Summary Digital Innovation Strategy
Chapter 1: What is special about digital business innovation?
Innovation is about change: the introduction of novelty into an economic system. Economic
or organizational change is always challenging: effects are uncertain and affect participants
unevenly. Technological change requires creativity, flexibility and perseverance.
Digital business innovation: improved technology-based business models for information and
communication (core elements of all economic activity). Even manual trades (plumbers etc)
are digital businesses, they use for example phones to text clients. Digital labor markets
such as TaskRabbit and Fiverr are digitizing the job matching process.
Not all companies are equally digital. Some only use (1) basic information and
communication technologies, like local services or manufacturing firms. Others (banks, credit
rating agencies, online retailers, and airlines) (2) rely significantly on digital technologies.
These tools improve how they communicate, coordinate, make transactions, collect data,
and make decisions. Because not all firms and industries are equally digitized, we can learn
from the most digital businesses to spread innovation to others.
1.1 Origins of digitalization
Book focuses on communication and information technology businesses: built on digital
info/com networks. Offer information products and services or create communication
networks for their customers. Digital content, software, computers. As leaders of the digital
transformation (society), studying them helps us understand the issues that will affect
digitalization of businesses that are only digitally enhanced (2) or general users (1).
Boundary object of their study: Online-to-Offline or O2O services: using online systems to
provide offline services. Support the search, coordination and matching necessary. Online
marketplaces such as Uber, Airbnb and Ebay. Do not have a natural size limit.
Digital transformation is not only happening in service industries. Through ideas like the IoT,
Industry 4.0, and Digital Agriculture, manufacturing and farming are also becoming digital.
These “Offline-to-Online” platforms collect data from physical activities and send it to
information systems for merging, organization, analysis, and better decision-making.
Before 1970, automation was mostly mechanical. After 1970, it became electronic, and
automation levels increased sharply. Since 2000, wireless communication has spread
rapidly. Today, combining the Industrial IoT and 5G networks enables full digital control and
remote operation through “digital twins.’’
,Since the 1970s, computers, communication technologies, and control instruments have been the main drivers of
innovation, leading the ongoing digitization, automation, and networking of the economy.
1.2 What are the challenges of digital business innovation?
Digital business: in its core processes dependent on information and communication
technologies to deliver (information) products and (communication) services. Digital:
information and communication that is reduced to (binary) computer code and that can be
processed and transferred using computers and communication networks.
Innovation involves creating something new. Because novelty cannot be precisely defined or
guaranteed in advance, ambitious projects are uncertain, risky, and unpredictable:
➔ Technical uncertainty: whether the technical goals can be reached.
➔ Market uncertainty: whether the commercial goals can be reached (demand).
➔ Behavioral uncertainty (subclass of ‘’): concerns user behavior when adopting new
technologies and makes it difficult to anticipate how users react to and engage with
new digital products and services. High in info and com based services: generativity -
capable of generating additional innovation.
Social construction of technology: social interactions among users of technology. And
interactions between users and technological artifacts that influence how people interpret,
adopt and use the technology in everyday lives. Positive unintended consequences:
innovation that enhances the value of the product (memes). Negative: reduce the value for
everyone (racist user groups that lower the reputation of digital services).
1.3 Why are information and communication technologies so critical to
economic performance?
Since 2010, digital technologies have become very important for the economy and
government goals. They drive innovation in many areas and shape how industries develop.
By 2020, companies like Amazon and Facebook had become some of the most valuable in
the world, showing how digital technology created new and powerful business models.
The reason? Information and communication technologies were driving the economy
because they facilitated very basic and critical functions of the economy and society. They
were General Purpose Technologies: applicable in all parts. How we take decisions:
,If technologies make it easier to access information, we make better decisions that lead to
different courses of action. Eg: buying phone. Friends > websites > decision > purchase. If
any of the elements of the information ecosystem (single retailers has limited control) are
missing or deficient, your ability to optimize your decision may be compromised.
Information and communication technologies are also called: invention machines. They
accelerate scientific progress by making the process of discovery and technological
development more effective. Tools that collect and analyze information (eg: microscope in
biology) make new knowledge possible. By collecting and sharing information, they shape
how society and the economy function.
In today’s economy, computers and communication devices act as key instruments for data
collection. When people use social media, apps, or connected cars, they create digital traces
that companies collect and analyze to make decisions. Sensors also play this role by
measuring physical activity, like motion or temperature in an engine, and sending the data
wirelessly to computers that can analyze (AI or human) and adjust operations automatically.
Because of the huge (economic, societal, technological, scientific) impacts of information
and communication devices, we can speculate that significant changes will follow too from
data and analytics. Impacts from internet > impacts from IoT.
KEY IDEAS:
● Information and communication are critical for decision making.
● Digitalization changes how people and organizations find, collect, analyze, and
communicate information.
● Rapidly evolving information and communication technologies influence the speed
and direction of scientific discovery and technology adoption.
● Instruments, computers, and communication networks create the Internet of Things
that promises to bring about a new wave of innovation in the economy.
, Chapter 2: Digital Disruption
Innovation is a multifaceted process: it involves products, processes and services.
Innovation creates economic change. Inventions only create scientific or technological
change, if they are not implemented and adopted in economic activity. Something practical
and concrete that is developed, implemented, adopted and applied in economic activities.
The economic impact of innovation depends on technology and context. It can be radical
(more value, but require new capabilities and destroy value of existing capabilities) or
incremental. And either competence-enhancing or competence-destroying (associated with
severe technical uncertainty), depending on the organizational contexts in terms of whether
existing or new ones are needed to apply them. Radical innovations bring big change but
also high uncertainty, especially when they disrupt existing business models.
2.1 Disruptive innovations offer a new performance trajectory
Predicting the timing and magnitude of disruptive innovations is difficult, but businesses can
prepare for it. Most innovations are gradual: allow innovators to keep improving their product
and compete more effectively in their markets. Also called sustaining innovations:
enhances the value of an existing information resource. Offer more and better along existing
performance trajectory. But can still be radical or competence-destroying. Eg: processing
power of chips. Continue on the same performance trajectory, but need new capabilities.
Disruptive innovations: offer entirely new or previously unimportant performance
trajectories. Eg: mobile phones (not focussing on more processing power anymore, but on
lightweight devices with long battery). The value proposition changed: a statement about the
aspects of a product that create unusual customer value. Why should you buy this product
and not something else? Customers who valued the previous VP respond differently from
new and previously unserved/underserved customers who embrace the new VP. But if the
second segment is large enough: new VP becomes dominant, such as the mobile phones.
Disruptive innovations transform complicated, expensive products into simpler, more
affordable ones (even poorer, less skills people can obtain them). Creates more jobs, uses
capital (sustainable innovations not). The rise of mobile computing disrupted the computer
industry by introducing new devices, companies, and technologies that shifted competition
away from traditional PC makers.
Chapter 1: What is special about digital business innovation?
Innovation is about change: the introduction of novelty into an economic system. Economic
or organizational change is always challenging: effects are uncertain and affect participants
unevenly. Technological change requires creativity, flexibility and perseverance.
Digital business innovation: improved technology-based business models for information and
communication (core elements of all economic activity). Even manual trades (plumbers etc)
are digital businesses, they use for example phones to text clients. Digital labor markets
such as TaskRabbit and Fiverr are digitizing the job matching process.
Not all companies are equally digital. Some only use (1) basic information and
communication technologies, like local services or manufacturing firms. Others (banks, credit
rating agencies, online retailers, and airlines) (2) rely significantly on digital technologies.
These tools improve how they communicate, coordinate, make transactions, collect data,
and make decisions. Because not all firms and industries are equally digitized, we can learn
from the most digital businesses to spread innovation to others.
1.1 Origins of digitalization
Book focuses on communication and information technology businesses: built on digital
info/com networks. Offer information products and services or create communication
networks for their customers. Digital content, software, computers. As leaders of the digital
transformation (society), studying them helps us understand the issues that will affect
digitalization of businesses that are only digitally enhanced (2) or general users (1).
Boundary object of their study: Online-to-Offline or O2O services: using online systems to
provide offline services. Support the search, coordination and matching necessary. Online
marketplaces such as Uber, Airbnb and Ebay. Do not have a natural size limit.
Digital transformation is not only happening in service industries. Through ideas like the IoT,
Industry 4.0, and Digital Agriculture, manufacturing and farming are also becoming digital.
These “Offline-to-Online” platforms collect data from physical activities and send it to
information systems for merging, organization, analysis, and better decision-making.
Before 1970, automation was mostly mechanical. After 1970, it became electronic, and
automation levels increased sharply. Since 2000, wireless communication has spread
rapidly. Today, combining the Industrial IoT and 5G networks enables full digital control and
remote operation through “digital twins.’’
,Since the 1970s, computers, communication technologies, and control instruments have been the main drivers of
innovation, leading the ongoing digitization, automation, and networking of the economy.
1.2 What are the challenges of digital business innovation?
Digital business: in its core processes dependent on information and communication
technologies to deliver (information) products and (communication) services. Digital:
information and communication that is reduced to (binary) computer code and that can be
processed and transferred using computers and communication networks.
Innovation involves creating something new. Because novelty cannot be precisely defined or
guaranteed in advance, ambitious projects are uncertain, risky, and unpredictable:
➔ Technical uncertainty: whether the technical goals can be reached.
➔ Market uncertainty: whether the commercial goals can be reached (demand).
➔ Behavioral uncertainty (subclass of ‘’): concerns user behavior when adopting new
technologies and makes it difficult to anticipate how users react to and engage with
new digital products and services. High in info and com based services: generativity -
capable of generating additional innovation.
Social construction of technology: social interactions among users of technology. And
interactions between users and technological artifacts that influence how people interpret,
adopt and use the technology in everyday lives. Positive unintended consequences:
innovation that enhances the value of the product (memes). Negative: reduce the value for
everyone (racist user groups that lower the reputation of digital services).
1.3 Why are information and communication technologies so critical to
economic performance?
Since 2010, digital technologies have become very important for the economy and
government goals. They drive innovation in many areas and shape how industries develop.
By 2020, companies like Amazon and Facebook had become some of the most valuable in
the world, showing how digital technology created new and powerful business models.
The reason? Information and communication technologies were driving the economy
because they facilitated very basic and critical functions of the economy and society. They
were General Purpose Technologies: applicable in all parts. How we take decisions:
,If technologies make it easier to access information, we make better decisions that lead to
different courses of action. Eg: buying phone. Friends > websites > decision > purchase. If
any of the elements of the information ecosystem (single retailers has limited control) are
missing or deficient, your ability to optimize your decision may be compromised.
Information and communication technologies are also called: invention machines. They
accelerate scientific progress by making the process of discovery and technological
development more effective. Tools that collect and analyze information (eg: microscope in
biology) make new knowledge possible. By collecting and sharing information, they shape
how society and the economy function.
In today’s economy, computers and communication devices act as key instruments for data
collection. When people use social media, apps, or connected cars, they create digital traces
that companies collect and analyze to make decisions. Sensors also play this role by
measuring physical activity, like motion or temperature in an engine, and sending the data
wirelessly to computers that can analyze (AI or human) and adjust operations automatically.
Because of the huge (economic, societal, technological, scientific) impacts of information
and communication devices, we can speculate that significant changes will follow too from
data and analytics. Impacts from internet > impacts from IoT.
KEY IDEAS:
● Information and communication are critical for decision making.
● Digitalization changes how people and organizations find, collect, analyze, and
communicate information.
● Rapidly evolving information and communication technologies influence the speed
and direction of scientific discovery and technology adoption.
● Instruments, computers, and communication networks create the Internet of Things
that promises to bring about a new wave of innovation in the economy.
, Chapter 2: Digital Disruption
Innovation is a multifaceted process: it involves products, processes and services.
Innovation creates economic change. Inventions only create scientific or technological
change, if they are not implemented and adopted in economic activity. Something practical
and concrete that is developed, implemented, adopted and applied in economic activities.
The economic impact of innovation depends on technology and context. It can be radical
(more value, but require new capabilities and destroy value of existing capabilities) or
incremental. And either competence-enhancing or competence-destroying (associated with
severe technical uncertainty), depending on the organizational contexts in terms of whether
existing or new ones are needed to apply them. Radical innovations bring big change but
also high uncertainty, especially when they disrupt existing business models.
2.1 Disruptive innovations offer a new performance trajectory
Predicting the timing and magnitude of disruptive innovations is difficult, but businesses can
prepare for it. Most innovations are gradual: allow innovators to keep improving their product
and compete more effectively in their markets. Also called sustaining innovations:
enhances the value of an existing information resource. Offer more and better along existing
performance trajectory. But can still be radical or competence-destroying. Eg: processing
power of chips. Continue on the same performance trajectory, but need new capabilities.
Disruptive innovations: offer entirely new or previously unimportant performance
trajectories. Eg: mobile phones (not focussing on more processing power anymore, but on
lightweight devices with long battery). The value proposition changed: a statement about the
aspects of a product that create unusual customer value. Why should you buy this product
and not something else? Customers who valued the previous VP respond differently from
new and previously unserved/underserved customers who embrace the new VP. But if the
second segment is large enough: new VP becomes dominant, such as the mobile phones.
Disruptive innovations transform complicated, expensive products into simpler, more
affordable ones (even poorer, less skills people can obtain them). Creates more jobs, uses
capital (sustainable innovations not). The rise of mobile computing disrupted the computer
industry by introducing new devices, companies, and technologies that shifted competition
away from traditional PC makers.
