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Enabling Digital Transformation Through Artificial Intelligence Business Horizons (2019) 62, 819e829 Available online at www.sciencedirect.com ScienceDirect www.journals.elsevier.com/business-horizons How intelligent is Watson? Enabling digital transformation through artificial intelligence Stefano Magistretti a, Claudio Dell’Era a,*, Antonio Messeni Petruzzelli b a School of Management Politecnico di Milano, Piazza L. da Vinci, 32 20133 Milano, Italy b Politecnico di Bari, Viale Japigia, 186, 70122 Bari, Italy KEYWORDS Abstract Due to its intrinsic characteristics, artificial intelligence (AI) can be General- considered a general-purpose technology (GPT) in the digital era. Most studies in purpose thefieldfocusontheex-postrecognitionandclassificationofGPTbutinthis technologies; article, we look at a GPT design ex-ante by reviewing the extreme and inspiring Crafting digital example of IBM’s Watson. Our objective is to shed light on how companies can technology; create value through AI. In particular, ourlongitudinalcasestudy highlights the Digital strategic decisions IBM took to create value in two dimensions: internal develop- transformation; ment and external collaborations. We offer relevant implications for practitioners IBM Watson; and academics eager to know more about AI in the digital world. ª Artificial 2019 Kelley School of Business, Indiana University. Published by Elsevier Inc. All intelligence; rights reserved. Digital product design 1. AI transforms society Edge, 1996). Scholars and practitioners define this phenomenon as digital transformation, con- We live in a world in which digital solutions are sisting of all the initiatives that leverage digital widespread, even if the distinction between digital toolsdsuch as 3-D printing, mobile computing, and and nondigital technologies is somewhat complex. artificial intelligence (AI)dto transform processes Technologies, and especially digital technologies, and organizations (Nambisan, Lyytinen, Majchrzak, influence our behaviors, our way of living, and are & Song, 2017). adopted differently around the world (Williams & Two main dimensions influence the world of digital technologies. The first concerns input. Due to their constant evolution and adaptation, the * Corresponding author processes to develop and sustain digital technolo- E-mail addresses: [email protected] (S. Magistretti), [email protected] (C. Dell’Era), antonio. gies require the involvement of a dynamic set of [email protected] (A. Messeni Petruzzelli) actors (Boudreau & Lakhani, 2013) whose different https://doi.org/10.1016/j.bushor.2019.08.004 0007-6813/ª 2019 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved. 820 S. Magistretti et al. goals and capabilities yield diverse solutions. The discovering opportunities hidden in digital tech- second concerns outcome. As digital technologies nologies is crucial (Chesbrough, 2003). Accord- increase flexibility in creating end products and ingly, the perspective suppliers might adopt is services, the outcomes are intentionally incom- twofold. They can develop a unique technology plete, allowing companies to continuously upgrade that unveils a new meaning and can be adapted to their offering even if the solution is already on the explore a unique application field (Dell’Era, market (Garud, Jain, & Tuertscher, 2008). Altuna, Magistretti, & Verganti, 2017; Magistretti & Dell’Era, 2018) or they can leverage the 1.1. Digital technologies redesign the essence of the digital technology by understanding competitive arena its intrinsic generalizability. Indeed, digital tech- nologies are inherently general-purpose technol- The abundant scholarly debate around the defini- ogies (GPTs) because of their substantial and tion of technology (Danneels & Frattini, 2018) has pervasive effect on society as a whole (Youtie, led to difficulties in properly framing digital tech- Iacopetta, & Graham, 2008). Researchers tend to nologies. Digital technologies include big data focus on studying and recognizing complex and (Kaplan & Haenlein, 2010), information knowledge relevant technologies ex-post. Numerous studies management systems, cloud computing, AI (e.g., have been published on the underpinning elements machine learning), and rapid prototyping systems of GPT (Gambardella & Giarratana, 2013) but only (Bughin, McCarthy, & Chui, 2017; Urbinati, few attempt to understand and conceptualize the Chiaroni, Chiesa, & Frattini, 2018), all of which process companies should follow to bring such foster the digital transformation of companies and technologies to market (Gambardella & McGahan, society. Big data, for example, not only reshapes 2010). The development of a new technology the way new products and services are designed may be scattered and not always linear. The open (Erevelles, Fukawa, & Swayne, 2016) but also has innovation paradigm (Chesbrough, 2006) affirms improved the healthcare industry by providing that this process has evolved over the last decade, more insights and information than ever before thus calling for further research to unveil its (O’Donovan, Leahy, Bruton, & O’Sullivan, 2015). dynamics. Furthermore, machine learning profoundly changed the way we create and envision new 1.3. Digging deeper into the discovery and products. An example is IBM’s Watson Chef initia- development of AI tive. Launched in 2016, this digital technology al- lows the screening and mapping of more than This study aims to extend current knowledge on AI 10,000 recipes to study the ingredients and pro- as an enabler of value creation in the digital world pose new combinations. (Kaplan & Haenlein, 2019). We pose this research Digital technologies can change the way we question: What managerial practices will help innovate and deliver value. People are not always companies discover the opportunities AI offers able to perceive the value in all proposed final during its development and integration in the solutions. Nokia Lumia is just one example of how market? In looking for the answer, we adopted a providing too many options is not always positive. case study methodology. We looked at Watson, the The real value digital technologies generate is not cognitive system launched by IBM in 2011. Results always found in their essence or intended function of our investigation are relevant for practitioners but it instead can be found in the actions they and researchers alike, providing some managerial enable. Netflix does not require big data to un- implications on how to unveil opportunities hidden derstand customer behaviors and create new TV in technologies and develop AI as a GPT that can series, but what is important is the outcome from better support digital transformation. Our study the customers’ perspective (i.e., new series more provides unique insights on how to design AI as a aligned with their expectations). Indeed, when GPT, going beyond the existing debate that is more faced with too many options for the same solution, focused on ex-post recognition. decisions are difficult to make (Verganti, 2017). 1.2. Unlocking opportunities hidden in 2. AI reshapes product development digital technologies The literature on technology management is vast In an overcrowded and fluid world in which the and, considering our focus on AI, we pay particular value of technology is more in the benefit gener- attention to its intrinsic link with GPT literature. ated for adopters than in the technology itself, As mentioned, studies on the proliferation of Enabling digital transformation through artificial intelligence 821 digital technologies and their link to value creation Petruzzelli, & Albino, 2017; Thomke & indicate that the digital era is profoundly reshap- Reinertsen, 2012); ing the new product and new technology devel- opment fields (Dobusch & Kapeller, 2018). 2. Others look at unveiling opportunities (e.g., Verganti, 2011; Dell’Era et al., 2017); and 2.1. AI enables digital transformation 3. Some focus on particular technologies to shed Considering the impact of digital technologies in new light on unusual aspects, such as uncer- today’s society, some scholars (e.g., Nambisan tainty or the possibility of recombining knowl- et al., 2017) argue that they favor more dynamic edge to generate new technologies (e.g., relations between the people involved and the Cohen & Levinthal, 1989; Levinthal, 1998). product outcomes. Moreover, research indicates that innovations that leverage digital technologies Given the focus of our investigation, the second can cut across industry and sector boundaries. As perspective (i.e., unveiling opportunities) is most such, the digital technology and GPT research fields relevant. Scholars point out that GPTs are core can benefit from each other. Several studies focus technologies that generate and spread incremen- on digital technologies by mapping the specific field tal or radical innovations in different fields, ac- of adoption (e.g., Urbinati et al., 2018; Yoo, tivities, and sectors. Some define GPTs as Boland, Lyytinen, & Majchrzak, 2012)whileothers technologies characterized by pervasiveness, attempt to understand specific digital technologies inherent potential for technical improvements, and their influence on new strategies and in- and innovative complementarities (Bresnahan & novations (Wieland, Hartmann, & Vargo, 2017). Trajtenberg, 1995). Technologies require the involvement of Numerous studies discuss the role of technology different people and roles in the innovation pro- substitution and how firms typically develop a new cess (Bharadwaj & Noble, 2017). The vast amount version or
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