Decoding the Mindset: A Neural Network Approach for Analyzing CEO’s Digital Strategy and Its Innovation Implications

Schäper, Thomas; Maibaum, Frederik; Schulz, Colin; Foege, Johann Nils

Abstract

The swift advancement of digital technologies demands CEOs to prioritize digital innovation strategies to stay competitive. However, an overemphasis on digitality, neglecting aspects like customer focus, operations, and collaboration, can hinder innovation. Using a neural network, we evaluated CEOs’ digital strategies by training on 1,000 company pitches and applying this to S&P 500 CEOs' Shareholder Letters (2001-2018). We discovered an inverted U relationship between digital strategy intensity and innovation performance. This stresses the need for a balanced strategy with the right digital focus. Our research illuminates top executives' digital mindset in driving innovation, emphasizing the potential pitfalls of a purely digital approach. Furthermore, our machine-learning method offers a novel, scalable way to quantify digital strategy, paving the way for subsequent research.