The twofold transition: Framing digital innovations and incumbents' value propositions for sustainability

Bähr, Karolina; Fliaster, Alexander Article — Published Version The twofold transition: Framing digital innovations and incumbents' value propositions for sustainability Business Strategy and the Environment Provided in Cooperation with: John Wiley & Sons Suggested Citation: Bähr, Karolina; Fliaster, Alexander (2022) : The twofold transition: Framing digital innovations and incumbents' value propositions for sustainability, Business Strategy and the Environment, ISSN 1099-0836, Wiley, Hoboken, NJ, Vol. 32, Iss. 2, pp. 920-935, https://doi.org/10.1002/bse.3082 This Version is available at: https://hdl.handle.net/10419/287823 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ SPECIAL ISSUE ARTICLE The twofold transition: Framing digital innovations and incumbents' value propositions for sustainability Karolina Bähr | Alexander Fliaster Department of Innovation Management, Faculty of Social Sciences, Economics and Business Administration, University of Bamberg, Bamberg, Germany Correspondence Karolina Bähr, Department of Innovation Management, Faculty of Social Sciences, Economics and Business Administration, University of Bamberg, Kärntenstraße 7, 96052 Bamberg, Germany. Email: [email protected] Abstract Although digital technology offers many sustainable business model opportunities, they are not always exploited. We argue that the framing of technology is still rarely considered a cognitive antecedent of business models for sustainability, despite that it offers insightful explanations, connecting technology's sustainability potential to its business model implementations. We conduct a qualitative multicase study of virtual power plants, adopted by seven incumbent companies in the German energy sector, and explore how they frame innovative digital technology, as well as how it affects their value propositions and the energy transition. Our research reveals several value proposition differences between two company groups. The first generates a singlefocused technological frame, concentrating on economic value. The second constructs a twofold digital and sustainable technological frame, resulting in additional socioenvironmental value components. Overall, companies that create a twofold frame operate as renewable energy enablers or system supporters and contribute to the energy transition. KEYWORDS business models for sustainability, digital innovation, energy, sustainability, technological frame, value proposition 1|INTRODUCTION Today's societies and organizations face the fundamental evaluative, ambiguous, uncertain and highly complex challenges of sustainability (Farla et al., 2012; Ferraro et al., 2015; Markard, 2017). Transitions towards sustainability imply enacting major changes in the established sociotechnical systems to prioritize more environmentally friendly production and consumption (Markard et al., 2012). These changes are nonlinear or disruptive and span longer periods (Loorbach et al., 2017). Sustainability transitions are highly dependent on context and policy and involve interactions between technology, institutions, and the social sphere (Hölscher et al., 2018; Markard, 2017). For companies, sustainability transition challenges refer to the need to move towards completely new and more sustainable value propositions and business models (Schaltegger, Hansen, & Lüdeke-Freund, 2016). Accordingly, scholars advocate for sustainable business models that permit the creation of ecological and social value, beyond purely economic benefits (Freudenreich et al., 2020; Lüdeke-Freund, 2020). Moreover, these business models must provide value not only to the company but also beyond its organizational borders, to its stakeholders and society as a whole (Hahn et al., 2014). Overall, sustainability aims to consider both today's and tomorrow's generational interests and to foster an acceptance that our environment's natural resources and ability to List of abbreviations/acronyms: BM, business model; BMWi, Bundesministerium für Wirtschaft und Energie; Federal Ministry for Economic Affairs and Energy 2013–2021; ES, environmental sustainability; IT, information technology; MW, megawatt; VPPs, virtual power plants. Received: 24 August 2020 Revised: 9 December 2021 Accepted: 7 March 2022 DOI: 10.1002/bse.3082 This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. © 2022 The Authors. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd. 920 Bus Strat Env. 2023;32:920–935. wileyonlinelibrary.com/journal/bse withstand pollution are limited (World Commission on Environment and Development, 1987). Along with these sustainability transition challenges, companies are increasingly confronted with another fundamental issue, business digitalization. Several authors offer distinct definitions of digitization, digitalization, business digitalization, and digital transformation (Bharadwaj et al., 2013; Nambisan et al., 2017; Ritter & Pedersen, 2020). In this study, we define digitalization at the organizational level as the adoption of new digital technologies intended to enable new market offerings, business processes or business models (Brennen & Kreiss, 2016; Gregori & Holzmann, 2020; Nambisan et al., 2017). Past research provides substantial empirical evidence that companies deliberately deploy new digital technologies, such as social media, big data analytics or digital platforms, to achieve ‘major business improvements (such as enhancing customer experience, streamlining operations or creating new business models)’(Fitzgerald et al., 2013, p. 2). In simpler terms, scholars argue that business digitalization can increase a firm's internal efficiency and organizational growth by adding value to customers (Björkdahl, 2020). While one main objective of business digitalization is to create economic value, sustainable business models enabled by digital technologies also aim for higher ecological and social value. Thus, while the challenges of digitalization and sustainability transitions are likely to be strategically relevant for the vast majority of industry sectors, they play a particularly decisive role for energy companies (Flaherty et al., 2019; Kolloch & Golker, 2016). Startups and established companies each make a unique contribution to the energy transition (Palmié et al., 2021; Schaltegger & Hansen, 2017). According to Palmié et al. (2021), incumbents excel at testing capital-intensive and complex business models, while startups, in particular, create business models that are characterized by a high ecological orientation, digital capabilities and a strong customer focus. In some industries, this business model innovation enables market players to initiate the sustainability transition, while in others, such as energy, the support of political and institutional players is essential (Schaltegger & Hansen, 2017). For instance, the German ‘Energiewende’(‘energy transition’) policy explicitly strives to reduce greenhouse gas emissions, boost energy efficiency and enhance renewable energy (Umweltbundesamt, 2018), resulting in the energy sector's decarbonization. The changing regulation has also led to the German energy sector's decentralization (Lindberg et al., 2019), essentially transforming the competitive landscape and severely increasing competitive pressure on market players (Geels et al., 2016). This market pressure forces companies to put additional efforts into developing economically feasible solutions, such as more profitable value propositions, through digitalization (Kolloch & Golker, 2016). Furthermore, new German regulations, such as the Act on the Digitalization of the Energy Transition (BMWi, 2016), also promote energy companies' digitalization efforts. Consequently, more than three out of four energy companies in the German-speaking countries Austria, Germany and Switzerland are currently working on a digitalization strategy (Kearney, 2020), with 44% rating digitalization as their top priority (Basilio, 2020). While research on business models for sustainability and business digitalization is burgeoning, these topics are largely disconnected in previous works, despite that companies are already facing these issues. Acknowledging this research gap, recent studies are increasingly addressing digital sustainability: the use of digital technologies for new business models that also enable social and environmental value creation (George et al., 2021; Gregori & Holzmann, 2020). These studies perceive business model innovation as a mediator between digital technologies and socioecological value creation and between sustainability innovations and business cases for sustainability (LüdekeFreund, 2020; Parida & Wincent, 2019). For example, sonnen uses software that can optimize charging and discharging processes to improve the life of batteries used to store renewable energy, and LichtBlick offers analyses of smart meter data to boost customers' energy efficiency (see for more information LichtBlick, 2022; sonnen Group, 2022). As such, the current study aims to contribute to this new and promising research area. From a theoretical perspective, we argue that companies' framing of underlying digital technologies is likely to affect how they support ongoing transitions to sustainability. The energy transition builds on the belief that societies should replace fossil energy with renewable energy systems enabled, in particular, by technological innovations (Loorbach et al., 2017). An example of such technologies is virtual power plants (VPPs). VPPs virtually integrate several distributed power-generating, power-storing and powerconsuming units to permit aggregation and remote control of individual units with different digital technologies (Nosratabadi et al., 2017; Othman et al., 2015). Aggregation and remote control of distributed units that use wind, solar energy or biogas help balance fluctuating power generation and grant access to more electricity markets due to minimum market entry constraints (Naval & Yusta, 2021; Nosratabadi et al., 2017; Othman et al., 2015). For example, Next Kraftwerke (n.d.) was a new entrant in 2009 and operated a VPP with more than 9500 MW and 13,000 units in 2021. In sum, VPPs unfold a huge potential to transform energy systems as they change established roles of industry incumbents (e.g., producer and consumer) by introducing new actors like citizens and their engagement in energy production. Past research already indicates that similar organizations might interpret the same technology differently, depending on framing, which results in very different organizational actions (Edmondson, 2003; Spieth et al., 2021). Innovation studies use the framing construct at the meso level to explore vital organizational processes, such as administrative innovation implementation (Kennedy & Fiss, 2009), organizational responses to discontinuous innovations (Weber et al., 2019) and knowledge transfer interactions (van Burg et al., 2014). However, despite some notable exceptions (Hahn et al., 2014; Scrase & Ockwell, 2010), the application of cognitive frames in sustainability research, especially in sustainable business model research, is still limited and constitutes a promising avenue for research (De Giacomo & Bleischwitz, 2020; Lüdeke-Freund, 2020; Rovanto & Bask, 2021). De Giacomo and Bleischwitz (2020, p. 3362) propose in their literature review, ‘to investigate the managerial cognitive dimension linked to BM [business model] for ES [environmental sustainability]’, because cognition is still neglected in this literature. Additionally, LüdekeBÄHR AND FLIASTER 921 Freund (2020, p. 678) concludes his ‘list of barriers [to business models for sustainability innovation] is extensive but not yet conclusive. Further barriers might be added, such as cognitive effects’. To address this gap, we explore the following research questions: •RQ1. How do incumbent companies in the German energy sector frame currently emerging digital VPP technologies? •RQ2. Which role do digitalization and sustainability considerations play in their technological frames? •RQ3. How do differences in incumbents' technological frames affect the design of sustainable value propositions and, as a consequence, the sustainability implications at the company and the broader societal level? Our findings extend existing knowledge in several ways. First, we enrich the discussion on sustainable business model innovation by adding the technological frame as an important cognitive antecedent (Bocken et al., 2014). Thus, we answer the call to inform sustainability research with an established concept from organization studies (De Giacomo & Bleischwitz, 2020; Köhler et al., 2019; LüdekeFreund, 2020). Second, we add knowledge on the system perspective within business models for sustainability research by providing two explanations for how business models' value creation connects companyand system-level sustainability (Bidmon & Knab, 2018; Bocken et al., 2014; Sarasini & Linder, 2018; Schaltegger, LüdekeFreund, & Hansen, 2016). We elaborate on two crucial sustainable business model facets: considering many stakeholders and delivering a blended value (Gregori & Holzmann, 2020; Schaltegger et al., 2012). Lastly, we add insights on incumbents' role in the energy transition, as they are powerful actors whose support offers important opportunities for societal transitions to sustainability (Loorbach et al., 2010; Loorbach & Wijsman, 2013; Rovanto & Bask, 2021; Schaltegger, Lüdeke-Freund, & Hansen, 2016). Primarily, we discuss technological framing and its relevance in sustainable business model research. Subsequently, we describe our data collection and analysis, followed by our empirical findings. In particular, we reveal that companies that create a twofold, digital and sustainable technology frame contribute to sustainability transitions beyond their organizational borders, operating as renewable energy enablers or system supporters. Finally, we highlight our managerial implications. For instance, we argue that influential incumbents should adopt potential sustainable technologies and that their communication strategy should encourage important sustainability-oriented stakeholders, such as green prosumers, to adopt digital technology to further promote society's sustainability transitions. The paper concludes with our limitations and suggestions for future research. 2|SUSTAINABLE VALUE CREATION AND THE TECHNOLOGICAL FRAME CONSTRUCT To create our theoretical framework, we respond to several sustainability scholars' recent calls for applying concepts from organizational studies to transition-related research questions (Köhler et al., 2019). One of the most influential theoretical constructs in management and organization theory is framing (Cornelissen & Werner, 2014). First applied to explore managerial cognition, and individuals' sense-making and decision making in organizations (Weick, 1995), framing has since expanded from the micro to the meso analysis level (Cornelissen & Werner, 2014; Maitlis & Christianson, 2014). Generally, framing helps us understand how organizations interpret information and how these interpretations guide organizational decisions and activities to adopt innovations and initiate organizational change (Edmondson, 2003; Kennedy & Fiss, 2009; van Burg et al., 2014; Weber et al., 2019). Past research reveals that framing helps actors deal with high uncertainty situations, stemming from ambiguous or missing information (van Burg et al., 2014). Thus, framing is likely to be relevant in the process of adopting new digital technologies associated with both high technological and market uncertainty (Nambisan et al., 2017; Yoo et al., 2012). We believe that the framing of those technologies is also important in the context of sustainability transitions, in which ‘the potential solutions and outcomes are not well-understood, societal preferences unclear and/or diverse, and political processes and techno-economic developments often unpredictable’(Markard, 2018, p. 628). In this context, technological framing should help organizations link novel digital technologies to broader societal discourses and design and articulate new visions concerning potentially sustainable innovations (Gish & Clausen, 2013). Hence, drawing on previous studies (Edmondson, 2003; Kennedy & Fiss, 2009), we argue that organizational actors' technological framing will guide their specific application patterns, such as new digital technologies' sustainabilityoriented value propositions. To address technological frames, we refer to Orlikowski and Gash (1994), who identify three broad domains: the nature of technology, technology strategy and technology in use. Several studies address these key domains (Olesen, 2014), providing empirical evidence that the domains ‘are a useful starting point for examining key actors' interpretations of technology, and the nature and extent of differences among them’(Orlikowski & Gash, 1994, p. 204). The first domain, the nature of technology, involves the innovator's ‘understanding of its capabilities and functionalities’(Orlikowski & Gash, 1994, p. 183), or features and uses (Davidson, 2002), and can be linked to the question, ‘What is it?’(Saarikko et al., 2020). The second domain, technology strategy, captures innovators' ‘views of why their organization acquired and implemented the technology’and denotes ‘the motivation or vision behind the adoption decision and its potential value to the organization’(Orlikowski & Gash, 1994, p. 183). Additionally, it includes standards for judging the success of technology adoption and answers the question, ‘Why should it be used?’ (Davidson, 2002; Saarikko et al., 2020). Particularly, this domain gains significance when organizations begin to use these technologies and public discourses translate into specific organizational contexts (Linderoth & Pellegrino, 2005). Finally, the technology in use domain entails innovators' ‘understanding of how the technology will be used on a day-to-day basis and the likely or actual conditions and consequences associated with such use’(Orlikowski & Gash, 1994, p. 183), referring to the question ‘How is it used?’(Saarikko et al., 2020). 922 BÄHR AND FLIASTER Previous studies reveal that technological frames are dynamic, as a contextual change can trigger organizations to reinterpret existing information and gain new insights (Davidson, 2002). Accordingly, the German energy sector is currently undergoing substantial changes, due to digitalization, deregulation, and decarbonization. This changing context may open up fresh opportunities to adapt and modify technological frames (Davidson, 2006), reflecting the growing awareness of sustainability issues. Hence, we expect energy companies to conduct business activities that use digital innovations to create economic value and solve ecological or social problems (Freudenreich et al., 2020; Lüdeke-Freund, 2020). These business activities can be embedded into novel business models that follow a ‘rationale which positions sustainability as an integral part of the company's value proposition and value creation logic’(Schaltegger et al., 2012, p. 102). Recent research also reveals that value creation and the resulting value propositions are central to business models in general and sustainable business models in particular (De Giacomo & Bleischwitz, 2020; Eyring et al., 2011; Geissdoerfer et al., 2018; Schaltegger, Hansen, & Lüdeke-Freund, 2016). To address sustainable value creation enabled by digital technologies, we refer to the business model paradigm (Amit & Zott, 2001), specifically to business models that combine value creation and capturing (Chesbrough, 2007). Despite the ongoing debate on business model concept definitions, the consensus on some central functions is growing (Zott et al., 2011). First, the business model describes value creation for all stakeholders, not just the focal firm's value capture logic. Second, it considers thirdparty activities, such as suppliers or customers. Third, it explains business logic at the system level and constitutes a new perspective for analysing organizations (Zott et al., 2011). Overall, business model innovation creates new business models through experimentation and exploration (Afuah, 2014; Chesbrough, 2010; Foss & Saebi, 2017). We must also briefly address business cases of sustainability, as business model innovations may result in different business cases, depending on the corporate sustainability strategy (Schaltegger et al., 2012,2019). Nonetheless, repetitive reproductions of single event-driven business cases can create business models for sustainability (Schaltegger et al., 2012). The literature discusses several different business cases in the context of sustainability (Schaltegger et al., 2012,2019; Schaltegger & Burritt, 2018). For instance, Schaltegger et al. (2012) differentiate between regular business cases, business cases of sustainability and business cases for sustainability. According to the authors, business cases of sustainability create economic profit while companies consider social and environmental issues, whereas business cases for sustainability entail ‘voluntary activity with the intention to contribute to the solution of societal or environmental problems’, (p. 98) which must involve executive action and result in positive business effects. More recently, Schaltegger and Burritt (2018) introduce four business cases, depending on managers' ethical motivations for sustainability activities. Moreover, by integrating stakeholder theory, we can add other business cases, pertaining to stakeholder management and sustainability (Schaltegger et al., 2019). The commonality in all these concepts is that they differentiate between business cases' initial purpose, beneficiaries and sustainability roles (Schaltegger et al., 2012,2019; Schaltegger & Burritt, 2018). Similarly, the technological frame addresses the purpose and benefits of technology adoption (Davidson, 2002; Orlikowski & Gash, 1994; Saarikko et al., 2020). These similarities constitute an excellent point of departure for the following ideas. Recent studies argue that three essential features characterize corporate sustainable business models: (1) creating value beyond economic benefits, involving ecological and social value components; (2) systematically recognizing the interests of and creating monetary/non-monetary value for multiple stakeholders, not only for themselves, their customers and shareholders; and (3) addressing several stakeholders' individual demands, while contributing to societal welfare (e.g., communities) (Bocken et al., 2014; Evans et al., 2017; Freudenreich et al., 2020;Hahn et al., 2014; Lüdeke-Freund, 2020; Schaltegger, Hansen, & LüdekeFreund, 2016). However, others present a more nuanced view. For instance, the system perspective within sustainable business model research discusses how sustainable business model innovation can support sustainability transitions at the system level, such as the business environment, regulations or institutions (Bocken et al., 2014; Schaltegger & Wagner, 2011). Accordingly, Rovanto and Bask (2021) show that incumbents can support societal transitions through their influence on suppliers. Incumbents can also support industry sustainability if they replicate the sustainable business models of more sustainable entrants or commercialize their new technologies (Bidmon & Knab, 2018; Schaltegger, Lüdeke-Freund, & Hansen, 2016), as they have superior experience and infrastructures (Richter, 2013). The relationship between business models and technology is especially intriguing in the context of sustainability, as the same technology might have different sustainability impacts depending on the chosen business model (Sarasini & Linder, 2018). Overall, scholars argue that new digital technologies can contribute to these key sustainable business model features by supporting the creation of blended value propositions that embed several stakeholders' social, ecological and financial values (Emerson, 2003; Gregori & Holzmann, 2020). Although prior studies demonstrate the importance of technological framing for digital technology adoption, research on sustainable business models has not yet employed this cognitive perspective (De Giacomo & Bleischwitz, 2020; Lüdeke-Freund, 2020). This cognitive perspective adds important insights as it helps to understand additional barriers to sustainability innovations and is essential to overcome these barriers. Thus, we empirically address this important gap by exploring how digital technological frames lead to more sustainable value propositions and contribute to sustainability transitions beyond organizational borders. 3|DATA COLLECTION AND ANALYSIS The multicase study methodology appears particularly useful for understanding complex phenomena, such as technological framing during sustainability transitions (Cunningham et al., 2017; Geels, 2002; Gregori & Holzmann, 2020; Yin, 2017). As it builds on constant case comparisons (Bansal et al., 2018), this methodology helps strengthen the reliability of emerging theoretical arguments. BÄHR AND FLIASTER 923 Concerning data collection, we focused on incumbent companies, taking a cue from prior studies that identify incumbents' contributions to the promotion of renewable technologies as one of the central and underexplored themes in sustainability transitions, especially in the energy sector (Markard, 2017). Thus, we collected and analysed data on incumbents in the German energy sector that adopted VPP technology. Innovative digital service platforms (Midttun & Piccini, 2017), such as VPPs, allow for the integration of several renewable and decentralized power-generating units (Nosratabadi et al., 2017). The VPPs have recently attracted the attention of key actors, resulting in creative efforts to collaboratively explore new business models and address the challenges of weak profitability (Breuer & LüdekeFreund, 2017; Richter, 2013). The VPPs contain several features that make them particularly suitable for our research objectives with regard to energy transition. For instance, they integrate especially renewable power-generating units, such as photovoltaics, wind turbines, hydro turbines and biogas. More advanced VPPs also embed power-generating unit and energy storage tool controllability, such as batteries, pumped storage or electric vehicles (Kasaei et al., 2017; Nosratabadi et al., 2017). As VPPs make decentralized, renewable power-generating units visible to system participants, they help avoid overcapacity and resource underutilization (Pudjianto et al., 2007). Aggregation and controllability are particularly critical, due to renewable energy sources' high volatility: a VPP aggregator controls and manages the entire VPP system by load dispatching, selling and purchasing energy to and from the energy market, while also considering diverse data sources, such as weather, operating cost and forecast data (Nosratabadi et al., 2017). Furthermore, VPPs not only rely on the activities of different industry actors, such as energy producers, software and hardware developers and marketer service providers, but also transform key components of the ecosystem (e.g., the actors and their business relationships). Within the VPP ecosystem, many energy customers play a dual role, serving as both electricity consumers and producers (prosumers) (Dellermann et al., 2017). As those ecosystem changes will have profound consequences on different sectors, sustainability scholars have recently called for more research on platform technologies, including VPPs (Markard, 2018). In this study, we identified the incumbent companies as the 10 biggest energy firms and 20 biggest municipal utilities in Germany. We conducted desk research and scanned publicly available information to determine which incumbents engage in VPP projects. As we could not obtain any information on VPP engagement for eight of the incumbents, we excluded them, as well as the incumbents that publicly reported using technologies developed by other incumbents that were already part of our case selection. Then, we contacted 78 middle managers and employees from 10 incumbents. From these, 53 did not respond, 12 answered our request, but were unwilling to participate, and one person agreed to have an informal exchange, but did not grant us permission to be cited. Thus, we were able to obtain 12 semi-structured formal interviews with respondents from seven incumbent companies (total interview duration 12.5 h, see Appendix A). All informants were or are still directly involved in projects related to VPPs and can be considered knowledgeable agents (Gioia et al., 2013). This is particularly advantageous for our explorative study on technological framing and sustainability, because as previous research demonstrates, middle managers and employees offer valuable insights for analysing potentially radical changes (Jarzabkowski et al., 2019; Lassen et al., 2009). The interviews took place in person, via phone or video conference, following the interviewee's preferences, and all were recorded and transcribed with the interviewee's consent. The transcripts totalled 91,600 words on 234 pages. We asked the interviewees to define VPPs, explain how their company uses them and describe what kind of value these VPPs have created for their company, customers and other constituencies. In this process, we followed the best practices for interview design (Rowley, 2012) and rigorous qualitative data collection and analysis in general (Gioia et al., 2013; Rheinhardt et al., 2017). For example, we returned to interviewees if new questions emerged during data analysis and flexibly adjusted our interview process to react to their answers. We also deployed additional sources to obtain information on the companies and their VPPs. Similar to other qualitative studies (Nag et al., 2007; Nag & Gioia, 2012), we collected and analysed publicly available corporate data (see Appendix B). Specifically, we studied 36 press releases and 47 annual reports covering VPPs, as well as archival data published in business magazines and newspapers (e.g., Handelsblatt), and energy industry journals (e.g., Zeitschrift für Energiewirtschaft). We used this additional information to develop a deeper understanding of the industry context and its current dynamics. We took several additional steps to ensure that our data met Lincoln and Guba's (1985) seminal criteria for trustworthiness, which are particularly important for qualitative research designs. For instance, both authors were involved in the data analysis to ensure that the findings did not solely rely on a single analyst's interpretations. Following Gioia et al.'s (2013) recommendations, we also read the interview data several times and engaged in mutual discussions to achieve agreements. Moreover, we also gained outsider perspectives by discussing emerging insights with four other industry experts, who work in the energy sector, but are not directly involved in the studied VPP projects, and with several other sustainability and digitalization scholars during two international research conferences (Corley & Gioia, 2004). We used MAXQDA ® Plus 2020 to code the interview data, specifically applying inductive open coding to identify central topics from an informant's perspective and allow insights to emerge (Corley & Gioia, 2004). We searched for important issues to grasp what is occurring and highlighted the corresponding interview text passages, which resulted in informant-centric central concepts (Thornberg & Charmaz, 2014). We clustered similar concepts to form first-order categories and assembled them into second-order themes, based on theoretical considerations (Gioia et al., 2013; Nag et al., 2007; Nag & Gioia, 2012). In this second-order analysis, we considered whether the emerging theoretically distinctive themes can better explain the 924 BÄHR AND FLIASTER companies' different technological frames and value propositions (Gioia et al., 2013). The data analysis consisted of several rounds. We went back and forth between the interview data and theoretical concepts, refining our framework based on accumulated evidence. Connecting emergent facets to previous technology framing literature, we concluded that several first-order categories could be optimally clustered into Orlikowski and Gash's (1994) three frame dimensions, while the other nine second-order themes emerged directly from the aggregation of informant-based first-order codes. In the final step, we further FIGURE 1 Data structure. † Emergent first-order categories are further clustered into nature of technology, technology strategy and technology use, referring to Orlikowski and Gash (1994) suggested concepts. ‡ The questions ‘what’,‘how’and ‘why’originate from Saarikko et al. (2020) BÄHR AND FLIASTER 925 consolidated the second-order themes, eventually building four overarching dimensions shown on the right-hand side of Figure 1 (Corley & Gioia, 2004; Gioia et al., 2013). Our constant comparisons between codes, themes, dimensions and cases produced insights into the value propositions resulting from VPPs' technological framing in the face of the twofold energy transition. Figure 2presents the resulting model. 4|FINDINGS Altogether, context is important for understanding technological frames and value proposition designs, as it shapes the environment in which they emerge (Thomas et al., 1993; Weick, 1995). Thus, our analysis allows us to conclude that the perception of contextual changes comprises three distinct themes: erosion of core business, technological advancements and the societal awareness. First, changes in the competitive landscape result in the erosion of the traditional core business, stemming from the decentralization of energy production. The business model of operating large power plants is disappearing (Interviewee 8), the ongoing commoditization of energy is perceived as a considerable challenge (Interviewee 7) and the emergence of new competitors is perturbing the industry (Interviewee 2). In fact, some customers quit and re-emerge as competitors (Interviewee 5). Overall, the new competitors demonstrate how to use VPPs to generate profits (Interviewee 11) and challenge established players to compete with lower prices (Interviewee 1). Second, the technological advancements are growing in importance in the energy industry, with the emergence of artificial intelligence, cloud-based services and big data (Interviewee 2). These digital technologies enable the automation of processes (Interviewee 9), by integrating existing sensors for data collection (Interviewee 11). Similarly, Interviewee 6 explains that the management of minor decentralized power-generating units necessitates more digital technology implementation. Additionally, the existing digital infrastructure either enables or limits the opportunities stemming from small decentralized units (Interviewee 8). Third, there seems to be a high societal awareness and acceptance of Germany's energy transition (Interviewee 4). Although the interviewees believe that the energy transition can work (e.g., Interviewee 4, Interviewee 8, Interviewee 11), many stress that the energy transition's design is dependent on regulation (e.g., Interviewees 1, 5 and 7). In other words, many actors, such as proactive customers (Interviewee 9) or standard-setting associations (Interviewee 4), support the energy transition, but the challenge lies in regulation, due to its imperfect (Interviewee 11) and fast-changing nature (Interviewee 3). In sum, the findings highlight how the energy companies perceive the energy transition and help us to contextualize their technological frames. Additionally, their perception supports our perspective that VPPs and the energy industry are a suitable case to study technological framing during sustainability transitions. On the one hand, our data analysis reveals that all energy incumbents share a similar understanding of the first technological frame domain (the nature of technology) and stress the same fundamental FIGURE 2 Resulting model of single-focused versus twofold technological frames: Incumbent companies value propositions 926 BÄHR AND FLIASTER issues: the virtual integration of small, decentralized power-generating units, the potential to include storage units and the active management of energy flows and market access. On the other hand, we find substantial differences between the incumbents regarding the two other domains (technology strategy and technology in use). Overall, the companies have two different patterns of framing VPP technology, leading to two different ways of designing value propositions and contributing to sustainability transitions. 4.1 |The single-focused technological frame: VPP's sole focus on business digitalization The first group of incumbent companies primarily emphasizes the technological aspects of adopting VPPs, such as automation and modifying existing organizational IT systems, and focuses on the economic benefits of technology adoption, such as operational efficiency. Even when they strive to attract new customers, owing to increased digital capabilities, these companies adhere to their existing customer value propositions that were in place before using VPPs, which we refer to it as their ‘legacy’value propositions (upper rectangle, Figure 2). Economic considerations and strong market-pressure perceptions characterize the technology strategy domain of incumbents with a single-focused frame. For instance, Interviewee 1 explains: ‘It is important to offer not only a commodity, but also a complete package, even though we are by far not the only one who can do this’. Similarly, Interviewee 8 declares: ‘We need other revenue models, other raisons d'être, and of course, the topic of VPP came up as a buzz word’. Furthermore, perceived market pressures and sense of urgency lead to prioritizing economic goals. As Interviewee 4 states, VPPs make it possible ‘to grant small units grid access and if necessary, to avoid economic risks. Balancing energy and avoiding cost risks, these are the objectives’. The ongoing commoditization trend drives incumbents to invest in innovative technologies to optimize their product/ services portfolio (Interviewee 3) and target efficiency through digitalization, automation, and better process management (Interviewee 11). In this context, Interviewee 11 expresses digitalization's importance for competition in the energy industry: ‘Everyone felt they had to have a platform, otherwise they would miss out on digitalization’. Regarding the technology use domain, we find that synced technological and economic considerations also dominate the ways in which these companies adopt VPPs. For instance, Interviewee 8 explains: ‘From the very beginning, we focused on small assets when we built our platform, both on the IT side and product side’. These techno-economic application facets outshine VPP sustainability. As Interviewee 1 notes: ‘It's not just about renewables, it does not matter where the flexibility comes from’. Our data analysis reveals that legacy value propositions, which focus solely on economic value, consist of four main components (see Figure 2). The first component, cost savings, centres on making the provided services more affordable for the customer and/or more profitable for the incumbent company. The VPP plays a limited and subordinate role, mainly supporting the legacy business model by adding flexibilities in the operations of heating or storage systems. The second component, internal service, means that the legacy business model's external customers obtain no economic benefits. Instead, the unit that operates a VPP creates economic advantages for other internal units of the same incumbent company. This internal service can be the first step in testing the value proposition that can then be scaled up. However, several incumbent companies do not currently plan to scale up their VPP operations, focusing solely on internal processes and services. The third component, full service, involves very intense customer service, as companies can use their existing knowledge and competencies in the energy business to organize end-to-end processes for their customers. The fourth component is to support partners' business models, entailing a strong external service orientation that is not limited to VPP processes. The services are bundled on digital platforms that enable partners to extend their business models by integrating third-party services. In sum, the value proposition of incumbents with a single-focused technological frame is built around creating economic value for the focal company and its customers. For instance, Interviewee 3 summarizes: ‘At the end of the day, for us, it was a purely monetary issue, so we had financial expectations. For customers, the plant operator […], their role in the VPP is profit maximization’. This sole focus on economic benefits also dominates the value propositions that companies with a single-focused technological frame offer to stakeholders other than customers. As Interviewee 8 notes: ‘Yes, the added values can vary depending on the stakeholder. However, at the end of the day, it is usually about automation, reducing process costs, reducing complexity […], and expanding individual business models’. 4.2 |The twofold technological frame: VPPs as digital and sustainable technology For the second group of energy incumbents, VPP adoption is a digital innovation that contributes to economic objectives and is an essential shift towards sustainability resulting in combined motives. For some, the shift towards renewable energy has been ‘a very digital topic from the start’(Interviewee 2). Specifically, regarding the technology strategy, Interviewee 2 notes: The purpose is making the whole thing manageable, reasonably integrating decentralized plants into the large energy industry, and enabling Germany's Energiewende. It is a very ambitious goal to offensively expand renewable energies. Within my company, this goal is on every poster, in every office, and in every meeting room. The strategy is communicated very strongly here and to the outside world. The twofold frame's technology use domain mainly addresses context-specific deployment decisions that are in sync with the technology strategy mentioned above. For example, Interviewee 2 explains that VPP activities occur outside the purely profit-oriented business BÄHR AND FLIASTER 927 Thomas, J. B., Clark, S. M., & Gioia, D. A. (1993). Strategic sensemaking and organizational performance: Linkages among scanning, interpretation, action, and outcomes. 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Business Strategy and the Environment,32(2), 920–935. https://doi. org/10.1002/bse.3082 Interviewees positions/units Interview duration (min) Business and business model innovation 64 Business customer management VPP 59 Controlling renewable production 58 Head of close to market services 70 Head of commercial management 80 Head of decentralized commercialization 70 Key account management VPP 81 Product development and product management VPP 71 Product management for new businesses 39 Product management for new businesses 35 Senior innovation engineer 55 Smart and digital trading manager 57 APPENDIX A: FORMAL SEMI-STRUCTURED INTERVIEWS 934 BÄHR AND FLIASTER Cases Case descriptions Data sources (covering VPP or the firm in general) A Case A primarily offers green energy and energy services. The VPP service focuses on the coordination of controllable energy users and producers, such as biogas plants. •1 interview •1 informal interview •6 press releases •7 reports B Case B offers complex energy solutions on a supra-regional level. The VPP focuses on aggregations of controllable units, especially regarding the provision of flexibility and grid management. •1 interview •1 press release •3 reports C Case C offers smart energy or heat solutions, particularly by controlling combined heat and power plants. •1 interview D Case D offers the management of decentralized power-generating units, the establishment of regional markets and pooling services to gain market access. •2 interviews •8 press releases •17 reports E Case E concentrates on the provision of general public services and uses the VPP to integrate decentralized power producing and consuming units into the energy grid. •3 interviews •5 reports F Case F has a digital platform around their VPP, offering four types of service building on this platform for a broad range of stakeholders. •3 interviews •13 press releases •11 reports G Case G uses software to offer VPP services, such as energy pooling and access to energy markets. •1 interview •8 press releases •4 reports APPENDIX B: SHORT CASE DESCRIPTIONS AND DATA SOURCES BÄHR AND FLIASTER 935