Internal Digital Platforms and Generative Mechanisms of Digital Innovation

As digitalization puts increasing competitive pressures on companies to innovate in the digital space, corporate information system (IS) landscapes are increasingly serving as platforms that facilitate the development of digital value propositions on top of existing data and functionality. Beyond the boundaries of a single firm, the enabling role of multisided digital platforms for innovation is a well-researched phenomenon. Internal digital platforms, on the other hand, have received less attention in the IS community. Their part in the quest for digital innovation remains unclear. In a critical realist research approach, this paper investigates the digitalization journey of the LEGO Group and identifies three generative mechanisms – modular upgradability, economies of substitution, and reproduction –, through which an internal digital platform enables speed and efficiency of digital innovation within a company. Based on Systems Theory, a holistic conceptualization of an internal digital platform is developed that unifies traditional enterprise systems with modern digital technologies. Consequently, the analysis elaborates how the interactions among these heterogeneous components shape digital innovation in a company and develops the generative mechanisms that together form a system-theoretic model. Furthermore, the findings reveal the strategic choice of granularity that companies are facing during design of individual platform components. Therefore, the study does not only contribute to IS theory, but also provides relevant implications for practitioners.