Digital Innovation in an Organization
Digital Innovation is a bucket term involving the use of digital technology to replace or complement the existing technology to improve the value chain of an entire organization. Digital technologies mostly involve computer-based solutions. ERP (Enterprise Resource Planning) is a type of digital innovation, which is adopted by the majority of the organization. It involves managing operating activities like accounting, inventory management, etc.
The main objective behind Digital Innovation is to pace up the value chain to avoid any bottleneck, which might lead to loss of business.
Digital Innovation is no more an optional initiative for an organization. It is the core of the competitive strategy. In order to sustain the competitive environment embedding digital innovation within an organization is becoming an inherent and unsaid mandate of the entire industry.
Digital Innovation may include incorporating the following in an organization.
· Developing new proprietary technology to gain sustainable competitive advantage.
(Eg: Predix for GE is an IoT tool, which has helped them in retaining its industry leadership).
· Implementing newer and faster technology. (Eg: Loyalty club membership card is now nearing obsoletion and the alternative is to use a mobile application instead).
· Diversifying from traditional business areas to technology-driven business. (Eg: Reliance is diversifying from traditional retail chains to e-commerce).
· Using data to improve core competency and gaining new competencies. (Eg: Netflix is using a tremendous amount of data to further it’s already established recommender system, leaving behind Blockbuster, its primary competitor).
For creating a digitally sound business strategy, an organization must lay the foundation for it and also provide facilities so that digital innovation is carried out smoothly. The entire value chain must be linked digitally.
This can be achieved by
Human Capital: Specialist in digital transformations is not mandatory, but the people involved must be competent enough to understand the systems and make developments as necessary.
Process: The transformation process is not a one-day event. There need to be a regular feedback system, an iterative and agile methodology to ensure the digital facility developed is suitable for the organization. The objectives of the digital facility must align with the overall business strategy and functional strategies.
Infrastructure: The organization needs to define the problem clearly so that the right and most optimal technology is used. Excess capacity may increase monumental installation as well as switching costs, and lack of capacity may lead to unrequired bottlenecks in the value chain.
Intensity: The organization must decide the intensity of pursuing digital innovation. So that the above three factors are chosen wisely.
