What is digital innovation: Benefits, risks, and examples13 min read
Digital innovation is vital to every business that wants to become successful in the 21st century. Regular day-to-day life now is different than before with how everyone can shop, communicate, and entertain themselves using only their mobile device.
The increase in the global digital population is putting a lot of pressure on businesses around the world as consumers choose to do everything possible online within the confines of their own homes.
In this article, you will learn the basics of digital innovation and why your business has to adapt to it to become successful today. In the end, you will see five of the best digital innovation examples that we have seen.
What is digital innovation?
To put it simply, digital innovation is the application of digital technology to improve different aspects and processes of the business, drive growth, and increase overall efficiency.
Digital innovation is usually confused with the terms “digitization” and “digitalization”.
However, digitization refers to the process of converting information that’s written or stored in physical form to digital (i.e. scanning or recreating physical documents to digital documents). Conversely, digitalization refers to utilizing digital information to improve processes.
As for digital innovation, it’s quite important to understand that this process doesn’t happen overnight. It’s more likely to happen in waves as more new advancements in technology are introduced.
Because of the pandemic, many customer journeys start digitally. They might have stumbled upon your business while scrolling through LinkedIn, watching a video on YouTube, or while searching on Google.
That is why organizations, no matter what industry, must consider themselves a technology business if they want to remain competitive.
Those that refuse to implement technology into their business processes and workflows are at risk of being run over by their more tech-savvy competitors. Consumers are more likely to find your business if you have some sort of online presence.
Let’s explore some of the specific benefits of implementing digital innovation into your business:
1. Data and Analytics
Digital innovation comes with improved data and analytics. Data that is elusive to non-digital methods of collecting information could be captured and processed easily. This is then turned into insights, which could help you understand your customers better.
For example, in digital marketing, it’s now possible to perform an A/B test to content and see which ones perform better. This will then give you valuable insight into your customers’ mindset and preferences, which could boost your sales and total return on investment.
2. Better Customer Experience
There has never been a time in history when consumers have had more choices than they have now. When it comes to customer (user) experience, the expectations are high.
Because most of the customer touchpoints today happen digitally, implementing a digital innovation would ensure that customer touchpoints would deliver a quality experience, be it in the form of a mobile app or a website.
3. Improved Productivity
Digital innovation, coupled with automation, could improve the organization’s total productivity and efficiency. Departments like marketing and human resources could make use of certain technologies to perform tasks automatically without active human intervention.
Since the pandemic started, a lot of companies have to quickly implement digital innovation as government-enforced lockdowns require non-essential-work employees to work from home. Companies that got a head start in digital innovation had a certain edge over those that didn’t.
4. Improved Innovation
As business processes are improved with the help of technology, digital innovation could also fuel innovation by providing organizations a means to fast-track the process. This is quite important as agility in innovation is important in gaining a competitive edge.
For example, organizations that use digital innovation platforms like Accept Mission don’t have to use any other tool to complete every step of the innovation process. With a good innovation tool, you can ideate, select the best ideas, and manage projectswithout leaving the platform.
Although digital innovation has a lot of benefits, there are risks associated with it. An example of such a scenario is what happened to Lidl, a German international discount supermarket chain when it attempted to implement digital innovation.
Lidl had to cancel a seven-year project to introduce a digital solution to its business. The problem was that they had already spent €500 million on it. They probably spent more as they tried to revive their old system.
Now, there are two main reasons why digital innovation could fail:
Application of the wrong technology
Unwillingness to adapt to the standard requirements of the new technology
The risk here is that digital innovation is costly, which could be fatal if the attempt fails. This is the reason why there must be a digital transformation strategy in place to outline the change and steps that would strategically reposition the business in the digital economy.
On the flip side, ignoring digital innovation is riskier.
Even though executives know the importance of digital innovation, only half of them actually have a digital transformation strategy. In fact, research from McKinsey suggests that the reason for that is fear of damaging the core business.
This is what happened to Kodak, which led its executives to file for chapter 11 bankruptcy in 2012. They had a good digital transformation strategy.
The problem was that they weren’t able to let go of their core business model (films were too precious for them). They may have emerged in 2013, but their presence wasn’t as great as before.
Best Examples of Digital Innovation
The question now is, how does successful digital innovation look like? In this section, we are going to look at five of the best digital innovation examples we have seen from world-renowned companies.
Who doesn’t like the Swedish furniture giant IKEA? You would be glad to know that this company has been featured a lot of times in different publications because of their digital transformation that’s transforming the business into a tech company.
Essentially, their digital innovation is making their business more attractive to consumers in this digital age with products and services that could match the lifestyles and needs of consumers today.
One of their remarkable moves was the IKEA Place app, which has an augmented reality feature that would enable you to try out various furniture in your home, see what it looks like, before actually having to purchase it.
Amazingly, this happened way before the pandemic started. Even then, a lot of people prefer to check things out digitally, rather than spend hours going through warehouses to see furniture and products.
IKEA is also known for its DIY assembly furniture. Yes, some customers would love to assemble their own furniture. However, there are others who are not part of the do-it-yourself club and would rather have someone do it for them.
To solve this frustration, IKEA acquired TaskRabbit, which is a platform that connects customers with freelance laborers. Aside from solving the DIY frustration of other customers, this had boosted the company’s digital customer service capabilities.
2. Best Buy
Best Buy has been in the market for far longer than Amazon. When the multinational giant entered the scene, Best Buy’s market share dipped so far in the consumer electronics industry until its new CEO implemented a digital transformation.
Although it took a long time, about seven years to be exact, Best Buy came out from the ashes as a technology company that uses technology to enrich people’s lives with improved delivery times, digital marketing, and customer recommendation (price-matching program).
The company also made the news in 2020 as it announced its deal with Accenture and Google Cloud in what the news called its “latest digital transformation play”.
Accenture will be assisting Best Buy in building and growing diverse talents (additional 1,000 employees to its digital and tech team) and investing in technology innovation (for enhanced customer experiences).
Google Cloud will help Best Buy in unifying its data sources across various platforms to develop a more personalized shopping experience for consumers. With the use of Google Analytics, Best Buy will develop new retail services across different channels.
The result? Best Buy’s stock in 2012 was only worth $11.67, which is its lowest dip point since 2002. As of March 2021, when the pandemic is still raging in some parts of the world, Best Buy’s stock is now worth $110.05, almost ten times its 2012 share price.
Nike is another good example of a company that completely transformed its brand. Technically, it’s still a shoe and clothing business for athletes, but like Best Buy and IKEA, it has now become a technology company.
Nike’s stocks in 2017 played somewhere in the $52 range. Though Nike’s products were exceptional, the way they do business seemed outdated. But in 2-3 years, they completely transformed the way they connect with their customers.
Aside from ramping up its ecommerce strategy and digital marketing efforts and making use of data analytics, its flagship store dubbed a “store of the future” in New York City, has finally paid off.
Nike’s NikeTown flagship store, which we also featured in our innovation types article, is a 55,000 square foot hub that provides a unique experience to shoppers. Other people went as far as calling it a “powerhouse of experience-driven retail”.
How technologically advanced the flagship store is?
Well, one of its amazing solutions is an advanced program that enables assistants to analyze the results of shoppers testing out their products in real scenarios, and then recommend the best products.
Aside from that, the flagship store also has an entire basketball half-court with adjustable hoops, a soccer trial area, a treadmill, and other high-tech tools.
This innovation has strengthened Nike’s direct-to-consumer business. The results? In the span of three years since they pumped out their digital transformation, their stock price has almost doubled, amounting to around $90 in 2019.
Start With a Digital Innovation Strategy
From the examples above, it’s quite clear that implementing a digital innovation is important in order to remain competitive in today’s digital world. Others that refused have been overtaken by those that have valiantly transformed their business digitally.
With digital innovation, you could expect the following benefits to your business:
Gain more robust data and analytics that could help you better understand customer behaviors and habits.
The insights, together with advanced solutions, would enable you to provide a better customer experience.
The automation that digital innovation brings would help you enhance the overall productivity of your employees.
By using advanced innovation platforms, you will be able to innovate at a faster rate and increase your company’s bottom line.
As such, digital innovation comes at a risk, too, especially when you apply the wrong technology or you fail to meet the requirements of the modern solution. This could result in heavy losses, like what Lidl experienced.
On the other hand, not implementing a digital innovation across your company is more fatal.
To apply digital innovation, you will need a strategy that would help you reshape your business, align your current operating model with new operating models, and digitally infuse modern technologies into your business.
It’s important that when designing your own digital innovation strategy, you stick to “why” you innovate, “what” to focus on, and “how” to successfully implement it. How about you learn it with us on one of our free innovation webinars? We could discuss digital innovation strategy there in detail.