Digital Innovation

What is Digital Innovation?

Digital Innovation is the application of digital technologies and applications to improve business processes, enhance customer experience and introduce new products or business models. It involves the utilization of new technologies to existing business problems and practices in a process that takes place in phases. This process involves switching from analog to digital processes, implementing new software and platforms, developing new technology, cloud migration, automation, connectivity and data analytics, and more. Digital innovation is a disruptive and ongoing process that changes industries and helps organizations stay relevant and competitive. It allows organizations to improve operational efficiency, and customer engagement, and launch successful new products.

Digital Innovation initiatives can include:

• Developing a new technology strategy in an existing business context
• Choosing to adopt and implement new software or platforms
• Deciding to evolve from analog to digital processes

Because the global marketplace is becoming more digital, businesses must also evolve in order to stay competitive.

Innovation plays a critical role in customer engagement, as it helps to create superior experiences that meet the expectations of modern and highly mobile customers. Through digital innovation, organizations are able to address customer/partner engagement, product/service innovation, and internal systems/processes to create new revenue streams, diversify offerings, and improve customer experience. Customers are expecting more and more from businesses, and organizations that prioritize digital innovation will be the ones that can best meet these expectations and provide a seamless customer experience. Digital innovation also provides organizations with a platform to introduce new products and services, making them more attractive to customers, while also improving internal processes. By embracing digital trends, organizations can stay competitive and engage customers in the most effective way possible.

Companies that innovate and transform see a number of benefits, such as:

• Streamlined business processes that come as a result of automation, SaaS, and other integrated technology solutions
• Digital solutions that cut costs, improve ROI, and boost revenue
• A competitive advantage

Though digital innovation has its benefits, it also has its downsides.

Many business leaders are afraid that innovation could damage their core business. While fear of change is understandable, it can also hinder growth. There are numerous stories of businesses that failed as a result of their reluctance to innovate.

Types of Digital Innovation

There are three main types of digital innovation that create growth opportunities for organizations:

• Building on traditional business models and processes
• Improving an organization’s current business model and processes
• Creating entirely new business models and processes

Digital Innovation Vs. Digital Transformation

• Digital transformation is an ongoing process to transform and improve business performance by changing the way a company thinks and operates. Unlike common perception, digital transformation isn’t only about the technology you adopt, but also involves people, processes, and a portfolio.
• Digital innovation (or digital business innovation) is that spark of creativity that leads to the development of new technology or innovative applications of existing digital tech. Digital innovation is often the precursor to digital transformation.

Let’s take the example of Domino’s Pizza. Back in 2017, the company started digitally innovating by building an omnichannel strategy that lets pizza lovers place orders on multiple platforms by utilizing chatbot technology and AI. Pretty neat, right? Now, all customers had to do was send a pizza emoji 🍕 through Facebook Messenger and Domino’s would receive their order.

Except, of course, there was more to it than that. In order to make the most of this technology, Domino’s had to digitally transform its internal processes. It had to integrate all of its databases — and therefore customer information — in order to save time and automate the process. While the customer may see only a pizza emoji (and then the real thing), there is so much more happening behind the scenes.

How Does Digital Innovation Affect Businesses?

Digital Innovation has a major impact on businesses, both positively and negatively. On the one hand, businesses can benefit from increased efficiency, streamlined processes, improved ROI on technology investments, and a competitive advantage over competitors. By leveraging data and analytics, businesses can gain invaluable customer insights, enabling them to make informed decisions. Additionally, digital innovation can improve customer experience and provide a frictionless user experience across all facets of a business. On the other hand, businesses that fail to recognize the value of digital innovation might find themselves behind the competition, unable to keep up with technologically advanced competitors. Furthermore, remote working has fast-tracked digital transformation initiatives, forcing businesses to quickly adjust during global pandemics and other uncertain times. Ultimately, digital innovation has become essential for any company wanting to achieve long-term growth.

The COVID-19 pandemic has had a profound impact on digital innovation, as organizations across nearly all industries have been forced to virtually interact with customers, employees, partners, and suppliers. A survey released by McKinsey & Co. shows increased use of remote work and collaboration, advanced technologies in operations, and cloud computing as a result of the pandemic. Technology expert Paul Kirvan has observed more use of customer-friendly apps, self-service apps, advanced e-commerce platforms, AI-powered data analysis, and an evolution of the role of the CIO in this new era. Additionally, automation has improved total productivity and efficiency across departments such as marketing and human resources. As a result of the pandemic, companies have been forced to rapidly implement digital innovation, often with an edge over those who did not. All of this has had a significant impact on the digital transformation of businesses, making digital innovation an integral part of surviving and thriving in the new normal.

Putting Digital Innovation at the Heart of the Business

Successfully implementing a digital innovation strategy isn’t always straightforward, but there are some simple steps you can take to help you get started. A lot of larger enterprises create in-house accelerators, or innovation labs, allowing groups of employees to test out new ideas and processes without disrupting the business as a whole. This can also be done on a smaller scale, by simply allowing a proportion of staff the freedom to experiment.

• Staff: Start by empowering 2-3 individuals who are passionate about driving your business forward to think creatively about how technology can solve your business challenges.
• Process: Structure an agile process of experimentation that will allow you to show progress and collect feedback. Ensure that this takes place away from your day-to-day business function so that it doesn’t disrupt existing operations.
• Technology: Adopt the right technology which will allow you the freedom to unify every element of your business needs. This will be unique to each company but may include team management, collaboration, cloud access or monitoring every part of a product’s lifecycle.
• Review: Create a framework for reporting on quick wins and failures. This will allow you to evaluate what is working and which experiments are not worth implementing further.

Creating a Culture of Digital Innovation in the Organization

• Invest in new software & technology: Investment in new software and technology can help create a culture of digital innovation in an organization by providing the necessary tools to unify business needs, such as team management, collaboration, cloud access, and product lifecycle monitoring. This can facilitate the breaking down of functional silos, which is often a barrier to change, and encourage experimentation and innovative ideas to flourish. Additionally, funding digital transformation as an investment enables organizations to self-fund innovation, optimize their technology investments, and remove roadblocks to change. Such investments can also help cultivate partner ecosystems and create in-house accelerators or innovation labs, allowing staff the freedom to experiment with new ideas. This helps organizations respond quickly to changes in the market and overall be more agile.
• Customer engagement: Customer engagement can help create a culture of digital innovation in an organization in several ways. First, understanding customers' needs and preferences is key to developing solutions that are tailored to their needs and expectations. For example, understanding customer feedback on products or services can help companies develop digital solutions that make it easier for customers to access and use their products or services. Additionally, engaging customers through digital channels such as social media can help companies understand customer preferences and develop solutions that are more useful and effective. Finally, customer engagement helps companies identify opportunities to increase customer satisfaction through innovative digital solutions. By understanding customer needs and preferences and developing digital solutions to meet them, companies can create a culture of digital innovation that helps them better serve their customers.
• Product and service innovation: Product and service innovation can help create a culture of digital innovation in an organization by empowering employees to think creatively about how technology can solve business challenges. By creating an agile process of experimentation and allowing staff the freedom to experiment, organizations can develop new ideas and processes without disrupting the existing business. Additionally, adopting the right technology and creating a framework for reporting on quick wins and failures can help the organization evaluate what is working and which experiments are not worth implementing further. Creating a culture of digital innovation will help organizations stay on top of current trends and technologies to stand out in the market, and bring teams together to create new revenue streams, diversify offerings, streamline internal processes, and improve customer experience.
• Improve innovation productivity: Innovation and productivity growth bring vast benefits to consumers and businesses.
  • Empower 2-3 individuals with the freedom to experiment and explore how technology can solve business challenges.
  • Structure an agile process of experimentation that allows the team to show progress and collect feedback.
  • Adopt the right technology that can unify all aspects of your business needs.
  • Create a framework for reporting on quick wins and failures, so as to evaluate which experiments are worth implementing.
  • Access big data and analytics to transform data points into actionable insights.
  • Leverage automation to reduce human error and allow employees to focus on more strategic tasks.
  • Centralize systems to reduce information discovery time for employees.
  • Create innovation labs or fast-track teams to act as incubators within the enterprise.
  • Select the right people from across the business and IT teams who are passionate about delivering business value.
  • Leverage an agile, iterative process to drive innovation without disrupting existing operations.
  • Create a project portfolio of quick wins and high-value initiatives.
  • Find the right technology to empower people and reinforce the process.
• Create an ROI or value-added system for prioritizing projects:
  • Assess the risk associated with each project and take a portfolio-level view of the digital transformation investments. Establish metrics in advance to measure the success of digital transformation efforts.
  • Develop micro-metrics for agile experiments to continuously iterate towards the perfect solution.
  • Incorporate business outcomes such as strategic, operational, and cost impacts in the evaluation of the projects.
  • Create a system to track quick wins and failures in order to determine which experiments are worth continuing and which are not.
  • Form fast-track teams across the business and IT teams to accelerate the delivery of digital applications.
  • Leverage an agile, iterative process to drive digital innovation without disrupting existing operations or development efforts.
• Ask for feedback from various departments in your business
  • Begin by forming a cross-functional team of high-performing individuals from various departments. This team should have an understanding of the existing business processes and how digital innovation solutions can help to address any shortcomings.
  • Encourage your team to think creatively and collaboratively about how technology can help to solve business challenges.
  • Set up an agile experimentation process to monitor progress and receive feedback. This process should take place outside of regular business activities to avoid disrupting operations.
  • Adopt the right technologies that allow your team to unify all aspects of your company’s requirements. This could include team management, collaboration, cloud access, and product lifecycle monitoring.
  • Request feedback from various departments in your business by creating an open and welcoming environment for ideas. This can be done by introducing a collaboration tool or a communication platform and encouraging everyone to share their thoughts and suggestions.
  • Create a framework for reporting on quick wins and failures, to help you evaluate which experiments are worth further implementation.
• Adopt an agile experimentation model: Adopting an agile experimentation model can help create a culture of digital innovation in an organization by providing staff with the freedom to experiment and test out new ideas and processes away from day-to-day business activities. This allows organizations to adapt to customer needs and challenges while fast-tracking their way to digital innovation. Furthermore, setting up in-house accelerators or innovation labs allows staff to brainstorm, accurately track progress, and receive feedback on experiments without disrupting operations. Finally, having the right technology in place allows them to unify their business needs and helps to create a process and framework to report on successes and failures. All of this together helps to create an environment of digital innovation and encourages staff to think outside the box.
• Create a digital innovation team: Creating a digital innovation team is an important step toward driving digital transformation in your organization. Here are the steps you need to take to set up a successful digital innovation team in your organization:
  • Identify the existing business processes that need to be improved.
  • Create a small team consisting of highly-performing individuals from different departments who are passionate about driving the business forward.
  • Empower the team to think creatively about how technology can solve business challenges.
  • Structure an agile process of experimentation that will allow for progress to be measured and feedback to be collected.
  • Adopt the right technology that will unify every element of the business needs.
  • Create a framework for reporting on quick wins and failures.
  • Implement an in-house accelerator or innovation lab to allow for experimentation without disrupting the business.
  • Leverage an agile, iterative process to drive innovation.
  • Create a project portfolio of quick wins and high-value initiatives.
  • Find the right technology platform (such as a unified platform that manages the entire application lifecycle) to empower the team and reinforce the process.
• Share best practices in digital innovation
  • Educate and inform employees on digital innovation: Developing an understanding of digital innovation and its potential benefits is the first step to creating a culture of innovation. To do this, it’s important to provide employees with learning and development opportunities so they can acquire the skills and knowledge that will allow them to effectively implement digital innovation. This could range from informal workshops to formal training and mentoring programs.
  • Encourage collaboration and experimentation: Create an environment that is conducive to collaboration and experimentation. Encourage team members to think outside the box and explore new ways of thinking and working. Introduce tools and processes that will facilitate this and make it easier for them to come up with new ideas.
  • Foster a culture of change: Embrace change and help employees understand the importance of adapting to the ever-changing digital landscape. Encourage employees to keep up with the latest trends and technology and to experiment with them.
  • Set up an innovation lab: Establish an innovation lab or an in-house accelerator that allows employees to test out new ideas and processes. Allow them to explore the use of technology and other digital means to create solutions that can improve the overall efficiency of the business.

Reward and recognize employees: Reward and recognize employees for their efforts in driving digital innovation. This could be in the form of awards, recognition, or even financial incentives. By doing this, you’ll show that you value their contributions and are willing to invest in their future.

See Also

Digital Innovation Strategy