PurposeThere is a lack of empirical-based models derived from practice to explain the digital innovation process. The authors investigate how the digital innovation process unfolds in practice.Design/methodology/approachThe authors undertake an exploratory and phenomenological study of 21 Malaysian small and medium enterprises (SMEs) in the information and communication technology (ICT) sector.FindingsThe findings show that the delineation between digital innovation process and outcome is blurred in practice, due to the process' iterative nature. Under this process, customers' role has changed from being passive receivers of innovative products to active reviewers, testers, influential decision-makers, initiators and co-creators at different review points in the innovation process. Enterprises' role has expanded from being the initiator of the innovation process to being a cogitative actor by seeking and absorbing knowledge from customer reviews into the digital innovation process. Market analysis is often the initiator of the digital innovation process, and the findings shed light on the underlying causative mechanisms of the initiation stage, which are understudied and not well understood in the existing literature.Originality/valueThe study contributes to academic knowledge by answering scholars' call for developing third-generation practice-based innovation models, which accounts for enterprises' context-specificities and internal and external environments, and for exploring the suitability of the need–solution fit approach for the digital innovation process. Such models have only been conceptually advocated in the literature. The study also informs practitioners on the organizational and operational activities involved in managing and strategizing for the digital innovation process.

Digital innovation entails the employment of new technologies to address business issues and to create practices that lead to the achievement of sustainability. It is observed that digital technology alters the individual dimension of the innovation process, allowing for a set of heterogenous actors to become active engagers in the process. A review of the previous research revealed a lack of focus on the roles these different actors play in the digital innovation process, as well as the mechanisms by which digital technology facilitates actor engagement, calling for research to shed some light on this topic. This phenomenological study undertakes an exploratory investigation of twenty-one Malaysian small- and medium-sized enterprises (SMEs) in the information and communication technology (ICT) sector, with the aim to demonstrate the importance of engaging market actors in each stage of the value co-creation process. Interviews with industry players show the shifted role of market actors in the innovation process—from product receivers to gatekeepers—at different stages of the innovation process. Market actors are extensively engaged in validating and evaluating the progress of ongoing digital innovation projects and, therefore, can modify their direction. Meanwhile, the role of innovation agents changes from an authoritative to reflective one. This study provides evidence that market actors are in a controlling position at certain points of the innovation process. As such, the view of the innovation process as being company-centric is challenged by the findings of this research. We provide new information regarding innovation practices, the roles of key actors, and their value in the digital context, which can serve as valuable knowledge for both academics and practitioners.

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