Building digitally-enabled process innovation in the process industries: A dynamic capabilities approach

Digitalization and industry 4.0 technologies promise to provide many novel opportunities and benefits to industrial firms, such as increased product quality, process reliability, and improved flexibility and productivity. Although digitalization shows great potential from a technological perspective, many process industry firms still face challenges in utilizing it for process innovations. Hence, this study aims to understand how process industry firms develop and implement new process innovations today and identify improvement opportunities through the better adoption and implementation of digitalization. The study adopted a multiple case study design in two steel manufacturing firms and developed a framework for building digitally-enabled process innovation using dynamic capabilities. The framework consists of 19 dynamic capabilities in total: 8 related to traditional process innovation and 11 related to digitally enabled process innovation. The study found four key challenges in process innovation (i.e., poor data strategy and readiness, lack of standardisation practices for change, competence and culture gaps, and ad-hoc problem solving) and four key enablers for digitally-enabled process innovation (i.e., infrastructure and methodological definition, preparation for predictive and analytical readiness, proactive management practices, and plan for a digital matureness for each function and department). The study's detailed empirical insights provide new understandings regarding required dynamic capabilities for the smoother transformation of a firm from the traditional process innovation to the digitally enabled process innovation. The dynamic capabilities are limitedly explored in the research of the process industries in the context of process innovation and digitalization. Thus, this study makes essential contributions to the theory of process innovation in process industries and strategic management by providing rich empirical insights from the steel sector.