Summary
Digital Transformation &
Innovation
,Table of Contents
Lecture 1: Definitions and background ................................................................................................... 1
Lecture 2: Traditional innovation theories (old school) .......................................................................... 5
2.1. Slides Hans Weigand .................................................................................................................. 11
Lecture 3a: Digital transformation of ecosystems; past, present and future ....................................... 13
3.1. Slides Hans Weigand .................................................................................................................. 17
Lecture 3b: Waves, disruption, and responsible innovation: “Toward transformation?” .................... 19
Article 1 – DI: (Bower & Christensen, 1994) – Disruptive technologies: catching the wave ................ 20
Article 2 – DI: (Tidd, 2006) – A review of innovation models................................................................ 23
Article 3 – DI: (Kohli & Melville, 2018) – Digital innovation: a review and analysis .............................. 28
Article 4 – DI: (Christensen, 1992): Theories of organizational innovation .......................................... 30
Article 5 – DI: (Yoo et al., 2010): The new organizing logic of digital innovation: an agenda for
information systems research ............................................................................................................... 33
Article 6 – DT: (Hinings et al., 2018): Digital innovation and transformation: an institutional
perspective ............................................................................................................................................ 34
Article 7 – DT: (Nambisan et al., 2017): Digital innovation management: reinventing innovation
management research in a digital world............................................................................................... 36
Article 8 – DT: (Orlikowski, 2007): Sociomaterial practices: exploring technology at work ................. 38
Article 9 – DT: (Yoo et al., 2012): Organizing for innovation in the digitized world.............................. 39
,Lecture 1: Definitions and background
Chesbrough (2003 & 2006) on innovation:
• “Most innovations fail”.
• “It is nearly impossible to predict the way these [new] products or offerings will shape social
practices”.
• “Successful innovation often demands an innovative business model at least as it requires an
innovative product offering”.
• “Innovating innovation” (meta-innovation).
Business model (canvas): an abstraction that captures the firm’s concept and value proposition while
also conveying what market opportunity the company is pursuing, what product or service it offers,
and what strategy it will follow to seek a dominant position. The business model tells us who the firm’s
customer is, what the firm does for its customers, how it does it, and how it is going to be compensated
for what it does.
Design of a business model:
• Customer segments: for whom your firm is creating value?
• Value proposition: the specific set, or bundle, of products and services that create value for
customers.
• Channels: the specific physical or digital conduits, or touch points, the firm utilizes to deliver
value to its customers.
• Customer relationships: are tangible and emotional connections the firm establishes with the
customer.
• Revenue streams: specify how the firm “monetizes” its value proposition.
• Key resources: the assets at the epicentre of the business model.
• Key activities: the actions that characterize the business model.
• Key partnerships: up-stream relationships the firm must be able to leverage.
• Cost structure: focuses on outflows of cash to upstream partners and providers of resources.
Digital business and innovation:
• Electronic commerce: is the process of distributing, buying, selling, marketing, and servicing
products and services over computer networks such as the Internet.
• Electronic business: is defined as the use of Internet technologies and other advanced IT to
enable business processes and operations.
• Electronic commerce and electronic business rely on the same set of enablers. The more
general term digital business is now the norm in business organizations and the business press.
• Innovation: is the practical implementation of ideas that result in the introduction of new or
improved goods or services.
• Social innovation: is the process of developing and deploying effective solutions to challenging
and often systemic social and environmental issues in support of social progress, typically by
changing social practices.
Digitization: the process by which content and processes become expressed and performed in digital
form. Making something digital which used to be analog, for example replacing paper by digital files.
• Digitalization ≠ digitization: you can’t digitalize without digitizing.
1
, Digital transformation and innovation (Piccoli):
• Digital transformation (DT) / digitialization: the application and exploitation of digital
technology to radically rethink organizational, business and operational models. Typically
underpinned by redesign of information systems.
o Emphasis in digital transformation is on embracing digital relationships with customers
(N=1) through digitally enhanced products or services. (Example Nordstrom clothes).
o Digital transformation blurs the distinction between IT strategy and business strategy.
• Digital innovation (DI): applying digital technologies by existing organizations to create new
and improved products, processes or services.
o The change engages an existing organization impacting products, processes or
services, generally to extend or reinvent the firm’s existing value propositions.
o Are not a one-time investment. They are characterized by recurrent changes to enable
organizations to participate and react to market dynamics.
Difference between DT and DI: DI has limited scope (like “a product”) and clear objective.
Industry 4.0 key concepts:
• Cyber-physical systems: systems of collaborating computational entities that are in strong
connection with the surrounding physical world and its on-going processes (Xu 2018).
• Cloud computing: outsourcing computing to internet-accessible scalable server environments.
• Internet of Things: things get unique identification (IP/URI) and a service interface to the
Internet.
• 3D printing.
Internet of Things (IoT):
• Enablers:
o Commoditization and consequential drastic price decline of sensors brought about by
the smartphone.
o Emergence and consolidation of the cloud computing architecture.
o Reliable internet networking.
• IoT devices appear powerful by off-loading computation to cloud.
• Smart IoT bridges physical world with cloud computing services offering new product
functionalities and determining new opportunities for value creation.
• Leads to mirror world concept.
Mirror world:
• Every object in PW (physical world) gets a unique identifier (oid).
• For each oid, there is an information object in MW (mirror world).
• The information (MW) object, or digital twin, maintains information about the state, location
and history of the PW object.
o Digital twin: a digital representation of a unique physical object implemented as a
software program capable of mirroring, in the virtual space, the object’s
characteristics and properties.
• Changes in the PW object are directly reflected in the MW object (sensing) and vice versa
(effectuating).
• Agents (companies, ..) in the PW have a MW identity and collaborate in the MW on the basis
of digital rights and smart contracts.
• Design and testing (by simulation) of the object (type) in MW before objects in PW are built.
What-if scenario simulation in MW possible for existing PW objects.
• Not all of these properties are always present.
2
Digital Transformation &
Innovation
,Table of Contents
Lecture 1: Definitions and background ................................................................................................... 1
Lecture 2: Traditional innovation theories (old school) .......................................................................... 5
2.1. Slides Hans Weigand .................................................................................................................. 11
Lecture 3a: Digital transformation of ecosystems; past, present and future ....................................... 13
3.1. Slides Hans Weigand .................................................................................................................. 17
Lecture 3b: Waves, disruption, and responsible innovation: “Toward transformation?” .................... 19
Article 1 – DI: (Bower & Christensen, 1994) – Disruptive technologies: catching the wave ................ 20
Article 2 – DI: (Tidd, 2006) – A review of innovation models................................................................ 23
Article 3 – DI: (Kohli & Melville, 2018) – Digital innovation: a review and analysis .............................. 28
Article 4 – DI: (Christensen, 1992): Theories of organizational innovation .......................................... 30
Article 5 – DI: (Yoo et al., 2010): The new organizing logic of digital innovation: an agenda for
information systems research ............................................................................................................... 33
Article 6 – DT: (Hinings et al., 2018): Digital innovation and transformation: an institutional
perspective ............................................................................................................................................ 34
Article 7 – DT: (Nambisan et al., 2017): Digital innovation management: reinventing innovation
management research in a digital world............................................................................................... 36
Article 8 – DT: (Orlikowski, 2007): Sociomaterial practices: exploring technology at work ................. 38
Article 9 – DT: (Yoo et al., 2012): Organizing for innovation in the digitized world.............................. 39
,Lecture 1: Definitions and background
Chesbrough (2003 & 2006) on innovation:
• “Most innovations fail”.
• “It is nearly impossible to predict the way these [new] products or offerings will shape social
practices”.
• “Successful innovation often demands an innovative business model at least as it requires an
innovative product offering”.
• “Innovating innovation” (meta-innovation).
Business model (canvas): an abstraction that captures the firm’s concept and value proposition while
also conveying what market opportunity the company is pursuing, what product or service it offers,
and what strategy it will follow to seek a dominant position. The business model tells us who the firm’s
customer is, what the firm does for its customers, how it does it, and how it is going to be compensated
for what it does.
Design of a business model:
• Customer segments: for whom your firm is creating value?
• Value proposition: the specific set, or bundle, of products and services that create value for
customers.
• Channels: the specific physical or digital conduits, or touch points, the firm utilizes to deliver
value to its customers.
• Customer relationships: are tangible and emotional connections the firm establishes with the
customer.
• Revenue streams: specify how the firm “monetizes” its value proposition.
• Key resources: the assets at the epicentre of the business model.
• Key activities: the actions that characterize the business model.
• Key partnerships: up-stream relationships the firm must be able to leverage.
• Cost structure: focuses on outflows of cash to upstream partners and providers of resources.
Digital business and innovation:
• Electronic commerce: is the process of distributing, buying, selling, marketing, and servicing
products and services over computer networks such as the Internet.
• Electronic business: is defined as the use of Internet technologies and other advanced IT to
enable business processes and operations.
• Electronic commerce and electronic business rely on the same set of enablers. The more
general term digital business is now the norm in business organizations and the business press.
• Innovation: is the practical implementation of ideas that result in the introduction of new or
improved goods or services.
• Social innovation: is the process of developing and deploying effective solutions to challenging
and often systemic social and environmental issues in support of social progress, typically by
changing social practices.
Digitization: the process by which content and processes become expressed and performed in digital
form. Making something digital which used to be analog, for example replacing paper by digital files.
• Digitalization ≠ digitization: you can’t digitalize without digitizing.
1
, Digital transformation and innovation (Piccoli):
• Digital transformation (DT) / digitialization: the application and exploitation of digital
technology to radically rethink organizational, business and operational models. Typically
underpinned by redesign of information systems.
o Emphasis in digital transformation is on embracing digital relationships with customers
(N=1) through digitally enhanced products or services. (Example Nordstrom clothes).
o Digital transformation blurs the distinction between IT strategy and business strategy.
• Digital innovation (DI): applying digital technologies by existing organizations to create new
and improved products, processes or services.
o The change engages an existing organization impacting products, processes or
services, generally to extend or reinvent the firm’s existing value propositions.
o Are not a one-time investment. They are characterized by recurrent changes to enable
organizations to participate and react to market dynamics.
Difference between DT and DI: DI has limited scope (like “a product”) and clear objective.
Industry 4.0 key concepts:
• Cyber-physical systems: systems of collaborating computational entities that are in strong
connection with the surrounding physical world and its on-going processes (Xu 2018).
• Cloud computing: outsourcing computing to internet-accessible scalable server environments.
• Internet of Things: things get unique identification (IP/URI) and a service interface to the
Internet.
• 3D printing.
Internet of Things (IoT):
• Enablers:
o Commoditization and consequential drastic price decline of sensors brought about by
the smartphone.
o Emergence and consolidation of the cloud computing architecture.
o Reliable internet networking.
• IoT devices appear powerful by off-loading computation to cloud.
• Smart IoT bridges physical world with cloud computing services offering new product
functionalities and determining new opportunities for value creation.
• Leads to mirror world concept.
Mirror world:
• Every object in PW (physical world) gets a unique identifier (oid).
• For each oid, there is an information object in MW (mirror world).
• The information (MW) object, or digital twin, maintains information about the state, location
and history of the PW object.
o Digital twin: a digital representation of a unique physical object implemented as a
software program capable of mirroring, in the virtual space, the object’s
characteristics and properties.
• Changes in the PW object are directly reflected in the MW object (sensing) and vice versa
(effectuating).
• Agents (companies, ..) in the PW have a MW identity and collaborate in the MW on the basis
of digital rights and smart contracts.
• Design and testing (by simulation) of the object (type) in MW before objects in PW are built.
What-if scenario simulation in MW possible for existing PW objects.
• Not all of these properties are always present.
2
