Introduction to Digital Innovation
L1
DEFINING DIGITAL INNOVATION
- “The carrying out of new combinations of digital and physical components to
produce novel products.” (Yoo, Henfridsson, & Lyytinen, 2010, p. 725)
- “A product, process, or business model that is perceived as new, requires some
significant changes on the part of adopters, and is embodied in or enabled by IT.”
(Fichman, Dos Santos, & Song, 2014, p. 330)
- “The creation of (and subsequent change in) market offerings, business processes,
or models that result from the use of digital technology” (Nambisan, Lyytinen,
Majchrzak, & Song, 2017, p. 224)
L2: Defining main terms and conceptualizing digital technology
Different types of Digital Innovation
- Digital product/service innovation
“…is significantly new products or services that are either embodied in IT or enabled by
IT”
- Digital business model innovation
“…a significantly new way of creating and capturing the business value that is embodied
in or enabled by IT”
- Digital process innovation
“… significantly new ways of doing things in an organizational setting that are embodied
in or enabled by IT”
Digital Innovation refers to the process as well as the eventual income (s:7)
- we can continuously update digital innovations
- (external compoetetitive environments ←> internal organizational environment)
initiate – develop – implement – expoilt → outcomes (product,service-process)
Many successful organizations are digital.
● Digital Transformation: “The combined effects of several digital innovations
bringing about novel actors (and actor constellations), structures, practices, values,
and beliefs that change, threaten, replace, or complement existing rules of the
, game within organizations, ecosystems, industries, or fields” (Hinings et al., 2018, p.
53)
- A bigger change that sets emotion usually at the organizational level due to the
combined effects of digital innovations. new ways of organizing, business
models…
slide 13: (digital innovation (digital technology (digital object)))
THE COMPONENTS OF DIGITAL TECHNOLOGY
- CONTENTS LAYER (DATA): raw representation of something, raw symbols that
don’t have any interpretation.
- SERVICE LAYER (SOFTWARE) : sets of computer programs written in a
programming language.
Firmware software: lowlevel control
Application software: enable users to perform
Algorithms: sets of intrıcton for computers to performs
- NETWORK LAYER (NETWORKS): connect different devices and enable them to
exchange data with one another. connects two or more hardware device
Physical transport: the media through which data are transported (light flash,
wired-wireless)
Logical transport: protocols and standards that govern how data is transported. (TCP, 5G)
- DEVICE LAYER (HARDWARE): physical devices we can touch. (computer,
computer processor, graphic cards…) collects input - performs processes- and
returns output.
Example: A smartphone has hardware (processor, screen), networks (Wi-Fi, 5G),
software (apps, operating system), and data (user photos, app data).
A blockchain example:
ChatGPT/GenAI
● Data: § All data freely available on the World Wide Web, proprietary data
● Software: § Advanced deep learning algorithms (e.g., GPT)
● Networks: § Internet/local networks
● Hardware: § Supercomputers
DIGITIZATION AND DIGITALIZATION
● Digitization: the process of encoding something physical into something digital: (e.g:
scanning paper documents)
, ● Digitalization: Using digital technology to transform business operations (e.g.,
replacing paper-based systems with digital workflows).
→ More and more of our world becomes digital!
HOMOGENIZATION AND DECOUPLING
Because data is represented as 0s and 1s (i.e., bits), all digital objects and content can
be stored, processed, and transmitted in the same way, we refer to this as
homogenization of data
Ex: the storage representation of images, text, and video on a computer system are
identical
Digitizing thus, at least in theory, leads to decoupling
- Digitization separates content from medium
ex: netflix before after
Moore’s law: the number of transistors on electrical circuits doubles approximately every
two years (Gordon E. Moore, 1965)
More generally, Moore’s law holds true for a variety of technological developments, leading
to exponential price-performance improvements
- The transmission capacity of networks
- The storage capacity of hard disk drives
- The pixel density rate in monitors
Miniaturization: huge computers → laptops → smartphones → smartwatches…
L4
Characteristics of a Digital Innovation
IMPORTANT FOR EXAM!!!
Characteristics of Digital Technology
, ● Components: Digital technology is made up of hardware, software, networks, and
data.
● Homogenization and Decoupling: Digital data is homogenized (uniform format)
and as a consequence decoupled from the medium, meaning content is separated
from the physical device.
● Reprogrammability: Digital products can be updated or changed, allowing for new
functionalities after release.
● Connectivity: Digital innovations connect users and devices, enabling interaction
across technologies.
● Digital Trace Data: Digital technology produces trace data, which can be analyzed
to improve products.
Marginal Costs of Digital Products (Low - near 0)
homogenization: stuff becomes cheap
Marginal cost reflects the change in production cost that results from producing one
additional unit
Digitized information, because of data homogenization, can be easily transmitted, stored,
and reproduced
ex: Compare the costs of producing and distributing books versus e-books
● Unlike physical products, digital products have near-zero marginal costs. This
is why products like e-books or digital music can be distributed almost for free once
they are created.
For physical products, costs decrease
due to economies of scale but eventually
rise due to production limits. However,
with digital products, marginal costs
are extremely low or near-zero because
digital items (like software, e-books, or
online services) can be replicated,
stored, and distributed without significant
additional costs.
L1
DEFINING DIGITAL INNOVATION
- “The carrying out of new combinations of digital and physical components to
produce novel products.” (Yoo, Henfridsson, & Lyytinen, 2010, p. 725)
- “A product, process, or business model that is perceived as new, requires some
significant changes on the part of adopters, and is embodied in or enabled by IT.”
(Fichman, Dos Santos, & Song, 2014, p. 330)
- “The creation of (and subsequent change in) market offerings, business processes,
or models that result from the use of digital technology” (Nambisan, Lyytinen,
Majchrzak, & Song, 2017, p. 224)
L2: Defining main terms and conceptualizing digital technology
Different types of Digital Innovation
- Digital product/service innovation
“…is significantly new products or services that are either embodied in IT or enabled by
IT”
- Digital business model innovation
“…a significantly new way of creating and capturing the business value that is embodied
in or enabled by IT”
- Digital process innovation
“… significantly new ways of doing things in an organizational setting that are embodied
in or enabled by IT”
Digital Innovation refers to the process as well as the eventual income (s:7)
- we can continuously update digital innovations
- (external compoetetitive environments ←> internal organizational environment)
initiate – develop – implement – expoilt → outcomes (product,service-process)
Many successful organizations are digital.
● Digital Transformation: “The combined effects of several digital innovations
bringing about novel actors (and actor constellations), structures, practices, values,
and beliefs that change, threaten, replace, or complement existing rules of the
, game within organizations, ecosystems, industries, or fields” (Hinings et al., 2018, p.
53)
- A bigger change that sets emotion usually at the organizational level due to the
combined effects of digital innovations. new ways of organizing, business
models…
slide 13: (digital innovation (digital technology (digital object)))
THE COMPONENTS OF DIGITAL TECHNOLOGY
- CONTENTS LAYER (DATA): raw representation of something, raw symbols that
don’t have any interpretation.
- SERVICE LAYER (SOFTWARE) : sets of computer programs written in a
programming language.
Firmware software: lowlevel control
Application software: enable users to perform
Algorithms: sets of intrıcton for computers to performs
- NETWORK LAYER (NETWORKS): connect different devices and enable them to
exchange data with one another. connects two or more hardware device
Physical transport: the media through which data are transported (light flash,
wired-wireless)
Logical transport: protocols and standards that govern how data is transported. (TCP, 5G)
- DEVICE LAYER (HARDWARE): physical devices we can touch. (computer,
computer processor, graphic cards…) collects input - performs processes- and
returns output.
Example: A smartphone has hardware (processor, screen), networks (Wi-Fi, 5G),
software (apps, operating system), and data (user photos, app data).
A blockchain example:
ChatGPT/GenAI
● Data: § All data freely available on the World Wide Web, proprietary data
● Software: § Advanced deep learning algorithms (e.g., GPT)
● Networks: § Internet/local networks
● Hardware: § Supercomputers
DIGITIZATION AND DIGITALIZATION
● Digitization: the process of encoding something physical into something digital: (e.g:
scanning paper documents)
, ● Digitalization: Using digital technology to transform business operations (e.g.,
replacing paper-based systems with digital workflows).
→ More and more of our world becomes digital!
HOMOGENIZATION AND DECOUPLING
Because data is represented as 0s and 1s (i.e., bits), all digital objects and content can
be stored, processed, and transmitted in the same way, we refer to this as
homogenization of data
Ex: the storage representation of images, text, and video on a computer system are
identical
Digitizing thus, at least in theory, leads to decoupling
- Digitization separates content from medium
ex: netflix before after
Moore’s law: the number of transistors on electrical circuits doubles approximately every
two years (Gordon E. Moore, 1965)
More generally, Moore’s law holds true for a variety of technological developments, leading
to exponential price-performance improvements
- The transmission capacity of networks
- The storage capacity of hard disk drives
- The pixel density rate in monitors
Miniaturization: huge computers → laptops → smartphones → smartwatches…
L4
Characteristics of a Digital Innovation
IMPORTANT FOR EXAM!!!
Characteristics of Digital Technology
, ● Components: Digital technology is made up of hardware, software, networks, and
data.
● Homogenization and Decoupling: Digital data is homogenized (uniform format)
and as a consequence decoupled from the medium, meaning content is separated
from the physical device.
● Reprogrammability: Digital products can be updated or changed, allowing for new
functionalities after release.
● Connectivity: Digital innovations connect users and devices, enabling interaction
across technologies.
● Digital Trace Data: Digital technology produces trace data, which can be analyzed
to improve products.
Marginal Costs of Digital Products (Low - near 0)
homogenization: stuff becomes cheap
Marginal cost reflects the change in production cost that results from producing one
additional unit
Digitized information, because of data homogenization, can be easily transmitted, stored,
and reproduced
ex: Compare the costs of producing and distributing books versus e-books
● Unlike physical products, digital products have near-zero marginal costs. This
is why products like e-books or digital music can be distributed almost for free once
they are created.
For physical products, costs decrease
due to economies of scale but eventually
rise due to production limits. However,
with digital products, marginal costs
are extremely low or near-zero because
digital items (like software, e-books, or
online services) can be replicated,
stored, and distributed without significant
additional costs.
