College aantekeningen

Digital innovation

Course set up
 6 lectures  exam readings
 2 tutorials  exam practice (compulsory)
o 6 groups, 2 online, 4 offline
o Registration will follow
 2 guest lectures  not exam readings, but key inputs for papers
 Exam 31 may, 60 percent of grade  minimum 5,5
 Paper + presentation  2 june – 28 june
o Two feedback meetings with supervisor compulsory
o Presentation paper 28 june (10%)
o Paper (30%)
 Contents
o 1. Introduction to digital innovations
o 2. Impacts of digital innovation I  economy and sustainability
o 3. Impacts of digital innovation II  new digital divides
o Guest lecture 1  Dirk Lukkien (Vilans) – Artificial Intelligence
o 4. Online platforms I  the rise of the platform economy
o 5. Online platform II  digitial user communities
o Guest lecture 2  José van Dijck (UU media studies) – The platform society
o 6. Mini-lectures on e-health, smart mobility, smart living and (social) media
 Lecutres & tutorials
o Lectures will be recorded
 Pp before lecture
 Recording in teams
o During lectures
 Mini assignments answers in the chat
 Questions in the chat  second lecturer will collect
o Tutorials and paper supervision meeting will not be recorded
o During tutorials
 Engage actively

,Lecture 1
What is digital innovation? & Ecosystem strategy for digital innovation
 What is digital innovation?
o New combinations of digital and physical components (digital) to produce
novel products
o Digital does not mean virtual world only  includes physical artifacts
 Otherwise, they cannot be consumed or scaled up
 Physical is important  how are sectors affected by digital innovations
o Focus lies on product innovation, not process innovation
 Focus not producing process
 Digitalize key functions and capabilities of industrial-age products
including cars, phones, televisions, cameras and even books
 Offering novel functionalities  changing way that we consume
 Improving price/performance ratios that transform their design,
production, distribution and use
 Sectors often disrupted by digital innovation, because it
changes the whole way of using/consuming
 Some process innovation builds on product innovation
 Digitization
o Transformation of mechanical into digital products
 Digitization = to digitize information means to turn it into digital
format
 Many possibilities; sound, visual, texts, weight, temperature, wind,
sun, etc.
o Digital innovation is not just ‘virtual’, but also physical
 Digital technologies always rely on a physical basis (energy, artefacts),
physical location (wifi, data centers) and with physical effects
(electricity use, waste)
 Information is independent of the product which is used to store the
string of 0’s and 1’s in the first place
o Dominant vision for the future  internet of things
 Moving from text to things
 Objects also part of the internet  connection to internet and ip
 Send information of current state to central server
 Example: communicating that they are for rent
o Combined digital/physical aspect of DI generates new inequalities
 Between china + US and the rest of the world
 City and countryside
 High and low educated people
 Characteristics of DI
o Re-programmability
 Physical carriers can be used for many purposes
o Homogenization of data
 Data are independent of physical carriers
 Different physical structures to 0’s and 1’s  process them in the
same way
 Analyzed and recombined  for example statistics

,  Can also be sold
o Self-referential
 Network externalities  each adopter of a digital innovation increases
the value of use for other adopters, both directly (social media) and
indirectly (via development of complementary innovations)
o Architecture
 Layered
 Contents  sounds, pictures, texts, robotics
 Service  apps such as search, social media, e-commerce
 Network  physical, logical (TCP/IS)
 Device  psychical, logical (OS)
 Modular
 Components in layered digital architectures are not just
modular, but product agnostic (google maps) rather than
product-specific (aircraft engine)
o This sets principle of modularity in digital innovation
apart from same principle in traditional
o Not know where it is going to be used for
o Creating modules for consumers to use
 A physical device like the iPhone is both a traditional modular
product and a digital platform offering other firms to develop
complementary devices, apps and content using software
development kits and application programming interfaces
o Product specific vs. product agnostic
 Example aircraft  pre-specified
 All modules of the aircraft are meant to make an aircraft and not
something different
 Example  Uber
 Many different modules which pre-existed, not developed because
uber wanted to, but just combined them
o Industrial organization
 Layered
 Contents  sounds, pictures, texts, robotics
 Service  apps such as search, social media, e-commerce
 Network  physical, logical
o T-mobile, KPN, Vodafone, hardware companies
 Device  physical, logical
 Power
 In traditional industries, firms higher up in the product
hierarchy are generally larger and have more power (airbus,
Volkswagen)
 In digital industries, firms in each layer can function
independently  power resides in platform firms, which can
be located in the device layer (windows, iOS) or service layer
(facebook, amazon)
 Strategy (section 4.1)

, o Digital innovation blurs product and industry boundaries  prepare for
disruption
o Choose your position in a layered, modular architecture  few companies
can fulfil the platform role
o What to develop yourself, what to use from the shelf, and what to develop by
partners
 Innovation ecosystem (Adner 2006)
o The ecosystem metaphor
o Digital services are typically co-produced by several organizations that jointly
create value to the end consumers
o Main advantage holds that every organization can focus on its core
competence
o Main disadvantage is that quality is no longer controlled by a single firm
 ‘Offering a Ferrari in a world without gasoline or highways’
o Example
 Traditional car rental companies owning cars, garages, desks, cleaning
facilities  labor-intensive
 New car sharing companies only owning cars, but partnering with
municipality parking, smart locks, national railways and consumers 
sabing on labour
o Three fundamental types of risk
 Standard  initiative risks
 The familiar uncertainties of innovation  resources, demand,
supply, competition, IPR)
 Ecosystem
 Interdependence risks  the uncertainties of coordinating
with complementary innovators
 Integration risks  the uncertainties presented by the
adoption process across the value chain
o Interdependence risks  the uncertainties of coordinating with
complementary innovators
 The more partners involved, the more value can be created
 However, for innovation to succeed, more partners mean more risk
 Probability of ecosystem success does not depend on average of
probability component success but its product
 Say four components and chance of success 90%  chance of
ecosystem success is 0.94 = 0.66
 And if one partner is a weak link (0.2), project is bound to fail
despite quality of other partners: chance of ecosystem success
is 0.2 x 0.9 x 0.9 x 0.9 = 0.15
 Mitigation of interdepended risks
 If partner fails/is delayed, other partners can decide to support
(exclusive license, financial), look for other partners (even from
competitor) or take up the task themselves
 Beta testing may reveal that some components are not so
critical anyway, or components are overlooked