Definition of digital innovation: Business model innovation (sometimes in conjunction with a new customer or user value proposition) acheived by leveraging new digital tools.
The overriding concept here is that the “digital” component is tactical and the strategic focus is the business (business model and/or value proposition). The important point is that it’s not a question of innovating for innovation’s sake, but in order to respond to unmet user needs or to provide a stronger customer value proposition.
For organizations, the challenge has more to do with organizational culture and business model innovation better enabled by digital tools, than anything else. In other words, its more of a “people problem” and a “paradigm shift” than a technological one. For instance, MIT Sloan economist and digital-business expert Erik Brynjolfsson argues that competitive advantage depends on innovation and that the biggest driver of innovation today is Information Technology.