AbstractThe redesign of traditional products into innovative digital products is a profound form of digital innovation. It is imperative for both digitally native and traditional firms to understand and effectively manage this form of digital innovation to survive and thrive amid expected disruptions when traditional products are driven out of business by digital products. Current insights into this form of digital innovation are limited, as previous research has focused on the design of innovative digital technologies. However, if we break everyday digital products down, we often find centuries‐old physical products and digital technologies that have existed for years, if not decades. Therefore, a more comprehensive understanding of digital innovation is needed to attend to how the digital and the physical are combined, and how such a combination makes digital products innovative even when it reuses existing digital technologies. To this end, this study addresses the research question, “How does the reuse of digital technologies enable the redesign of a traditional product into an innovative digital product?” Adopting the “design thinking as reframing” perspective, we conducted a grounded theory study of the design thinking acted out by the doing of the design of an innovative digital theatre. This study inductively develops a theory explaining the design thinking of redesigning a traditional product into an innovative digital product as a digital reframing process, where designers take the frames of digital technologies and rethink existing products (frame taking), merge the frames into the product under design (frame merging), and propose a new frame to interpret the resultant product (frame giving). Our study has important implications for both research and practice.