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Article - Digital Innovation: Advantage or Disruption

March, 2017

Manish Bhatt, Director (IT), Vadodara Municipal Corporation thinks that digital innovation tends to be a massive competitive advantage if done at the right time with the right set of resources

Digital technologies…are combinations of information, computing, communication, and connectivity technologies (Bharadwaj, El Sawy, Pavlou, & Venkatraman, 2013)

Innovation … is an idea, practice or object perceived as new (Rogers, 1995)

Digital innovation is about going beyond the conventional IT business model of delivering and maintaining products and projects. If done at the right time with the right set of resources, digital innovation tends to be a massive competitive advantage.

 

Some major influences of digital innovation are:

IT is no longer just a service or support department for organizations outside the software industry.

Innovation is no longer considered a value-addition.

More and more companies are pushing towards mobile-first strategy.

A growing trend of long running businesses facing new threats from newbies or outsiders. If we summarize, some recent trends:

YouTube and Netflix have forced channels like Star and HBO to explore the online market for expanding viewership.

Online marketplaces like Amazon and Flipkart have challenged the retail market enormously.

Online taxi booking portals such as Ola and Uber have taken away a huge market share from the traditional taxi companies.

Customers’ impression of a business is established through digital engagement, forcing businesses to recognize that software is the brand.

 

As a result of digital innovation, decision-makers are asking some fundamental questions, such as:

What does a digital strategy look like?

How do you integrate digital world into your business?

Where do you start?

Where will the new skills required by going digital come from?

 

The use of Digital Innovation can be analyzed in terms of 3 aspects

1) Product - digitally-enabled products, digital components and control systems

2) Business model - open innovation, co-creation, platform ecosystems

3) Data - analytics, big data, customer / personalization

 

Digital disruption is the change that occurs when new digital technologies and business models affect the value proposition of existing goods and services. The difference between disruption and innovation isn’t black and white, but there are clear distinctions. “Disruptors are innovators, but not all innovators are disrupters—in the same way that a square is a rectangle but not all rectangles are squares,”

Disruptive businesses always operate with a degree of innovation; however, innovation alone doesn’t always displace an existing market, industry or technology. Digital disruptors are better, stronger, and faster. They build better product experiences that create stronger customer relationships and bring it all to the market faster.

In such a scenario, the questions for aspiring digital disruptors would be:

How will you create an ongoing digital customer relationship?

How will you generate more ideas more quickly?

What does your total product experience look like?

What is the role of technology & operations?

What partners will get you there quickly?

 

And the path to disruption would entail

Senior-level commitment to putting the customer first

Disrupt the process in order to disrupt the product

Give authority to small teams to generate focused innovations

Test and measure; expect and accept failure

Partner to get there quickly

 

The conclusion is disruptive innovation breaks apart previous arrangement on who’s getting what share of industry value. Low-end disruptive innovation offers lower prices on an existing market. Low-end disruptive innovation disrupts pricing. New-market disruptive innovation identifies a new customer segment, new market and creates new products, which result in new revenue streams. New-market disruptive innovation disrupts markets segmentation.

We still have a lot to learn

We are eager to keep expanding and refining the theory of disruptive innovation, and much work lies ahead. For example, universally effective responses to disruptive threats remain elusive. Our current belief is that companies should create a separate division that operates under the supervision of senior leadership to explore and exploit a new disruptive model. Sometimes this works and sometimes it doesn’t.

In certain cases, a failed response to a disruptive threat cannot be attributed to a lack of understanding, insufficient executive attention, or inadequate financial investment. The challenges that arise from being an incumbent and an entrant simultaneously have yet to be fully specified. How best to meet these challenges is still to be discovered.

Disruption theory does not, and never will, explain everything about innovation specifically or business success generally. Far too many other forces are in play, each of which will reward further study. Integrating them all into a comprehensive theory of business success is an ambitious goal, one we are unlikely to attain anytime soon.

But there is cause for hope. Empirical tests show that using disruptive theory makes us measurably and significantly more accurate in our predictions of which fledgling businesses will succeed. As an ever-growing community of researchers and practitioners continues to build on disruption theory and integrate it with other perspectives, we will come to an even better understanding of what helps firms innovate successfully.

Opinions expressed in this article are the author’s own.

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