**1. Introduction**

The widespread adoption of digital technology has brought about significant transformations across all industries, particularly in the realm of business operations. Given the constantly evolving digital landscape, digital transformation has become an ongoing, iterative process for businesses, continually shaping and influencing

their operations. To remain competitive and relevant in this rapidly changing digital environment, it is essential for businesses to commit to continuous digital transformation efforts. The success of digital transformation is highly dependent on the firm's digital strategy [1], which reflects the dynamic capabilities and strategic management [2] of the organisation in the constantly evolving and complex business and technology environment. The digital strategy, in contrast to the traditional view of IT as a "functional level strategy that must be aligned with the firm's business strategy" [3], is a comprehensive plan of action that outlines how an organisation can leverage digital technologies to achieve its goals and objectives. It includes a roadmap for digital transformation, outlining how digital technologies will be integrated into the organisation's operations, processes, and culture, as well as how they will be used to create value for stakeholders [4]. Therefore, rather than being perceived as a purely technical implementation, digital technology possesses the potential to fundamentally transform the ways in which businesses operate, the underlying structures of their business models, and even their overarching business strategies.

In general, the journey towards digital transformation consists of three iterative phases: digitisation, servitisation, and the development of a digital ecosystem [5–7], which we call as the transformation trilogy. As illustrated in **Figure 1**, digitalisation and servitisation follow different evolution paths, which can sometimes occur simultaneously and iteratively. These different paths are all aimed towards the creation of a digital ecological platform. Once the ecological platform is established, it can further evolve into a digital business ecosystem with upstream and downstream partners in various value chains. This evolution towards a digital ecosystem can occur through a variety of pathways, including mergers and acquisitions, partnerships, and organic growth. Ultimately, the goal is to create a collaborative digital ecosystem that enables businesses to leverage the strengths and capabilities of all ecosystem partners to create new value for customers and drive business success.

The initial phase of digitisation refers to the conversion of analogue information into digital data, which can then be utilised in various business processes

**Figure 1.** *Digital transformation trilogy (modified on servitisation paths [8]).*

### *The Chasm of Technology Innovation in Digital Transformation: A Study from the Perspective… DOI: http://dx.doi.org/10.5772/intechopen.111793*

and operations. This phase aims to increase operational efficiency by automating repetitive tasks, enabling quicker data processing, and improving data accuracy [9]. Digitisation lays the groundwork for subsequent phases of servitisation and the development of a digital ecosystem. Even though nearly all businesses today are datarelated, digitalisation is taking place across a wide range of industries to increase the scope and depth of data in people's everyday lives.

During the early phases of digital technology adoption, digitisation was limited to the conversion of paper-based records to electronic formats. However, digitisation has since evolved to encompass much more. With the rapid advancement of sensor and AI technology, digitisation is expanding the dimensions of data sources, enhancing our ability to perceive and interact with the world around us. Sensors can detect and measure things that are beyond the range of human perception, such as radiation or air quality, and convert that data into a digital format that can be analysed and used in a wide range of contexts. The various types of sensors, such as proximity sensor, pressure sensor, motion sensor, magnetic sensor, chemical sensor, etc., extend the ability of humans to perceive their surroundings [10]. Furthermore, AI-enabled non-invasive sensing technology, such as Radio Frequency-capture [11], can detect and track human motion and behaviour in places where humans cannot capture information directly via line of sight. Synthetic biology sensors [7] use genetically engineered cells to detect the changes in their environment and produce a measurable output, which can be used in environmental monitoring, disease diagnosis and food safety. These multidisciplinary cutting-edge technologies used to collect information or monitor environments are referred to collectively as sensors and digitalisation techniques. Therefore, the digitalisation process is not yet complete, and there is ample room for development. Businesses can adopt the new technology to increase their data sources capacity and foster the development of more innovative applications.

The second phase of digital transformation is servitisation, which is a broad and transformative process that can have a significant impact on every aspect of an organisation's operation. Adopting servitisation requires a long journey for organisations, as they must shift their focus from selling products to offering value-added services that enhance the customer experience and generate ongoing revenue [12]. Servitisation involves a comprehensive rethinking of how an organisation delivers value to its customers, with a focus on creating a seamless and integrated experience that combines products and services which highly depend on the technology infrastructure. In addition to external customers, servitisation also encompasses internal users, such as employees and stakeholders within an organisation. For internal users, servitisation involves optimising workflows and IT tools to enhance efficiency and support decision-making. Examples of servitisation for internal users may include introducing advanced material management systems to streamline operations, implementing big data dashboards to support data-driven decision-making, and offering training and development opportunities to improve employee skills and capabilities. By embracing servitisation for internal users, organisations can improve overall efficiency, reduce costs, and enhance the quality of service delivery. This, in turn, can create a more engaged and motivated workforce, leading to improved productivity and performance. Therefore, servitisation is not only relevant for external customers but also for internal users. By optimising workflows and IT tools and providing training and development opportunities, organisations can create a more efficient and effective workplace that delivers value to both external and internal users. In summary, given the scope and complexity of servitisation, this phase is a lengthy and iterative process. Executives must consider the suitability of technologies for their businesses and assess the potential impacts of technologies on organisations while closely monitoring the advancement of science and technology. The dynamic environments of firm-specific assets [2], which are comprised of both constantly evolving technologies and businesses, is forever challenging for the second phase of digital transformation.

The third phase of the digital transformation process aims to increase competitive advantage and expand business territory by building a digital business ecosystem. A digital business ecosystem is a network of organisations, individuals, and digital technologies that work together to create, deliver, and capture value via digital channels [13]. Value co-creation activities between the participants of a digital business ecosystem can give rise to a multitude of new opportunities or business models based on collaboration within or across industries. The rapid exchange of data, information, and knowledge among its participants enabled by technical infrastructures fosters the development of innovative applications that can quickly adapt to the market's dynamic conditions. Therefore, digital business ecosystems are highly dynamic and constantly evolving, with new applications, participants and collaboration models emerging all the time. Since each ecosystem is developed from a unique digital service that caters to a specific set of requirements and goals, every ecosystem is unique and customised to the specific needs and objectives of the organisations and individuals that participate in it. For instance, the Google Android business ecosystem is founded on the open-source operating system, the Amazon business ecosystem is centred around the e-commerce business model, and the Facebook business ecosystem is driven by social needs, with each ecosystem being distinct and defined by its unique characteristics and objectives. The transition from digital services provider to digital ecosystem is a dynamic and iterative process. Some successful collaboration models create shared value and are retained within the ecosystem, even growing and expanding over time. However, applications that do not create shared value will be eliminated after a period of time, as seen with Google Hangouts, which was based on Google search. Therefore, during this stage, business strategy and technological innovation become interdependent.

The digital transformation trilogy consists of three distinct but interconnected stages, which are intertwined and iterative processes. The first phase, digitalisation, could occur in the second phase or the third phase in the form of a new data source or a new service; and the servitisation could occur in the third phase to increase the diversity of the ecosystem. However, regardless of its stage or form, new technology is the primary driver for digital transformation. Therefore, the eternal challenge of an organisation is to adopt the appropriate technologies to catch up with the optimal digital strategy for business growth. From an organisation's perspective, the primary concerns of technology management are determining which technologies are suitable and how to evaluate alternatives for organisation and business growth. It is not a purely technical issue but rather a complex decision process intricately intertwined with incumbent infrastructure, existing business processes, business goals, and even a company's value proposition and corporate culture.
