PNR Paper

Digital innovation strategy: A framework for diagnosing and improving digital product and service innovation

Daniel Nylén, Jonny Holmström, Digital innovation strategy: A framework for diagnosing and improving digital product and service innovation, Business Horizons, Volume 58, Issue 1, 2015, Pages 57–67, ISSN 0007–6813.

Executive Summary

Given the increasing presence of digital technology in businesses, managers need to learn and apply new tools to support the firms in managing the digital innovation processes. In this paper, the authors built one of those tools to assess the state of digital innovation management and to support ongoing improvements.

A Managerial Framework for Digital Innovation Strategy

In the last few years, IT role went from a supporter of internal operations to an enabler that penetrates all aspects of the business. While IT is now omnipresent across internal operations and the business’s services and products offerings, it is not always easy to evaluate the state and to track the evolution of digital technology in the organisation. To this end, the authors created an holistic framework centred around five keys areas:

  1. User Experience: Digital products and services must be easy to use and provide an user experience that will help engage its users.
  2. Value Proposition: For managers to assess the value and for the organisation to be aligned with its customers, digital products and services need to be articulated around a clear value proposition.
  3. Digital Evolution Scanning: Firms need to scan the digital environment and gather information on new digital devices, channels, and associated user behaviours if they want to identify opportunities and evolve their offerings.
  4. Skills: To maximise returns on investment, firms need to acquire new skills both internally and externally. To do so, firms can create new roles and get the help from consultants who will put them on the right track.
  5. Improvisation: Managers need to promote a creative environment by providing the right balance between structure and flexibility.

How to Use the Framework for Digital Innovation Strategy

While the framework is quite easy to use, a good amount of planning and preparation is needed to make the exercise successful. We recommend proceeding as follow:

  1. Identify who should be the leader of the initiative. It should be somebody involved at the intersection of business and technology as they have a good grasp on what’s happening on both sides. It can be a consultant or someone internal.
  2. The framework is best used by doing a workshop and printing the form below or using the sheet we created here which will do the calculation automatically. We recommend to do a workshop, because the facilitator can drive the conversation and collect insights from the room.
  3. Once the forms are completed and the average scores calculated, firms should focus on the lowest scores, because they are the areas where the firms underperforms and where they can probably maximise the ROI of future investments. Firms can either discuss the results during the same workshop or do different sessions to deep dive into a particular subject.
  4. At the end of the workshops, firms should have a list of action items that they can execute to increase the score of elements that are underperforming.
  5. Firms should establish a monthly or quarterly followup to make sure that they are on the right track and that they still have their priorities in order.

Final Words

In this paper, we explored a framework that allows managers to explore the unique characteristics of digital innovation and allows them to continuously adjust their efforts. When applying this framework, managers must consider political policies, regulations and the impact of digital innovation on the internal processes of their organisation. In conclusion, each firms also need to tailor the framework to their own needs and capabilities and can use a variety of tools to support the process.