Innovative Solution Bundling–Unbundling: A Paradox in the Digital Era

The paper aims to provide a conceptual framework to analyze the effect of digitalization on innovation decisions. In terms of methodology, by developing an envisioning contribution with the specific conceptual goal of identifying, the research proposes an analysis of innovation decisions within the S-D logic theoretical framework, highlighting that digitalization exacerbates the strategic dilemma of specialization versus diversification, bringing to a paradox. The findings show that digitalization's vastly increased reach and responsiveness push actors towards two opposing innovation orientations that can increase the value co-creation potential. One direction is solution bundling, which can be considered as developing a flexible service based on the weakly coupled available resources, the other is solution unbundling, which we define as developing specialized service by tightly coupling resources, “freezing” the further service potential. The consequent two opposing processes (i.e., solution bundling and unbundling) are each inherently self-reinforcing and that digitalization intensifies such amplifying feedback loops. We discuss why these dynamics are paradoxical and what this implies for actors by adopting an institutional approach to consider market dynamics and leveraging resource-based view and service-dominant logic.