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Digital platforms mediate the association between the IoT and frugal innovation. Furthermore, organizational readiness also moderates on the association between digital platforms and frugal innovation. Only those businesses that update their business operations according to the needs of their customers can achieve success. Frugal innovation is an emerging concept, and its achievement is a very tricky and complex task. Only those businesses that update their business operations using the IoT and digital platforms can achieve success. Moreover, modern SMEs should be able to adapt to the required changes in their business activities. Hence, SMEs also require some strategic changes in their operations in order to cope with changing business circumstances.
- Internet of things
- digital platforms
- organizational readiness
- frugal innovation
1. Introduction
The emergence of digitalization and innovation have become real challenges for business organizations [1]. Innovation refers to the procedures that entrepreneurs and organizations use to conceptualize the latest products and ideas and the processes to advance existing processes, ideas, or products in a novel way [2]. It is the planned modification in the enterprise’s actions to improve the growth and performance [3].To respond to the challenging environment, business organizations pay attention to frugal innovation and the Internet of things (IoT) [1][3].
The origin and starting point of frugal innovation ideas are not clear yet. However, the few research studies conducted mention that this notion was firstly introduced by economists, therefore it has stemmed from the frugal engineering 2006 concept introduced by the chairman and CEO (Carlos Ghosn) of Renault Nissan-Alliance [4] Frugal innovation is the process of designing novel product architecture at reasonable prices that provide consumers with the latest applications, as opposed to the existing solutions [1]. Frugal innovation is a mechanism which enables the organizations to serve the underserved customers who are unable to afford the existing products [4]. Researchers claimed that the IoT acts as a road map for improving the process of innovation [5]. The IoT consists of interconnected devices via a local network or the Internet [3]. This mechanism provides opportunities for communicating and receiving ideas and information about the advanced business models that have emerged due to digitalization. Particularly in the era of digitalization, digital platform capabilities become an important means through which organizations develop their networks that facilitate the provision of their services in more innovative ways [6]. It is self-evident that the massive improvement in technologies has changed the business environment [7], and more specifically, the operational activities. In this context, organizations use various advanced digital technologies that enable them to be connected all around the world in order to cope with emerging requirements i.e., innovative business operations [5].
Frugal innovation has brought changes to the ways businesses operate, moving from traditional to more innovative ways [8], and such transformation of business’s operational activities are exclusively dependent on advanced digital technologies, including the IoT mechanism. Industry 4.0 is the industrial revolution’s latest phase, which greatly focuses on automation, real-time data, connectivity, and machine learning [2]. Industry 4.0 is the digital transformation of organizations to digital structures that emphasize digital technology to complete the new level of innovation required in the modern era through the aid of interconnectivity through the IoT and digital platforms [5]. It has entirely changed the way and pattern of organization’s operations. Additionally, customer needs and trade and industry requirements also changed with the improved latest wave of digitization. The key purpose of industry 4.0 is to enhance the effectiveness and competence of entire organizations [6]. Industry 4.0 contains various technologies that facilitate digital transformation of the production-, manufacturing- and value creation-related activities of SMEs, because it provides new means and patterns for organizational control and growth for SMEs [1][2]. Transformation means changing the overall strategy, which is a large decision to accept. Industry 4.0 is the rising challenge for businesses due to its automated and digital elements that are based on digital technologies, such as the IoT, digital platforms etc. [5][6].
The IoT that enables business organizations to communicate and connect through the Internet and local networks all around the world is possible due to the advancement of technologies [9]. The IoT assists business organizations in every activity and contributes to the advancement of the operational mechanisms of these organizations [10]. In the era of dynamic business environments, organizations focused on frugal innovation mechanisms as a strategic option for survival and sustainable growth [4]. Frugal innovation refers to the use of existing resources to serve that customer who is unable to afford high-price products and services [11]. The IoT makes it possible for business organizations to adopt new methods of doing business [12]. The adoption of a new business model requires knowledge and information about the successful operational models via the IoT devices [13]. Due to the advancement in technologies, large number of business entities transformed traditional ways of business operations to new ones by adopting the mechanism of frugal innovation [14]. In this regard, the IoT provides a foundation for acquiring required information and adapting new techniques that enable successful frugal innovation. As the IoT plays a critical role for the development of digital platforms and assists frugal innovation, limited studies have been found on the IoT–frugal innovation link to date. Both the IoT and digital platforms can determine frugal innovation; therefore, the current study highlights the foundational role of the IoT for the development of digital platforms and frugal innovation.
Frugal innovation requires major changes in the existing processes of business organizations [11]. Existing literature highlights that most organizations’ attempts to implement new processes and programs often fail due to insufficient organizational readiness for those changes [15]. Organizational readiness is the ability of an organization to accept, adapt and implement required change [16]. With higher organizational readiness, organizational members are more inclined to initiate change, put in their best efforts, and demonstrate cooperative behavior and attitudes, which overall results in a more successful and effective implementation of frugal innovation [17]. Members of organizations with higher readiness perceive that they have sufficient resources that will contribute to the proper implementation of change. Organizational readiness recognizes that organizations depend on existing resources and conditions to implement change and new projects [18]. In line with the importance of organizational readiness for the successful implementation of an innovation project, this study tested the moderating role of organizational readiness on the relationship between digital platforms and frugal innovation.
2. Development and Findings
Due to the advancement and effect of the IoT on businesses, previous researchers explored the IoT impacts on businesses. However, the role of the IoT for the enhancement of frugal innovation has been ignored. It is self-evident that frugal innovation is a comprehensive range of innovative activities that help organizations in the achievement of their targets, relative performance, and implementation of business strategies.
The IoT provides numerous opportunities to achieve business objectives and keep a competitive business position. Frugal innovation is affected by a variety of features of digital platforms provided by the IoT. The results of H1 showed that the IoT enable businesses to perform strategically. This study proposed a framework that offers direction to businesses in developing-countries that the IoT helps in attaining frugal innovation. Previous studies support this linkage that the IoT is set of connections of different devices that are attached through the Internet and can exchange and collect data and information with each other, the IoT tool makes sets of data which are mined and required to-be collected for actionable outcomes [19]. The IoT allows frugal innovation to give advantages to customers and companies for the development of services and applications to solve and address emerging challenges [20]. However, it is stated that effective utilization of the IoT brings advancement and development in digital platform services. The IoT has increased the task of connecting people and productivity in organizations through various platforms, such as emails, live meetings, and social network services, for online feedback and information sharing to a large extent [12]. Development of technology increases the information sharing amount and invention through connected devices with enhanced number of machines and tools used in this perspective [21]. The H3 showed that digital platform shave a positive influence on frugal innovation. The outcomes recommend that digital platform be able to help organizations to achieve frugal innovation and perform strategically. Digital platforms refer to the capability to achieve the objectives and targets of an organization through frugal innovation [22]. Digital platforms support frugal innovation for services and product processes within and outside of the organization [23]. H4 shows that various services of the IoT, such as gadgets and software, were established to influence frugal innovation through digital platforms. Organizations that implement the IoT are capable of formulating the effective use of digital platforms, which consecutively can lead organizations to attain frugal innovation. Previous research supports that digital platforms carry benefit for customers and businesses through frugal innovation [24]. The H5 results proposed that organizational readiness act as key aspect in relation between digital platforms and frugal innovation. In line with research findings, it was observed that organizational readiness plays a moderating role on the IoT and frugal innovation. When the IoT is more effective in contributing positively to digital platforms, a high-level of the organizational readiness plays an important role for frugal innovation through digital platforms.
This entry is adapted from the peer-reviewed paper 10.3390/su14074120
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