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There 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.

The authors undertake an exploratory and phenomenological study of 21 Malaysian small and medium enterprises (SMEs) in the information and communication technology (ICT) sector.

The 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.

The 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.