Practical advice

A summary of advice based on a selection of research articles is given below (with references and links to internal article reviews where available): 

IT investments can positively influence the relationship between open innovation strategies and invention/product innovation.

• IT facilitates external R&D activities by reducing different types of costs associated with use of external knowledge (identification, assimilation, and utilization), and organizations should analyze opportunities and challenges related to utilizing IT to reduce these types of costs [11]. An important area of competence development in this regard involves learning how to identify, encourage, and leverage external partners in innovation work [12].

IT can enable customer-focused innovation in organizations.

• Use of IT applications to support business processes for 1) customer service and support, 2) tracking customer loyalty or satisfaction, 3) product marketing and information, and 4) personalized marketing, may help organizations to effectively utilize IT to acquire and manage customer knowledge bases, and hence develop and manage customer relationships. This is particularly relevant for organizations focusing on product leadership and differentiation, and should be combined with development of structures and work processes for engaging customers in codeveloping and/or customizing and configuring products [13]. 

Developing capabilities for digital innovation management

• Balancing new opportunities with established structures and practices is important for incumbent organizations working on digital innovation initiatives.
  • Being able to balance and achieve exploitative innovation and explorative innovation concurrently is important for organizations’ ability to respond to disruptive digital innovation. The former involves capitalizing existing resources and capabilities, often extending them incrementally to serve existing markets and consumers. The latter focuses on developing new products or services to address emerging market condition and emerging consumer expectation. Use of external resources in explorative innovation efforts may be necessary, especially in situations of resource constraints, where in-house personnel must be dedicated to exploitative innovation [14].

• Development of digital innovation management competence should be emphasized [12].
  • Digital innovation involves a new logic compared with traditional product development methodologies (like stage gate models), and incumbents should focus on building competence on how digital technologies shape the nature and form of innovation. In this regard, Nambisan et al. (2017) [10] describe three distinct qualities of digital innovation: The boundaries of both innovation processes and outcomes are less clear, the innovation agency is less predefined and more distributed (i.e. involving a more dynamic collection of diverse actors at different times), and the dependencies between innovation processes and outcomes are complex and dynamic (making it difficult to separate them - i.e. processes and products/services (outcomes) are shaping and being shaped by the other).
  • Assess effects of digital innovation on a strategic level [12].
    • Digital components in products involve opportunities for functional variation and customization, and hence potential for economies of scope. Organizations should therefore investigate the potential effects of digital technologies on their product and service offerings. In this regard, Nylén and Holmström (2015) [15] present a framework and a diagnostic tool focusing on different areas of digital innovation management.
    • The role of the IT function in digital innovation should be assessed [12].

• Digital innovation requires new governance structures and mechanisms to efficiently orchestrate the portfolio of contributions from diverse actors. Incumbents need to combine governance structures and purchasing practices suited for digital innovation (i.e. network governance) with traditional supply chain governance [12].

References / sources

1. Changing the competitive landscape: Continuous innovation through IT-enabled knowledge capabilities.
   Joshi, K.D., Chi, L. Datta, A. & Han, S. (2010). Information Systems Research, 21(3).
2. Use and efficacy of information technology in innovation processes: The specific role of servitization.
   Kroh, J., Luetjen, D., Globocknick, D. & Schultz, C. (2018). The Journal of Product Innovation Management, 35(5).   
3. Information technology and intangible output: The impact of IT investment on innovation productivity.
   Kleis, L., Chwelos, P., Ramirez, R.V. & Cockburn, I. (2012). Information Systems Research, 23(1).  
4. External knowledge and information technology: Implications for process innovation performance. 
   Trantopoulos, K., von Krogh, G., Wallin, M.W. & Woerter, M. (2017). Management Information Systems Quarterly, 41(1).
5. Service innovation in the digital age: Key contributions and future directions.
   Barrett, M., Davidson, E., Prabhu, J. & Vargo, S.L. (2015). Management Information Systems Quarterly, 39(1).
6. Information technology and product/service innovation: A brief assessment and some suggestions for future research.
   Nambisan, S. (2013). Journal of the Association for Information Systems, 14(4).  
7. Service innovation: A service-dominant logic perspective.
   Lusch, R.F. & Nambisan, S. (2015). Management Information Systems Quarterly, 39(1). 
8. Hierarchical business value of information technology: Toward a digital innovation value chain.
   Hensen, A.H.R. & Dong, J.Q. (2020). Information & Management, 57(4). 
9. Digital product innovation within four classes of innovation networks.
   Lyytinen, K., Yoo, Y. & Boland, R.J. (2015). Information Systems Journal, 26(1).
10. Digital innovation management: Reinventing innovation management in a digital world.
    Nambisan, S., Lyytinen, K., Majchrzak, A. & Song, M. (2017). Management Information Systems Quarterly, 41(1).  
11. Does information technology improve open innovation performance? An examination of manufacturers in Spain. 
    Gómez, J., Salazar, I & Vargas, P. (2017). Information Systems Research, 28(3).
12. Embracing digital innovation in incumbent firms: How volvo cars managed competing concerns. 
    Svahn, F., Mathiassen, L. & Lindgren, R. (2017). Management Information Systems Quarterly, 41(1).  
13. Leveraging customer involvement for fueling innovation: The role of relational and analytical information processing capabilities. 
    Saldanha, T.J.V., Mithas, S. & Krishnan, M.S. (2017). Management Information Systems Quarterly, 41(1).
14. Agility in responding to disruptive digital innovation: Case study of an SME. 
    Chan, C.M.L., Teoh, S.Y., Yeow, A. & Pan, G. (2018). Information Systems Journal, 29(2).  
15. Digital innovation strategy: A framework for diagnosing and improving digital product and service innovation. 
    Nylén, D. & Holmström, J. (2015). Business Horizons, 58(1).

Other external resources for practitioners

Professor Youngjin Yoo: "Digital first: Managing disruption in the digital economy". 

Professor Kalle Lyytinen talks about digital innovation management:

Article reviews related to IT and innovation