Scholars and Students Unpack the Digital Business Revolution

Harvard Business School's Digital Initiative, led by professors Marco Iansiti and Karim Lakhani, brings an interdisciplinary approach to studying how digital technology has transformed business and innovation.
by Julia Hanna

Think of Harvard Business School's recently launched the Digital Initiative (D/I) as a giant laboratory, where leading scholars and practitioners convene to research, teach, and put into practice new understandings about the relentless digital transformation of business.

Launched in 2013, D/I focuses on the economics and strategy of digital: how organizations need to adapt and change in this new environment, and the individual skills required to succeed in a digital economy.

"You know that a significant change has taken place when you can have the same conversation with an analyst at a hedge fund, an Amazon employee focused on retail data, and a forecaster at General Electric," says HBS David Sarnoff Professor of Business Administration Marco Iansiti, who serves as faculty chair of the initiative and head of the Technology and Operations Management unit.

D/I is one of 13 initiatives and projects created by the School to foster interdisciplinary research on the great problems and opportunities facing society—including such topics as business and the environment, health care, US competitiveness, social enterprise, and leadership.

Driving Forces

For businesess, the transformation to digital is being driven by two primary factors, according to Iansiti: the explosion of connected devices and expanded computing capacity in the cloud.

The study of innovation and business is still in its infancy. ©

From a research perspective, more of the scholars HBS is attracting are studying digital, says Associate Professor Karim R. Lakhani, a member of D/I'sw faculty who also serves as principal investigator of the Crowd Innovation Lab at Harvard's Institute for Quantitative Social Science. "The Digital Initiative gives us the space to collaborate and build a scholarly community that reflects what is happening in the broader world while creating new learning materials for students and practitioners."

Iansiti and Lakhani's MBA elective course Digital Innovation and Transformation is a direct reflection of the organizing impetus behind D/I. In it, students get a hands-on sense of what is unique about digital economics and business models, from new businesses like 3-D printing to "classics" like Facebook.

They also do a deep dive into data analytics. "There are datasets available now that simply weren't possible a decade ago," says Lakhani. But access to data is not the same thing as understanding the data correctly. "Many of the tools available now make it easy to look at correlations between two factors and draw incorrect conclusions; that can drive exactly the wrong decisions."

Students also consider the expanding practice of leveraging crowds for innovation and how crowdsourcing models have played out in different business environments. Lakhani notes, for example, that digital innovation has changed the models and mechanisms around financing. "We always thought (innovation financing) would be a hierarchical, top-down model like venture capital," he says. Companies like Kickstarter-a crowdfunding site that anyone can access and participate in—have changed that view.

An additional course focus is digital transformation, or how companies across all industries are evolving, from music to advertising to industrial products. (A course segment on organizations that tried to change and failed—like Nokia—is also included.)

"We talk about why Google would buy Nest—a thermostat company—and how it is also getting into the car business," says Iansiti. "Ford is realizing that its future competitors are likely to be Facebook and Google and not BMW and Toyota."

“We talk about why Google would buy Nest—a thermostat company—and how it is also getting into the car business”

Students use the HBS Open Forum platform to file assignments, for example posting short essays (with the option to include graphics, data, and video) to describe a company that is exceling at digital transformation. Participants are encouraged to comment on other posts and engage with the wider community, resulting in a cross-pollination of ideas that broadens the overall conversation. (HBS Professor Clayton M. Christensen leveraged the same platform for a new approach to research by reaching out to over 5,000 alumni of his Building and Sustaining a Successful Enterprise course. As a result, 126 participants contributed insights included in his June 2014 Harvard Business Review article The Capitalist's Dilemma.)

More recently, HBS's Health Care and Digital initiatives collaborated on the Health Acceleration Challenge to identify proven innovations that, if scaled, would dramatically enhance health care value. They netted almost 500 entrants, reaching 20,000 visitors and engaging 2,500 commentators, ultimately selecting four finalists who will benefit from an advisory network of health care industry leaders (including many HBS alumni), be the subject of a teaching case, and receive a cash prize of over $35,000.

An upcoming D/I event—one of a number offered throughout the year—also ties into Iansiti and Lakhani's Digital Innovation and Transformation course, giving MBA students, faculty, and practitioners a chance to explore and address digital challenges and opportunities.

The #digHBS Summit, to be held March 30, will engage D/I advisors, friends, and faculty in interactive discussions, tighten the feedback loop between scholarship and practice, and complement students' academic coursework with tales from the proverbial frontlines of practice. Participants will take on a range of issues affecting businesses that have been transformed by digital, such as those in the music, news, and entertainment industries. The gathering will look at the emerging collaborative and sharing economies, explore organizational change in a digital context, consider the implications of new technologies for health care, and ask hard questions about the promise and peril of big data.

The emphasis in all of this, Iansiti and Lakhani point out, is on doing, whether in teaching, learning, or research. "There is a direct engagement with the world that is bringing HBS closer to the medical school or engineering school model," says Lakhani. "The costs of engaging with the world and having an impact have dropped dramatically."

Iansiti points out that there is also, unfortunately, a downside to this new reality. "We are just beginning to appreciate the implications of this highly connected environment and how quickly risk pools across different parties," he says.

However its impact may be felt, technology can no longer be shunted along to segregated departments or individuals. It has become fundamental to even the most traditional aspects of management, from building competitive advantage to understanding customers to forecasting trends and boosting productivity.

"The genie is out of the bottle," says Lakhani. "As a result, we need to educate, train, and inform."

About the Author

Julia Hanna is Associate Editor of the HBS Alumni Bulletin.

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    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited
    Digital innovation is necessary for availing all possible usages of digitisation which evolve fast regularly.Stage has already arrived where more or less everything can be done online thereby eliminating a manual approach. Hence, while all routine and critically technical jobs are accomplished by the computers, the leaders get enough time to use their faculties for planning and decision making. Thus, they need not get bogged down in the basic nitty-gritties and remain fully involved to achieve qualitative results.