Digital Twins in the Automotive Industry : An Incremental Path to Business Model Innovation?

Fayoumi, Amjad and Goy, Japser and Sutanto, Juliana (2024) Digital Twins in the Automotive Industry : An Incremental Path to Business Model Innovation? In: The International Conference on Information Systems 2024, 2024-12-15 - 2024-12-18, Thailand.

Abstract

Largely, technologies are credited with the emergence of new business models that have disruptive impacts. However, technology and its applications alone are rarely responsible for changes of this scale. Instead, these changes often stem from the business model and its innovativeness, which either builds around the technology or vice versa (Habtay & Holmen, 2014). The commoditization of new digital technologies such as mobile devices, broadband connections, analytics, cloud computing, and the Internet of Things pushes the boundaries of what is technologically possible and what the market demands from organizations (Yoo et al., 2010; Kane et al., 2015; Sebastian et al., 2017). Digital transformation drives innovation in the form of products, processes, and business models, as well as the redesign of underlying value chains and the enhancement of operations (Porter & Heppelmann, 2015). Digital Twin (DT) is defined as a “virtual, digital representation equivalent to a physical product” (Grieves, 2014), such as a virtual representation of a car engine in real-time. Research on DTs has investigated their conceptualization, design, development, and benefits, but rarely how such a complex technology can contribute to the emergence of new business models. This study examines the path that firms pursue toward digitally driven business model innovation. We conducted 21 interviews with experts from two German automotive manufacturers, asking them about their use of DTs and how they foresee developments with this technology in the near future. We were particularly interested in exploring the role of DTs in business model innovation. Dynamic capabilities theory is used as an analytical lens to study the artifact-centric dynamic configuration. Our findings show that there are three sequential strategic paths of innovation based on DT technology: an initial pathway that focuses on improving current production operations, an intermediate pathway that uncovers potential and delivers new possibilities through R&D, and a final pathway that expands beyond existing frameworks by creating new business models and value streams, resulting in business model innovation.