original article. This reprint may differ from the original in pagination and typographic detail. Author(s): Title: Year: Version: Please cite the original version: All material supplied via JYX is protected by copyright and other intellectual property rights, and duplication or sale of all or part of any of the repository collections is not permitted, except that material may be duplicated by you for your research use or educational purposes in electronic or print form. You must obtain permission for any other use. Electronic or print copies may not be offered, whether for sale or otherwise to anyone who is not an authorised user. ICT-Related Intangibles and Organizational Innovation: Indicators for Improving Connectedness and Flexibility Koskinen, Minna; Luomala, Joni; Maaranen, Petri Koskinen, M., Luomala, J., Maaranen, P., (2012). ICT-Related Intangibles and Organizational Innovation: Indicators for Improving Connectedness and Flexibility. Human Technology, Volume 8 (1), pp. 24-45. URN:NBNfi:jyu-200804151351. Retrieved from http://www.humantechnology.jyu.fi. 2012 An Interdisciplinary Journal on Humans in ICT Environments ISSN: 1795-6889 www.humantechnology.jyu.fi Volume 8(1), May 2012, 24–45 24 ICT-RELATED INTANGIBLES AND ORGANIZATIONAL INNOVATION: INDICATORS FOR IMPROVING CONNECTEDNESS AND FLEXIBILITY Abstract: In this paper we address the role of ICT-related intangible assets in organizational innovation. We focus on two important innovation enablers: first, connectedness, the ability of individuals to create and maintain connections to each other; and second, organizational flexibility to adapt to changing needs. For connectedness and flexibility, an agile ICT infrastructure and information management services are needed. Through a Delphi study, we identified several factors hindering organizational innovation, and formulated a set of indicators and related metrics for improvement. We conclude that it is necessary to consider ICT-related factors when organizations pursue improving their innovativeness. However, ICT solutions do not lead to organizational innovativeness independent of other organizational factors and people. If the organization is well-functioning, suitable ICT solutions can provide important added value for its innovation activities. Keywords: organizational innovation, ICT solutions, information management, intangibles, connectedness, flexibility, improvement. INTRODUCTION The development, adoption, and implementation of innovations are critical determinants of organizational competitiveness and effectiveness (Baregheh, Rowley, & Sambrook, 2009). In contemporary organizations, information and communication technologies (ICTs) pervade every aspect of an organization’s value chain, creating a vast electronic network of interconnected applications and data (Kohli & Melville, 2009). Not only do an organization’s daily operations © 2012 Minna Koskinen, Joni Luomala, and Petri Maaranen, and the Agora Center, University of Jyväskylä URN:NBNfi:jyu-200804151351 Minna Koskinen The Agora Center University of Jyväskylä Finland Joni Luomala Department of Computer Science and Information Systems University of Jyväskylä Finland Petri Maaranen Department of Computer Science and Information Systems University of Jyväskylä Finland ICT Intangibles and Organizational Innovation 25 rely on ICTs, but the innovation processes do as well, which makes ICT-related factors important as enablers or hindrances of organizational innovation. Two key issues enable innovation. First, innovation relates to the ability of individuals to create and maintain connections to each other informally (Jansen, van den Bosch, & Volbera, 2006). Second, innovation is associated with change, which means that business processes need to be flexible and able to adapt to changing needs in and beyond an organization (MacKinnon, Grant, & Cray, 2008). The demand for connectedness and flexibility set challenges for the organization’s ICT infrastructure, as well as for the services provided by the information management function. To be able to make proper decisions regarding ICT-related issues, organizations need knowledge of the factors that enable or hinder connectedness and flexibility. Guidelines for an organization’s ICT infrastructure and ICT services are set in the enterprise architecture. It establishes an organization-wide road map to achieve the organization’s mission through optimal performance of its core business processes within an efficient ICT environment (Institute for Enterprise Architecture Developments, 2007). It provides important added value for the organization and enables more effective strategy making and better knowledge of the effects of various decisions by high-level management (Varveris & Harrison, 2005). To support innovation processes effectively, the enterprise architecture should incorporate connectedness and flexibility as important issues in ICT-related decision making. In this study, we identified intangible ICT-related factors that enable connectedness and flexibility in organizations, as well as metrics for their assessment. The study is based on qualitative data gathered using the Delphi method (Linstone & Turoff, 1975). A group of panelists, primarily Finnish ICT and innovation experts within academia and industry, were asked to identify ICT-related factors that hinder flexibility and connectedness in organizations and which thereby impede innovation processes. Various statements about the identified factors were formulated from the data and given to the panelists for further comment, refinement, and corrections. A list of indicators was formulated based on the identified factors, and related metrics were identified from the gathered data and relevant literature. This paper is organized as follows. First, we provide a literature review on issues related to innovation and ICT. We then describe the research setting and methodology. After that, we present the indicators and metrics identified as the result of the study. Finally, we discuss some conclusions from the study. A REVIEW OF THE LITERATURE In this section, we discuss various issues related to innovation and ICTs. These issues include innovation processes, connectedness and flexibility in an innovation process, and ICTs in innovation processes. Innovation Processes Baregheh et al. (2009) defined innovation as “the multi-stage process whereby organizations transform ideas into new/improved products, services or processes, in order to advance, compete and differentiate themselves successfully in their marketplace” (p. 1334). This definition Koskinen, Luomala, & Maaranen 26 emphasizes that the innovation activity concerns not only the process of inventing but also extends idea inventing into the implementation and commercialization of the innovation. Innovation has specific characteristics, as presented by the Commission of the European Communities (2009). Innovation concerns successfully exploiting new ideas and transforming them into economic value and sustainable competitive advantage. Innovation, then, is something new for the company but not necessarily for the field of markets; it must be beneficial to customers and customers must be willing to pay for it. Innovations help organizations diversify and improve the quality of their product and service selection, and improve processes. Innovation activities can be promoted by creating an inventive and creative working environment and investing in R&D activities, networking, and information technology. Furthermore, as Hautamäki (2010) indicated, innovation always occurs within local and global innovation ecosystems, that is, an environment that contains other companies, research institutes, funders, labor, markets, common legislation, and so forth. Innovations may concern technology or social and organizational arrangements (Edström, Lind, & Ljungberg, 2004). They can be clever, insightful, and useful ideas from anyone in an organization, or they can arise from organized innovation activities, with resources allocated for research and development to create innovations (Godin, 2004). The innovation process may be organized in different ways. An organization may invest in the necessary research and development itself (a closed innovation process) or acquire the innovation from other organizations, for example, in the form of licenses or technologies (open innovation process; Chesbrough, 2003; Hautamäki, 2010). The innovation may also be developed in a networked community for exclusive use of the participants (private-collective innovation process) or to be used freely (common innovation process; Hautamäki, 2010). Another way is to gather the ideas from customers or users who want to improve products to better meet their needs (customer-driven innovation process; Hautamäki, 2010). Moreover, innovations can be classified in various ways. Explorative innovations open up completely new ways of thinking and actions, while exploitative innovations refine and improve already existing explorative innovations (Jansen et al., 2006; March, 1991). Explorative innovations can create new fields of knowledge, breed new technology, open new markets, enable novel ways of doing things, and spur renewal of organizational structures and practices (Jansen et al., 2006). However, returns from exploration are systematically less certain, more remote in time, and organizationally more distant from the locus of action and adaptation (March, 1991). Innovations also can be distinguished by how they affect design structures. Modular innovations change the core design components, whereas architectural innovations change their interrelationships (Henderson & Clark, 1990). Autonomous modular innovation can be done without modifying other components, whereas systemic innovation requires significant modifications to other related components (Teece, 1996). Various models of the innovation process are presented in the literature and, typically, they include three to six stages. For example, Chesbrough (2003) identified three stages: research, development, and marketing. Baregheh et al. (2009) proposed five stages: creation, generation, implementation, development, and adoption. Siebra, Filho, Silva, and Santos (2008) distinguished three stages: production of scientific and technological knowledge, transforming knowledge into working artifacts, and responding to and creating market demands. For the purposes of our study, we identify four generic phases of innovation processes: detecting and making sense of the problem, creating ideas to solve the problem, ICT Intangibles and Organizational Innovation 27 studying and developing solutions to the problem, and adopting a solution. We find these phases independent of the type of the innovation and the innovation process. Connectedness and Flexibility in an Innovation Process Two characteristics of organizations are important for successful innovation processes: connectedness and flexibility. Both are necessary throughout the innovation process, although with varying emphases. Connectedness is the ability of people to relate with each other inside and outside the organization (Jansen et al., 2006) in the interactive webs of relationships embedded within social networks (Cross & Parker, 2004). Human connections such as trust, personal networks, and sense of community play important roles in thriving organizations and contribute to knowledge sharing, innovation, and high productivity (Cohen & Prusak, 2001). Innovation communities often involve interpersonal ties that provide sociability, support, information, a sense of belonging, and social identity (von Hippel, 2005) Most of the work in organizations is not done through the formal organizational structure but rather through informal social networks, and the multiple dimensions of communication therein dictate an organization’s ability to innovate (Cross & Parker, 2004). Networks are communities of practice in which connectedness is built upon shared histories, experiences, reciprocity, affections, and mutual commitment, and which contribute to organizational learning and innovation through engagement, imagination, and alignment (Wenger, 2000). Any process of knowledge socialization and collective learning is based on relationships of meaning building and sharing within a context of coparticipation that promotes the development of shared values, reciprocity, and mutual trust (Sawhney & Prandelli, 2000). Knowledge building occurs by combining people’s distinct individualities with a particular set of activities, and it is this combination that enables innovation (Leonard-Barton, 1995). Networks are not only a means of accessing distributed information and capabilities, but also a form of coordination guided by the enduring principles of an organization (Kogut, 2000). Practice creates epistemic differences among the communities within an organization, and the organization’s advantage lies in dynamically coordinating the knowledge produced by these communities despite such differences (Brown & Duguid, 2001). Connectedness is emphasized in the early phases of innovation processes, and is essential for gathering knowledge from innovation networks inside and outside the organization about market needs, other companies, and new possibilities (Siebra et al., 2008). Connectedness increases opportunities for informal interaction and accessibility to knowledge sources and also helps individuals to combine knowledge and to create new knowledge (Jansen et al., 2006). Dense social relationships resulting from connectedness help individuals share experiences. Connectedness forms the foundation for developing trust and cooperation among individuals, which subsequently develops a deep understanding for refining and reshaping existing products, processes, and markets (Jansen et al., 2006). Connectedness also relates to openness to new ideas, because innovation requires people to combine ideas, capabilities, skills, and resources in new ways (Fagerberg, 2003). Flexibility is the ability of an organization to respond to potential internal and external changes in a manner that sustains or increases its value delivery (cf. Browne, Dubois, Rathmill, Sethi, & Stecke, 1984). Flexibility is not merely adapting to the changes in the environment but Koskinen, Luomala, & Maaranen 28 embracing change: It is a two-way process in which the organization not only reacts to change but also influences it (Conboy & Fitzgerald, 2004). Flexibility is particularly important in innovation processes that are internal to organizations in that internal innovation requires implementation in the organization. In such an innovation process, flexibility is emphasized in the later phases because the greater the innovation, the more it necessitates organizational changes and the more complicated it is to adopt (Chesbrough, 2003). The willingness of managers and other employees to change their ways of doing things, particularly in willingness to engage risk, is important for new ideas to be translated into action (Shavinina, 2003). ICTs play a role in organizational innovation as well, because they can further an organization’s ability to adapt and be competitive (Fitzgerald & Wynn, 2004). Agility is a term that combines flexibility and speed (Conboy & Fitzgerald, 2004). Seo and La Paz (2008, p. 136) defined organizational agility as a set of processes that allow an organization to sense changes in the internal and external environment, to respond efficiently and effectively in a timely and cost-effective manner, and to learn from the experience to improve the competencies of the organization. MacKinnon et al. (2008) discussed strategic flexibility, referring to an organization’s deliberately crafted agility to recognize, assess, and act to mitigate threats and to exploit opportunities in a dynamically competitive environment. Strategic flexibility also refers to a set of organizational abilities to behave proactively and/or to respond quickly to a changing competitive environment, and thereby to develop and maintain a competitive advantage. Zhang (2005) identified two organizational capabilities crucial to a firm’s ability to pursue a variety of strategic options in responding to changing markets: product flexibility and cross-functional coordination. Product flexibility enables an organization to manipulate its product variety and to change efficiently and rapidly, thus developing more product strategy options to address environmental uncertainties. Tight cross-functional coordination within and across organizations promotes the smooth acquisition and sharing of critical information that the organization needs to quickly detect market and product changes, to redesign business processes and work flows, and to develop new insights and skills. ICT in Innovation Processes Information capital is an essential category of assets for implementing any business strategy, which includes the organization’s databases, information systems, networks, and technology infrastructure (Kaplan & Norton, 2004). In contemporary organizations, ICTs pervade every aspect of an organization’s value chain as a vast electronic network of interconnected applications and data (Kohli & Melville, 2009). The innovation processes and the organization’s daily operations, which might change in the implementation of an innovation, rely on ICTs. The strategic readiness of information capital measures how well the IT infrastructure and applications support the critical internal processes (Kaplan & Norton, 2004). From the viewpoint of innovation processes, this includes a demand for ICT solutions and services that support and enable organizational connectedness and flexibility. McAfee (2006) suggested that ICTs set off several kinds of revolutions in organizations and identified three distinct categories of these technologies (see Table 1). The first category, Function IT, involves technologies that make the execution of stand-alone tasks more efficient, technologies such as simulators, spreadsheets, computer-aided design, and statistical software. ICT Intangibles and Organizational Innovation 29 Table 1. The Three Varieties of Work-changing Information Technology (IT; McAfee, 2006, p. 145). Category Definition Characteristics Examples Function IT IT that assists with the execution of discrete tasks Can be adopted without complements Impact increases when complements are in place Simulators, spreadsheets, computer-aided design, and statistical software Network IT IT that facilitates interactions without specifying their parameters Does not impose complements but lets them emerge over time Does not specify tasks or sequences Accepts data in many formats Use is optional E-mail, instant messaging, wikis, blogs, and mashups Enterprise IT IT that specifies business processes Imposes complements throughout the organization Defines tasks and sequences Mandates data formats Use is mandatory Software for enterprise resource planning, customer resource management, and supply chain management They enhance experimentation capacity and increase precision. These technologies achieve their highest value when they have complements, such as new design processes. The second category, Network IT, provides the means by which people communicate with one another, such as e-mail, instant messaging, blogs, and groupware. They facilitate collaboration, allow expressions of judgment, and foster emergence. These technologies bring complements with them but allow users to implement and modify the complements over time. Finally, Enterprise IT encompasses applications that organizations adopt to restructure interactions among groups of employees or with external partners, such as software for enterprise resources planning, customer resource management, and supply chain management. They redesign business processes, standardize work flows, and monitor activities and events efficiently. These technologies introduce new interdependencies, processes, and decision rights, and necessitate organizational changes as soon as the new systems go live. According to McAfee (2006), the adoption of the various types of technologies set different challenges for the organization’s management. For Function IT, the managers’ main responsibility is to help create the complements that will maximize the technologies’ value. Because Function IT does not bring its complements with it, managers must find ways to identify them and spur their use. For Network IT, because the use is voluntary, the managers’ role is more demonstrative, that is, showing how these technologies can be used and setting norms for participation. The most challenging type of technology to adopt in organizations is Enterprise IT. They define new cross-function business processes that impose the processes on employees without allowing employees to modify them and, thus, bring higher levels of oversight. In some cases, management may need to intervene forcefully throughout the adoption, when new processes, changed decision rights, and greater interdependence are introduced. ICTs have dual importance from the viewpoint of innovation processes. First, innovation processes are enabled by appropriate ICT solutions and hindered by inappropriate ones. The first phases of innovation processes concern detecting and making sense of the problem and then creating ideas to solve the problem, and thus necessitate a great deal of investigation and Koskinen, Luomala, & Maaranen 30 collaboration. Technologies in the first two categories, Function IT and Network IT, are emphasized here because investigation and collaboration can be supported by, for example, knowledge management systems (Alavi & Leidner, 1999; Robey, Boudreau, & Rose, 2000) and networking and collaboration tools (Schneidermann, 2007). Additionally, various social media applications may enable social creativity and networking (Schneidermann, 2007). The need for collaboration continues in the later phases, in addition to support for developing and implementing the innovation. Various modeling and simulation tools, as well as prototyping systems, become helpful in studying and developing solutions to the problem (Schneidermann, 2007). Secondly, adopting an innovation in an organization often involves changing the tasks or processes that the current ICT solutions support, and hence the adoption may be enabled or hindered by these solutions. Here, the flexibility and agility of an organization to take the innovation into use become important. In relation to innovations that are intended for improving the performance of an organization, this concerns the flexibility of the organization’s ICT solutions and services and the agility of the organization to carry out ICT-related changes. Different solutions bring forth different issues to consider. For example, the flexibility of an enterprise resource planning (ERP) system refers to allowing changes in the ways of working. ERP systems integrate internal and external management information across an entire organization, and they often have caused trouble in process changes, such as delays in implementation, increasing staff requirements, and system upgrade problems (MacKinnon et al., 2008). As a result, the ability to adjust rapidly to changing business needs has become one of the essential requirements of ERP systems (Kirikova, 2009). Implementing a mix of information systems and integrating them through suitable middleware is a more flexible solution and less disruptive to the organization, but because the software packages typically come from different vendors, integration problems may arise, and maintenance and upgrades are more problematic than in ERP systems (MacKinnon et al., 2008). Regardless of the solution, a flexible ICT infrastructure should ease the transformation or at least not hinder the change. The definition of an ICT (or IT) infrastructure varies in the literature. Duncan (1995) defined IT infrastructure as a set of tangible assets, including platform technology, network and telecommunication technologies, key data, and core data processing applications. Rockart, Earl, and Ross (1996) concurred with the four assets but required integrating and interconnecting them in a way that, from the viewpoint of users, all types of information can be expeditiously and effortlessly routed through the network. Typical functional requirements for a flexible ICT infrastructure are extensibility, adaptability, and integratability. Byrd and Turnder (2000) identified both technical and human components. Thus, technical IT infrastructure includes IT connectivity, application functionality, IT compatibility, and data transparency, whereas the human IT infrastructure includes technology management, business knowledge, management knowledge, and technical skills. The latter are components that combine business processes and ICTs in an effective way. A flexible ICT infrastructure should enable the organization to embrace changes and provide relevant data for decision making. In aligning business processes and ICT infrastructure, the enterprise architecture plays an essential role (Pavlak, 2006). Enterprise architecture is a “blueprint” that specifies the main components of the organization, its information systems, the ways in which these components work together to achieve defined business objectives, and the way in which the information systems support the business processes of the organization (Kaisler, Armour & Valivullah, 2005). Enterprise architecture establishes an organization-wide road map to achieve the ICT Intangibles and Organizational Innovation 31 organization’s mission through the optimal performance of its core business processes within an efficient ICT environment (Institute for Enterprise Architecture Developments, 2007). It is used for defining and controlling the interfaces and interaction of all of the components of the information systems and organizational units (Zachman, 1999). The enterprise architecture provides important added value for the organization and facilitates more effective strategy making and better knowledge of the effects of various decisions by high-level management (Varveris & Harrison, 2005). It is essential for evolving current information systems and developing new systems that optimize their mission value (Institute for Enterprise Architecture Developments, 2007). In order to support an innovative organization, the enterprise architecture must include characteristics that support connectedness and flexibility. Various frameworks have been developed to provide a common basis for describing enterprise architectures, for example, the Zachman Framework (Zachman, 2008) and TOGAF (The Open Group, 2010). The framework used in this study is the enterprise architecture grid (EA Grid; Hirvonen & Pulkkinen, 2004; Pulkkinen, 2006; Pulkkinen & Hirvonen, 2005), which is based on TOGAF. We describe the framework below. RESEARCH SETTING AND METHODOLOGY In this section, we present the empirical foundation for our study. We define the objective and questions of our study, introduce the research framework, and describe the research methodology and process. Research Objective and Questions This study was carried out within a multidisciplinary research project on the added value of intangibles for organizational innovation. Adopting the resource-based view (Penrose, 1959), we propose that sustainable competitive advantage results from intangible assets because they enable the accumulation of other types of assets. The project focused on intangibles as drivers of organizational innovation in Finnish companies that are active in an international context. The overall objective of the project was to identify critical factors for the intangibles that support innovation in organizations. The purpose is to reduce unnecessary barriers in the organizations’ systems and procedures, and strongly stimulate connectedness and flexibility that are important for innovation. The results will be used to construct a tool that supports analysis and gives directions for improving innovation performance. In addition, ways for improvement and change management will be indicated. The project focused on intangibles in the areas of human resources, communication, marketing, and ICTs. In this study, we focused specifically on ICTs. The objective of the study was to identify intangible ICT-related factors that enable connectedness and flexibility in organizations, as well as related metrics for assessment and improvement. The research questions were the following: 1) Which intangible ICT-related factors are important for innovation processes in light of enabling connectedness and flexibility in organizations? 2) What metrics are needed for their assessment and improvement? Koskinen, Luomala, & Maaranen 38 manner (Seo & La Paz, 2008). Standardization of data formats or application interfaces is a good solution for cross-organizational interoperability, particularly when the interaction is frequent and continuous, such as between partnering organizations. The needs for crossorganizational interoperability should be identified so that standardization can take place and the necessary application interfaces implemented. Indicator 6: The users should have support for perceiving and utilizing the added value of the information residing in the organization’s data repositories and other information sources. Added value will be lost if the potential of existing information capital is not perceived and utilized for creating new competences and knowledge, enhancing existing processes, or creating additional services or new products. Perceiving is difficult when huge amounts of unstructured information exist and its context and relevance are not clear (Seo & La Paz, 2008). The users should have support for perceiving and employing information from various sources to create added value. Knowledge management systems are necessary to provide this support in a complex information environment, but they require that information is stored in a way that is easy to locate, access, and analyze (Alavi & Leidner, 1999). Data gathered from various sources should be parsed into a standardized format that can be used efficiently by the organization’s information systems. Information filtering may be needed so that only reusable and relevant data are stored (Seo & La Paz, 2008). An important source of information is people, and therefore means by which to share and store tacit and informal knowledge is essential. Indicator 7: The organization’s data models should be integrated. Without integration, the organization’s data become fragmented, which means that the same data are stored in different systems, possibly using different formats, different concepts, and even having different contents. Fragmentation leads to the vulnerability of systems, duplicated storage, and poor access to data. Data models should be compatible with the operational ontology of the information services. In a fragmented data environment, master data should be identified and managed with appropriate tools. Metadata should be specified extensively and consistently based on a common vocabulary and schemes. Indicator 8: Data repositories should enable data transfer between different systems. Flexible and reliable data transfer between different information systems is not possible if the organization’s data repositories do not have interfaces for integration or the interfaces are not adequate for the purpose. In addition, if data repositories require ad hoc fixes to meet the data transfer needs, changes to systems become increasingly difficult to manage and integration is vulnerable. Data repositories should have interfaces that enable all necessary data transfer between different systems. Systems Architecture Systems architecture represents the information systems and their interconnections. Major components thereof are organizational information systems, which are usually implemented either as one-vendor ERP systems or as a combination of different software packages (MacKinnon et al., 2008). In the following we describe the identified indicators and metrics that relate to systems architecture (see also Table 5). Indictor 9: The organization’s systems architecture should be well-planned, unified, and consistent, and used as a basis for system acquisition and utilization. An organization may use a number of different information systems that need integration, and such complexity is ICT Intangibles and Organizational Innovation 39 Table 5. Key Indicators Identified for Systems Architecture. Indicator Statement Measurement Indicator 9 Systems Architecture The organization’s systems architecture is well-planned, unified and consistent, and it is used as a basis for system acquisition and utilization. The roles and interdependencies of different systems and applications in the organization’s business processes have been specified. Common system standards and directions for lean and flexible acquisition processes have been specified. Indicator 10 Systems Integration The organization’s information systems can be integrated rapidly and reliably. Information systems provide adequate and documented interfaces for their integration. Information systems are integrated with suitable middleware, or an organization-wide ERP system has been implemented. Indicator 11 Upgrades and Realignment of Systems Existing information systems are upgraded and realigned easily and rationally. Systems can be upgraded and realigned without changes in other systems and unwanted side effects. Upgrades and changes are made only if they are business-wise necessary. Indicator 12 Support for Business Processes and Innovation Activities Information systems provide the support needed in business processes and innovation activities. Information systems and applications support all aspects of business processes and innovation activities. New applications suitable for innovation activities are identified continuously and their use is promoted. Information systems enable gathering and reporting of information on the organization’s business performance. Indicator 13 Usability and Flexibility of Systems and Applications The use of systems and applications is easy and flexible. Systems and applications support meaningful ways of working. Systems and applications are easy to use together, transparent and clear to use, and their user interfaces are well-designed for the task. Systems and applications can be customized to special user needs, and varying mental and operational models. very difficult to manage successfully. A well-planned, unified, and consistent systems architecture is required to enable rational and well-grounded decision making and systems acquisition and integration so that the output is optimal for the organization. The systems architecture should specify the roles and interdependencies of various systems and applications in the organization’s business processes. It should set common system standards and give directions for lean and flexible acquisition processes. Koskinen, Luomala, & Maaranen 40 Indicator 10: Information systems should be rapidly and reliably integrable. A major issue in enabling organization-wide and fluent business processes is system integration. Integration is difficult or even impossible if the organization’s information systems are incompatible, do not have adequate interfaces or the number of interfaces is too great to manage, or the interfaces have not been documented. Information systems should provide adequate and documented interfaces for their fluent and reliable integration. Point-to-point integration, the socalled spaghetti integration, is a maintenance nightmare when many systems need to be integrated. Individual systems should provide adequate interfaces for their integration, and they should be integrated with suitable middleware (MacKinnon et al., 2008; Zhang, 2005). Another choice is to implement an organization-wide ERP (MacKinnon et al., 2008). Indicator 11: Existing information systems should be easily and rationally upgraded and realigned. Whether an organization decides to use middleware for system integration or to implement an organization-wide ERP system, the solution should support modularity. This means that the individual systems or system modules can be changed and new ones added without changes in other systems or modules (Chung, Byrd, Lewis, & Ford, 2005). The larger the change, the more time it takes, the more side effects are to be expected, and the higher the cost. Another problem involves ongoing changes to and in software. Frequent upgrades and software changes make the management of systems difficult, and new systems and versions may not be adequately perfected. Supplier-driven upgrades and changes are not necessarily wise for the organization. Therefore upgrades and changes should be made only if they are beneficial for the business (Kankaanpää & Maaranen, 2009). Indicator 12: Information systems should provide the support needed for business processes and innovation activities. It should be ensured that information systems and applications support all aspects of business processes and innovation activities. Externally available applications and systems also should be considered. New applications suitable for innovation activities should be identified continuously and their use promoted (e.g., social web applications). Information systems should enable gathering and reporting of information on the organization’s business performance, so that needed improvements can be detected in a timely manner. Indicator 13: The use of systems and applications should be easy and flexible. Systems and applications often are difficult to use, take more time than is reasonable, and divert attention from the actual task. The benefits of use may be unclear, which weaken the users’ motivation to use them. Systems and applications should support meaningful ways of working. They should be easy to use together, transparent and clear to use, and the interfaces should be well-designed for the task. Systems and applications also should be customizable to users’ special needs, as well as to the varying mental and operational models of the users. Technology Architecture According to Pulkkinen (2006), technology architecture concerns the technologies and technological structures used to build information and communication systems, such as application technology, hardware, and networks. The key task of technology architecture is to offer technological possibilities for flexible information systems and other innovation supporting tools. We identified some technological factors that, as tangibles, cannot be included as indicators, but which are important prerequisites for intangible assets. First, the speed, flexibility, capacity, ICT Intangibles and Organizational Innovation 41 and coverage of the internal and external technology infrastructure should meet the needs of the organization’s information services and systems. Second, many of the previously discussed integration and management issues require the various tangible technologies and technology platforms to be integrated and managed properly, and that technology-independent external access to the organization’s data and systems is possible. Third, the various tangible technologies should be easy to use and easily adapted to different user needs. We now describe the identified indicators and metrics that relate to technology architecture (see also Table 6). Indicator 14: Technology-related decisions, and the acquisition, implementation, and maintenance of technology are well-planned and organized. Common technology architecture, standards, and a strategy should be defined: The lack thereof easily leads to a fragmented and unmanageable technology infrastructure. These should be consistently used in decision making, acquisition, and maintenance. Indicator 15: Adopted technology is affordable and easy to maintain. The existing technological solutions should be documented in a way that their life cycles can be managed. It should be possible to implement new technological solutions smoothly and without heavy additional investments. Maintenance of technology should not be dependent on any one person or supplier because the loss of that person or supplier would pose a great risk for the organization. Table 6. Key Indicators Identified for Technology Architecture. Indicator Statement Measurement Indicator 14 Management of Technology Management of technology is well-planned and organized. A common technology architecture, standards, and strategy have been defined, and they are consistently used in decision making, acquisition, implementation, and maintenance. Indicator 15 Acquisition and Maintenance of Technology Adopted technology is affordable and easy to maintain. The existing technological solutions have been documented in a way that their life cycles can be managed. New technological solutions can be implemented smoothly and without heavy additional investments. Maintenance of technology is not dependent on one person or supplier. DISCUSSION AND CONCLUSION In this study, we employed an internal organizational approach to the innovation process. The importance of connectedness and flexibility in the various phases of the innovation processes has been noted in previous research. Both are needed throughout the process, but we conclude that they are emphasized differently. Connectedness is emphasized in the early phases of the innovation process because it is required for gathering knowledge from innovation networks inside and outside the organization. Flexibility is emphasized in the later phases because of the needed organizational changes. If the aim of innovation is to improve the performance of the Koskinen, Luomala, & Maaranen 42 organization, the flexibility of the organization’s ICT solutions and services and the agility of the organization to carry out ICT-related changes are extremely important. Our findings confirm that organizational issues related to ICTs are very important; indeed the majority of the identified factors are found in the business architecture category, and only about a half of these factors deal with ICTs or information management. Innovativeness should be a strategic concern for the organization. Lean and well-functioning business processes and organizational structure are necessary foundations for good ICT- related decisions. The strategic role of ICTs in achieving business processes and innovativeness should be recognized as well. When the organization and its business processes are designed to embrace opportunities for innovativeness, suitable ICT services and systems can be implemented to support them. ICT solutions have limitations, however, which need to be considered during planning and implementation. Clearly a major issue identified in this research for enabling connectedness and flexibility is integration. Factors related to integration can be found in all categories, extending from organizational and business process integration to systems and technological integration. Integration is a concern not only within the organization but extends beyond the organizational boundaries. Integration creates a basis for well-functioning connections within and between organizations, and is necessary for connectedness. Flexible integration, on the other hand, is a basis for flexible organizational structures and ways of working, which are needed for implementing the changes involved in adopting innovations. In this way, integration is important both in the early phases of innovation processes by enabling connectedness and in the later phases by enabling flexibility. Service thinking and user-orientation also arose in several indicators. They show a requirement for fitness, fluency, and flexibility that not only relates to existing processes and workflows but also promotes innovation therein. Fluent workflows and ways of working with well-designed and adaptable tools enable users to focus on their actual work instead of the systems and applications they are using. Service orientation also helps the service provider understand the customer’s business processes or the users’ ways of working, thereby improving the ability to detect and embrace opportunities for new service innovations. A single but rather obvious factor is the need for systems and applications that support business processes and innovation activities. The systems and applications should support, for example, cooperation, information gathering, and learning. Different aspects mentioned in the responses include group work, networking, unified communication, customer relationship management, data mining, and tacit knowledge sharing. Largely, these support the early phases of innovation processes not only by enhancing connectedness among people but also by improving the accessibility, retrieval, and processing of information. 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Information systems, strategic flexibility and firm performance: An empirical investigation. Journal of Engineering and Technology Management, 22, 163–184. Authors’ Note All correspondence should be addressed to: Minna Koskinen The Agora Center University of Jyväskylä P.O. Box 35 FIN-40014 University of Jyväskylä, Finland [email protected] Human Technology: An Interdisciplinary Journal on Humans in ICT Environments ISSN 1795-6889 www.humantechnology.jyu.fi