A revised perspective on Disruptive Innovation - Exploring Value, Networks and Business models

Doctoral thesis, 2010

The concept of disruptive innovation has received much attention in recent years. These innovations can be defined as offering an initially lower performance while at the same time bringing some new attributes to the market. This thesis aims to develop and extend existing theory on disruptive innovation with an emphasis on business models and value networks. Previous work in this area has shown that incumbents are often toppled by entrants when disruptive innovations are introduced since these technologies are not initially demanded by the established firms’ customers. Much attention has been devoted to how disruptive innovations emerge in low-end segments and in new markets. However, more knowledge is needed about whether and how they can prosper inside an incumbent firm’s established market segment. Moreover, the challenges related to these innovations have increasingly been framed as related to the business model of firms, but little is known regarding how and why this is the case. Drawing upon data from several case studies, the empirical findings in this dissertation suggest that disruptive innovations may prosper in a segment where incumbents are already present. They do so by compensating the lower traditional performance with some new ways of creating value, for instance by removing labor or changing activities inside the customer’s organization. These findings in turn suggest that this theory needs to focus more on how different performance dimensions create value. Additionally, it is argued that a more nuanced conceptualization of customers and networks is needed. When regarding customers as a collection of actors with different competencies and incentives, it becomes clear that disruptive innovations are problematic even when a firm’s existing customers demand them. These innovations may be incompatible with the different activities and incentives of some actors, which may result in a barrier to adoption. Disruptive innovation can therefore be regarded as a business model challenge in the sense that the new value creation and distribution distorts the firm’s surrounding constellation of actors. Firms need to change their network, but struggle to do so since business models transcend their boundaries and they are therefore forced to act under conditions of interdependence.