Balancing digital transformation and innovation – energy use as a model

Abstract

The future of digital innovation is inevitable, but it must also be sustainable. Digitalization shapes tomorrow, while sustainability ensures its continuity. In today's digitally connected world, companies must actively pursue disruptive innovation to maintain their long-term competitiveness. While this means most companies are digitizing their business operations, the impact of this digital transformation on disruptive innovation remains unclear. Therefore, this research aims to demonstrate the effect of digitalization on disruptive innovation. The researcher hypothesizes that this relationship takes the form of an inverted U, where digitalization initially fosters disruptive innovation, but the returns diminish and eventually become negative. This inverted U-shape indicates that digitalization initially provides access to new technologies, data, and tools that enable the development of disruptive innovations. However, as digitalization increases, the density and complexity of information and new technologies become more challenging to utilize for generating disruptive innovations. Furthermore, increasing digitalization leads to the standardization of systems, which promotes incremental innovation. We also argue that a company's capacity for assimilation enables it to better integrate and leverage new knowledge, thus extending the positive impact of digitalization on disruptive innovation. To test the research hypothesis, the current research highlights the importance of balancing strategic R&D investments with digitalization for disruptive innovation, challenging the notion that more digitalization is always better.