Digital Innovation Strategy: A Framework for Diagnosing and Improving Digital Product and Service Innovation

INTRODUCTION

Digital technology has become a very important part in defining the success and downfall of firms. As it is giving rise to many different technologies every day, firms do not have a certainty of surviving this ever changing market. In order to be successful as well as remain a competitor, firms need dynamic tools to support themselves in managing the new types of digital innovation processes that emerge. The nature of these processes forces firms to challenge prior assumptions about their product and service portfolio, their digital environment, and ways of organizing innovation work. Under the notion of customer-driven digitization, organizations across all industries need to heavily invest in transforming and innovating their business (processes) to become digitally literate and have a framework for supporting ongoing improvements in digital innovation management. The framework, geared at supporting ongoing improvements in digital technology management process, covers five key areas: user experience, value proposition, digital evolution scanning, skills, and improvisation.

Five key areas to be measured and evaluated in seeking to manage digital product and service innovation

1. User experience

One of the key areas of digital management process is user experience. While using a website, a smartphone or any digital platform the user experience needs to be excellent. Web navigation has to be smooth while based on filtering functionalities that allow users to easily navigate and reach at the desired product in a few clicks. The firms should not only consider the browsing and usability experience rather they should also focus on customer’s experience of interacting with these web- sites. They must focus on the aesthetic properties of digital products and services as users are affected by beauty and appearance also. Creating an integrated user experience that evokes engagement is most important when moving beyond websites and desktop applications which can be done through obtaining a composite measure of the levels of usability, aesthetics, and engagement in firm’s digital products and services.

2. Value proposition

Value proposition is the processes of value creation involving the value network around the firm, including suppliers, customers, and third parties. The value proposition of digital products and services is evaluated through assessing three elements, beginning with customer segmentation. This involves analyzing the customer base in order to make strategic decisions about how to reach different groups of customers with the products and services in the firm’s digital portfolio.

Firms need to decide how the products and services in their digital portfolio can be differentiated and bundled. They need to balance premium and free and the role of advertising in each of the firm’s digital products and services, as well as defining boundaries between them while defining units in each of them. Firms engaging in digital innovation need to deal with commissions of channel owners so they need to know how to negotiate the commission of channel owners. To this end, iTunes challenged the music industry’s established bundling model by pricing tracks instead of albums.

3. Digital evolution scanning

Digital evolution scanning involves identifying new opportunities for innovation. As digital innovation emerges in these acts of recombination, firms need to continuously consider how they can be active participants. Digital technology evolves itself by first starting with a simple hardware and software combination and later over the time into more and more sophisticated