Digital Innovation – Why it‘s different from traditional innovation management
In this article you will get to know the difference between conventional innovation management and digital innovation. In our free e-book “Create Outstanding Organizations” you will learn how to prepare your business for the decade of digital innovation. You can download the e-book free of charge here.
Innovation is not necessarily digital innovation
Innovation has many different aspects. For some it is a synonym for product development, for others it is the development of organizational innovation or service innovation. Accordingly, innovation is equally represented by the continuous improvement process, the idea management and the innovation management of a company.
An improvement in the manufacturing process of a product, a completely new product for existing or new markets or an innovative service – these different types of innovation have always been a defining component of innovation management.
Digital innovation, on the other hand, refers exclusively to the development of digital products, services and digital business models. A borderline case is the question to what extent the integration of sensors for data mining into a physical product can be attributed to traditional business innovation or digital innovation. The installation of sensors tends to be more innovation-based in the traditional point of view, and the development of services and business models based on this data tends to be more attributable to digital innovation.
Digital innovation affects the whole company
Traditional innovation management often has little impact on corporate structures and workflows.
- A new production line is opened for an innovative product. But production itself only changes insignificantly.
- In order to occupy a new market segment, new sales structures are being established. But the main sales organization remains the same.
- And even with process innovations, the basic process often remains the same – only in optimized form.
Digital innovation, on the other hand, affects the whole company. All workflows and processes within companies are gradually being converted into digital workflows or completely rethought. Companies use innovative technologies such as digital communication tools, artificial intelligence or the Internet of Things to develop new processes and services based on data. The change affects all departments.
In contrast to the traditional innovation management, which is often delegated to individual departments, digital innovation affects all departments.
Digital innovation is different
Digital innovation adds new areas to the existing types of innovation described at the beginning: the development of digital services for customers and the development of digital business models.
Digital innovation can consist of services that help customers use products better or more efficiently or receive information faster and more specifically. Examples are digital instructions for use, a tracking service in logistics or digital analyses of energy consumption. Digital services are often not an independent source of revenue for companies. They serve to keep the existing offer attractive or to make it more attractive.
Digital business models are a unique form of value creation. Companies use digital technologies. Based on this, they build offers for which customers are willing to pay. Digital business models can exist as a supplement to an existing product or as independent digital innovation.
Common digital business models are so-called freemium offers, where customers receive the basic version of a product free of charge and have to pay for upgrades. Another example of a digital business model is the creation of a digital ecosystem or marketplace where customers, suppliers and other industry partners come together.
Since the development of this type of innovation often differs drastically from traditional product development, many companies have established their own departments and created positions such as Chief Digital Officer. Traditional innovation and digitalization are two separate disciplines.
Does this make sense in any case? It depends on how far away digital innovation is from the core business. Companies can also use existing structures such as the continuous improvement process to drive digital innovation.
Innolytics® supports digitalization and innovation
The development of digital business models and services often requires different processes and methods than e.g. product innovation, which are mainly realized by innovation processes. Innolytics® supports both digitalization and innovation. Companies can set up different communities on their platform – for example, quality and improvement circles at local facilities as well as cross-divisional digital working groups. The groups can exchange ideas on the platform, develop ideas, evaluate them and transfer them into an innovation roadmap.