The terminology of Digital innovation is far from new. It has been around since the invention of transistor in Bell’s Lab in 1947. But it has gained recent popularity due to the explosion of information and communication technology (ICT) during the 21st century. This writing will describe the terminologies used related to Digital Innovation and how each term plays its part.
Digital Innovation
Digital innovation, often referred to as digital business innovation, is the spark of creativity that leads to the development of new technology-based products, services, and processes that solve important problems in society. Many companies engage in digital innovation because they need to stay competitive in a rapidly changing business environment. In today’s highly connected world, businesses cannot succeed without making effective use of digital technologies to achieve their objectives.
Digital innovation is the practice of implementing modern digital technology to solve business problems by optimizing processes, developing new products and services, and improving existing products and services. The main goal of digital innovation is to create value for customers by leveraging the power of digital technologies to rapidly transform ideas into practical realities that meet the changing needs of their customers.
Deloitte suggests that implementing digital technologies can improve a company’s financials and progress towards its business goals by reducing costs, boosting revenue, improving productivity, and increasing customer satisfaction.
Types of Digital Innovation
1. Digital transformation
This refers to replacing the traditional ways of doing things with more modern ones in order to meet the needs of the digital age. It involves using new technologies and tools to increase efficiency and performance.
Digital transformation has been defined by Deloitte as “the process of changing how a business operates to create maximum value for its customers and shareholders by leveraging new and emerging technologies”.
“Digital transformation is an ongoing journey that must be embraced by every employee of a company. It is not something that can be accomplished overnight.” – Roland Berger
2. Digital product innovation
This refers to the development and introduction of new products or services that incorporate digital technology.
Digital product innovation includes developing digital products, digitalizing existing products, and introducing digital products to the market. It includes the development of digital platforms that enable the aggregation of different digital products and related services by multiple players in the market. – McKinsey & Company
3. Industry digitization
This is the process of digitally transforming an entire industry or sector, such as the financial services industry, healthcare industry, retail industry, transportation industry, or the telecommunications industry.
In 2018, Roland Berger, a German management consulting firm, published “Industry Digitization: The Digital Transformation of Businesses Across Industries”, a report that sought to answer the question “What is the future of business?” The study examined the ways in which companies are responding to the digital transformation of their respective industries. The study concluded that Industry 4.0 will have the greatest impact on logistics. A more recent study by Gartner predicts that by 2022, more than 75% of core businesses in the manufacturing and resource industries will be digitized to some degree. It also stated that at least 30% of existing manufacturing and industrial processes will have been fully digitized by that time.
The McKinsey & Company report “Industry Digitization: The Digital Transformation of Businesses Across Industries” suggests that companies with a strong digital strategy, as opposed to those companies with a “digitally focused strategy” (i.e. those whose strategies do not adequately address the impact of digital technologies), are more likely to achieve a competitive advantage.
Digital Strategy
As a company starts the journey towards digitization, it is essential to identify its strategic objectives and put in place a plan to achieve them. Digital strategy focuses on using technology to improve business performance, whether that means creating new products or reimagining current processes. It specifies the direction an organization will take to create new competitive advantages with technology, as well as the tactics it will use to achieve these changes. This usually includes changes to business models, as new technology makes it possible for innovative companies to provide services that weren’t previously possible.
Digital strategy, in practice, is the method by which a company adopts digital technologies to improve business performance. This involves deciding the direction the company wants to take in adopting new technologies, and the tactics it will use to achieve this change. It involves the development and implementation of specific plans designed to bring the organization’s business strategy to life by harnessing the benefits of the digital world.
Digitization
Today, technology has integrated with business to become something more than hardware or software. Digitization is the process of using technology to improve business performance. Companies need to understand their unique value, and then link this value to their customers in order to distinguish themselves from their competitors. Digitization can be broadly divided into three different categories: customer-facing technologies, operational technologies and enabling technologies. Customer-facing technologies involve new products and services being offered to customers through the use of digital technology such as mobile apps, analytics or virtual reality. Operational technologies involve the use of digital technologies to optimize operations, such as the use of machine learning and predictive analytics. Enabling technologies include digital solutions that enable other companies to innovate and improve their own products, processes and services.
Each category overlaps with every other one to some extent; for example, many customer-facing technologies are enabled by operational technologies such as cloud computing and mobile internet platforms. A digital strategy that sets out clear goals and targets will help ensure a company gets the most from its investment in digital technologies.
To Conclude
Digital Innovation, Digital Strategy, and Digitization are some terminologies widely used in imagining and interpreting the new wave of technological revolution in the 21th century. By correctly knowing the definition of each, innovation practitioners should benefit from their strategic thinking, planning, and execution. Such understanding is important in supporting the ultimate goal of digital transformation — that is, for companies to leverage digital technology to create new sources of economic value.
