What is Digital Innovation? The Complete Guide

Digital innovation - the complete guide

Digital innovation has fundamentally changed the world as we know it.

Countless observations of the shift to digital are seen in our day-to-day lives. Both immediately in the new ways we communicate, shop, and consume media and more subtly by shifts in manufacturing, government, and security. In a relatively short period, industries that appeared steady have been flipped on their head. The power of this disruptive force is transforming every single industry.

In 2020, it was recorded that 59% of the world’s population are now online. But in a post-pandemic world, never before has there been such pressure on business owners to digitally innovate whilst cutting the fat.

In uncertain times it is difficult to focus and prepare for change ahead. In this post, we offer a primer on the current state of digital innovation. Exploring what digital innovation means on a business level, how it continues to change industries and markets, and how best to implement a digital transformation strategy in your business.

What does digital innovation actually entail?

At its heart, digital innovation is simply the application of software technologies to existing business problems or practices.

The process is ongoing but can be better understood as taking place in waves, with each wave propelled by new advancements in technology.

Previous waves have been driven by the advent of Web 2.0, smart mobile devices, and improved access to high-speed internet. The Internet of Things (IoT), wearables, and smart home applications are just some examples of how Web 3.0 is already impacting our lives and technology as we know it.

Due in part to the pandemic, a large majority of customer journeys now start digitally. Therefore, to remain competitive in today’s digital age, every organization must now consider itself a technology business. By leveraging opportunities to develop digital products, and using predictive data and analytics to better understand both customers’ behavior and internal performance, businesses can grow revenue, cut costs and even build additional revenue streams with new digital capabilities.

Right now, digital innovation is changing the business landscape at breakneck speed. The business opportunities are threefold:

  • Use digital technologies to enhance traditional business models
  • Use digital technologies to transform existing business models and processes
  • Use digital technologies to invent entirely new engagement models or business models
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Why prioritize digital innovation in your business?

Businesses that refuse to recognize the value of disruptive technology will quickly be overtaken by more savvy competitors. Smart leaders should constantly think about how technological advancements can help them remain relevant and add business value.

Companies that innovate can benefit from:

  • A competitive advantage
  • Technology solutions that improve ROI and boost revenue
  • Improved efficiencies and streamlined processes thanks to automation and integrated digital solutions

Digital innovation is essential for any company wanting to achieve long-term growth. Here are some of the reasons why:

Data is everything
Ensure that data and analytics are central to your digital innovation strategy. Due to the ever-increasing interconnectivity of our world, businesses have access to more customer data than ever before. Business leaders who prioritize digital innovation will be able to transform this data into invaluable customer insights, helping them make more informed business decisions.

New customer expectations
There has never been more choices for consumers. Customers high expectations when it comes to a slick and frictionless user experience. This covers everything from the usability of an application to how you communicate with your internal staff. Prioritizing digital innovation will ensure that you are always using technology to provide your customers with a premium experience across all facets of your business.

Improving employee productivity
Digital innovation provides an opportunity for businesses to use automation to increase employee productivity. For example, core business functions, such as HR, can use technology to automate key areas like payroll and employee onboarding, providing staff with more time to focus on other tasks.

Remote working has fast-tracked many businesses’ digital transformation initiatives. The numerous global lockdowns which took place throughout 2020-21 required teams to work from home to achieve business continuity. 88% of organizations worldwide made it mandatory or encouraged their employees to work from home after COVID-19 was declared a pandemic.

Early evidence suggests that access to a global workforce and increased productivity (77% of remote employees say that they’re more productive working from home) have been just some of the benefits seen by businesses who were able to quickly shift to a digital work model.

Security is more important than ever
Digital threats to businesses have never been greater. As companies move increasingly to the cloud (90% of companies now use cloud computing for some of their services) cyber attacks have increased exponentially, meaning that businesses must use technology to increase their security. Cybercriminals are getting smarter, and companies that do not keep pace with advances in security may end up paying a heavy price.

What are the risks of digital innovation?

Prioritizing digital innovation isn’t without its risks.

An infamous example being Lidl’s failed attempt to implement a company-wide ERP system. A decision not to change their existing processes and customize the software ultimately cost the company over €500 million, before they realized that a customized version was too expensive to scale. Lidl then retreated to their old system, providing a clear example of the heavy losses which can be felt if a digital strategy goes wrong.

The lessons to learn? SAP experts suggest the fault lied with Lidl’s unwillingness to adapt to the standard requirements of new software, whilst others suggest the software itself was to blame. Regardless, it is an example of what can go wrong if a digital strategy is not implemented with careful, strategic planning.

Ignoring digital innovation is risky too

Gartner predicts that by 2025 all industries will have adopted digital transformation in some way. However just over half of CEOs and senior executives admit to having a digital business strategy in place.

The latest research from McKinsey suggests that incumbents are failing to innovate because they fear they will damage their core business. This is a dangerous strategy to adopt in a rapidly changing technological landscape.

Kodak offers a real-world example of a company left behind due to an unwillingness to adapt. They were well aware of the digital revolution taking place and devised a seemingly strong strategy. The company created the first digital camera and hired top technology talent for leadership positions.

However, the firm ultimately met its demise by failing to let go of its core business model. Film was too precious for Kodak, and through fear of cannibalizing their core product, they went from a $30 billion company in 1996 to a minimal existence. The firm eventually filed for chapter 11 bankruptcy in 2012 and later re-emerged in 2013 to focus their efforts on serving commercial clients.

What does successful digital innovation look like?

Whilst mastering digital innovation is no easy task, some industry leaders have taken the plunge and incorporated digital technology into their offering with great effect and staggering rewards.

Machine to machine (M2M) communication is ushering in an era of ‘predictive maintenance’ – an industry set to be worth $12.3 billion by 2025. Sensors embedded in machinery are capable of transmitting data to pinpoint when maintenance is needed. This improves safety and efficiency by ensuring parts that need immediate attention are inspected, while valuable time isn’t wasted on machinery that is functioning well. The upshot for businesses is the prevention of mechanical breakdowns and a reduction in maintenance costs. The Oil and Gas industry provides a real-world example. Many pipeline operators are now using sensors instead of human inspections to relay information on pipeline integrity – thus saving time on labor costs and increasing the safety of their operation.

Marketers use new touch-points to engage with customers. Customers now use multiple channels to engage with a business before taking action. Through a well-thought-out digital strategy, marketers can turn these touch-points into incredibly effective acquisition channels. Starbucks offers a prime example of this approach. The company launched a mobile order and pay app back in 2009. This mobile app enables customers to order and pay for food and beverages from outlets in advance. The initiative was a staggering success, with Starbucks announcing that mobile order made up a record 22% of transactions in 2020. However, for the coffee giant, the real value lies in the data generated by the application. It allows the firm to target customers with tailored marketing messages and well-timed offers based on an individual’s specific purchasing habits.

Food delivery veterans Domino’s is a brand that has been through a successful digital transformation journey, with Fortune contributor Kyle Wong hailing it as a “case study on how digital transformation leads to business value”. As of 2020, customers can order pizza from Slack, Facebook Messenger, Twitter, and Alexa with the use of emojis and voice recognition technology thanks to the company’s smart digital rehaul. This is a move that delivered significant rewards throughout the COVID-19 crisis as around 75% of customer transactions took place via digital routes throughout 2020.

How to put digital innovation at the heart of your 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.

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.

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.

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.

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.

What are the next tech trends driving transformational change?

2015 research from PwC indicated that mobile technologies, data capabilities and cybersecurity were the top digital technologies strategically important by CEOs.

Digital Innovation metrics


With mobile accounting for 61% of all eCommerce traffic in 2020 and the cost of damage related to cybercrime projected to hit $6 trillion annually by 2021, those predictions weren’t wrong.

However, according to Forbes, 5G, Quantum Computing and Customer Data Platforms (CDP) now join AI and cybersecurity as the top digital transformation trends for 2021 and beyond.

Deloitte’s comprehensive report “Tech Trends 2020” provides an end-to-end analysis of the macro technology forces set to reshape industries as we know them. Digital reality, cognitive technology, and blockchain are listed as the top technologies set to disrupt incumbents, whilst digital experience, analytics, and cloud remain strongholds of digital progression.

Digital Trends


It’s naive to assume that digitization is restricted to technology or digitally native firms. Digital innovation for non-tech companies is one of the most salient trends in the global marketplace today. Heavy industries, like mining, manufacturing and railroad, have been embracing digital innovation for some time now, with digital processes being applied to safety, automation of tasks, and efficiency initiatives.

With digital processes now touching every industry throughout the world, it’s not a case of if but when digital innovation will impact incumbents and/or position innovators as the new champions.

Frequently Asked Questions

What is digital innovation?

Digital innovation is the use of technology to improve and advance existing processes within a business. Digital innovation can improve customer experience, enable new business models and provide the opportunity to launch new products.

Is digital innovation important?

Digital innovation enables businesses to constantly improve their value by streamlining processes, increasing efficiencies, and achieving a better return on technology investments. Without digital innovation, growth can be slow and businesses may find themselves overtaken by competitors who have adopted new technologies to improve their offering.

What are the 4 main areas of digital transformation?

Digital transformation can be categorized into four main areas: technology, data, process people and organizational change capacity. In order for a company to successfully digitally innovate, they need to obtain talent in all four areas. For example, hiring people with technological depth and breadth will provide technical insight. Secondly, getting a handle on your company’s data will be key to nailing down optimization opportunities. Thirdly, process transformation requires an end-to-end mindset which will be provided by process management professionals. And finally, strong leadership is needed to direct organizational change.

How do I make my business more digital innovative?

Tivix builds digital products that enable businesses to sustain digital innovation. Our team of world-class software engineers, product managers, and designers build smart products for leading organizations worldwide. Their experts are on hand to provide innovative digital solutions to your business challenges – book a free consultation here.

What is Digital Innovation? The Complete Guide

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