Digital Disruptive Innovation

The following sections are included:

• Contents
• Introduction: Digital Technologies and Disruptive Innovation: From Processors to Platforms

The term “disruptive technology” as coined by Christensen (1997, The Innovator’s Dilemma; How New Technologies Cause Great Firms to Fail. Harvard Business School Press) refers to a new technology having lower cost and performance measured by traditional criteria, but having higher ancillary performance. Christensen finds that disruptive technologies may enter and expand emerging market niches, improving with time and ultimately attacking established products in their traditional markets. This conception, while useful, is also limiting in several important ways.

By emphasising only “attack from below” Christensen ignores other discontinuous patterns of change, which may be of equal or greater importance (Utterback, 1994, Mastering the Dynamics of Innovation. Harvard Business School Press; Acee, 2001, SM Thesis, Massachusetts Institute of Technology). Further, the true importance of disruptive technology, even in Christensen’s conception of it is not that it may displace established products. Rather, it is a powerful means for enlarging and broadening markets and providing new functionality.

In Christensen’s theory of disruptive technology, the establishment of a new market segment acts to channel the new product to the leading edge of the market or the early adopters. Once the innovation reaches the early to late majority of users it begins to compete with the established product in its traditional market. Here we present an alternative scenario in which a higher performing and higher priced innovation is introduced into the most demanding established market segments and later moves towards the mass market.

Innovation is widely recognized as a major driver of long-term corporate growth. Successful innovators who manage to dominate new markets enjoy Schumpeterian rents for their inventions. How then can a firm dominate a new market? Two streams of literature have proposed opposite answers to this question.

The First Mover approach indicates that by setting up a strong differentiation strategy, companies are supposed to create a new area where profits abound. This approach is supported especially by Kim and Mauborgne (2004) who coined the term Blue Ocean to describe it.

The Fast Second approach, defended by Markides and Geroski (2005), contends, on the contrary, that companies should not try to become pioneers, but should target the newly created market in second position, and colonize it.

But neither Blue Ocean nor Fast Second are able to convincingly explain successful market domination. Our study of 24 innovation cases suggests that innovation which leads to market domination is instead achieved by using four kinds of breakthroughs, separately of simultaneously.

In many hi-tech sectors one of the most important competitive weapons is standardisation. It is particularly true in network markets where users would like to buy products compatible with those bought by others. Different processes may lead to standard setting. Sometimes there are fierce standardisation wars, whereas in other cases competitors are able to agree on a common standard before the introduction of a new technology on the market. Quite often a single firm is not able to adequately sponsor the adoption of its technology as a standard. Therefore, partners supporting the standard-setting process have to be found and collaborations have to be formed. In this paper, the reasons that may lead firms to co-operate or not cooperate are first analysed and then the different typologies of collaborations are described together with their motivations and critical success factors. Finally, the dynamic of the standard-setting process will be investigated and discussed. The paper is based on the study of ten cases in the multimedia sector.

Despite accounting for a very small percentage of the population that adopts an innovation, the ‘innovators’ and ‘early adopters’ — representing the two earliest groups of individuals to acquire the new product or service — play a crucial role in the dissemination of the innovation to larger market segments. The objective of this paper is to understand the characteristics of these individuals that positively influence their decisions to adopt innovations. We argue that awareness of these traits will enable firms to attain speedier uptake of their offerings while aiding policymakers achieve quicker and wider proliferation of new technologies intended for societal benefit. We undertake a review of the literature studying the diffusion of innovations and show future directions that this framework should take to analyse the adoption lifecycle.

The purpose of this paper is to clarify the definition of digital transformation (DT) and to introduce a structured approach with phases, activities and results. Our research is based on a literature review which provides insight into the basic understanding of DT. Examples complete the research and show the practical application of DT. The main findings are that although DT is a widely known concept, an approach for the structured DT of business models is missing. The paper offers a clear definition of the DT of business models and phases for the DT of business models. Moreover, the paper offers examples of enablers and DT.

The Industrial Internet of Things (IIoT) poses large impacts on business models (BM) of established manufacturing companies within several industries. Thus, this paper aims at analyzing the influence of the IIoT on these BMs with particular respect to differences and similarities dependent on varying industry sectors. For this purpose, we employ an exploratory multiple case study approach based on semi-structured expert interviews in 69 manufacturing companies from the five most important German industries. Owing the lack of previous research, our study contributes to the current state of management literature by revealing the following valuable insights with regard to industry-specific BM changes: The machine and plant engineering companies are mainly facing changing workforce qualifications, the electrical engineering and information and communication technology companies are particularly concerned with the importance of novel key partner networks, and automotive suppliers predominantly exploit IIoT-inherent benefits in terms of an increasing cost efficiency.

Scientific research and innovation management practice have emphasised the important role of individual competencies in meeting the challenges of the digital transformation. However, it still lacks empirical studies that strive to determine how certain competencies of employees might affect the success of the digital transformation itself. In order to empirically determine the individual contribution of specific employee competencies to a successful digital transformation in terms of a high Industrial Internet of Things (IIoT) usage performance, a quantitative study among German component manufacturers of the capital goods industry was conducted. Drawing upon a sample of 284 employees, our results reveal that high developed cognitive and processual competencies of individuals promote the digital transformation processes of a firm. Surprisingly, social competencies have only a little influence. Furthermore, our findings also confirmed that a high IIoT usage performance is beneficial for a firm, significantly enhancing divisional success.

Large manufacturing companies will in future be continuously challenged to develop and implement new IoT-related business models. Existing research offers interesting insights on high-level stages of business model innovation (BMI) processes in general. However, only little is known about the presence of main gates in BMI processes and even less about the underlying decision criteria applied at these gates. To shed more light on this research field, 27 expert interviews with employees from eight companies across the IoT ecosystem were conducted. The expert interviews reveal that, despite the increasing popularity of (radically) new innovation approaches, two main decision points can be identified across BMI processes. These findings are a first explorative step towards a better understanding of IoT adoption and provide a starting point for interesting future research avenues.

The Industrial Internet of Things (IIoT) poses several implications on manufacturers in terms of economic, ecological, and social aspects referring to the Triple Bottom Line (TBL) of sustainable value creation. Due to its technical core, the current research focused on its technical fundamentals, whereas the economic discussion is still in its infancy. This paper aims at painting a comprehensive and structured picture of IIoT-related economic, ecological, and social benefits and challenges. For this purpose, we employ an exploratory multiple case study approach based on semi-structured expert interviews in 46 manufacturing companies from three leading German industries. Our study contributes to the sparse body of scientific IIoT literature by analysing the IIoT’s implications according to the TBL. We show that, in order to qualify for sustainable industrial value creation, the IIoT requires an extension of the established TBL by three further dimensions, i.e., technical integration, data and information, and public context.

The Industrial Internet of Things is recently a widely discussed phenomenon. However, business level effects of this phenomenon are by now underresearched. We tackle this research gap by presenting an in-depth analysis of business model changes manufacturing firms employ to adequately react to this technological development. Against the background of a multiple-case study we identify and characterise three archetypes of business models manufacturing firm implement in order to benefit from opportunities provided by the Industrial Internet of Things. Furthermore, we present insights on how firms innovate their extant business model in this context. Thereby, our study considerably contributes to business model research and additionally bolsters up a strategic firm level perspective on the Industrial Internet of Things.

Providers of product-service solutions find it challenging to simultaneously manage an increasing need for customised offerings along with internal demands for efficiency. To manage this balance, this paper explores the utilisation of platform strategies in the development of integrated product-service solutions. While platform strategies have been employed for many years in the development of physical products, this paper focuses on platform strategies in the development of solutions that combine both products and services. Based on a case study, we identify different assets that can be shared by these integrated product-service solutions and provide rationales for using platform strategies for solutions. We emphasise the potential of applying platform strategies while acknowledging the need for a holistic perspective on what assets to share among solutions. In particular, we draw attention to knowledge platforms as a basis for development of product-service solutions. The potential from using technology and usage knowledge platforms is highlighted in particular.

Digitisation leads to far-reaching changes of products in all industries and has a massive impact on the global innovation landscape. For manufacturing companies, it is crucial to strategically align their product portfolio with digitisation and bring out a continuous stream of digital product innovations in order to strengthen their market position and remain competitive. The paper at hand, presents a methodology for digitising product portfolios. The methodology takes into account a company’s current digital position, possible future scenarios, digitisation strategies for the portfolio derived from the scenarios as well as concrete digitisation measures for each product group of the portfolio. The result is a portfolio roadmap which shows the planned development of the portfolio in the light of digitisation.

Platform and complementary products configure platform-based markets. This study focuses on the genres of complementary products in a platform-based market. We examine differences in the influences of mediating factors on the evolutionary mechanisms of genres, based on different diffusion strategies in the Japanese video game sector: Nintendo DS and PlayStation Portable. This study shows that a rapid platform diffusion strategy generates bandwagon effects in the evolution of genres, and, in turn, the excessive evolution of various genres negatively influences the sales distribution of software in the platform-based market, leading to a rapid decline of the platform. Additionally, this rapid decline results in an evolutionary failure of genres at a later stage in the platform’s lifecycle. Thus, we imply that a rapid platform expansion strategy may cause a rapid decline of the platform-based market and may exclude innovations based on undeveloped genres of complementary products.

The focus of this study is on how online brand communities are utilised throughout the new product development (NPD) process by promoting communications between firms and communities. We investigate leading MP3 player manufacturers and mobile phone handset manufacturers in Korea. The results of our case studies show that the roles of online brand communities vary along the NPD stages — from trendsetters (lead users) to innovation facilitators (users as innovators), and information disseminators (early adopters). These communities can help firms gain insight into customer needs, desirable characteristics of new products and trends for future development. Furthermore, various inputs from online brand communities can stimulate firms’ internal communication among several departments involved in the NPD. Finally, this study suggests the extended research model and generates hypotheses on the roles and impacts of online brand communities.

This paper addresses the problem of survival and growth of incumbent telecommunication operators. In particular, this paper investigates the extent to which the platform-based approach is appropriate for the internationalisation strategy (platform leadership) of incumbent telecommunications operators in the context of the transition to the Next Generation Network (NGN). It examines the case of BT in the UK, as a large-scale first mover in this transition, exploring the major transformation project BT 21st Century Network (BT21CN). The case demonstrates how the platform-based approach can be used to promote business transformation of an incumbent telecom operator in a turbulent environment. The platform architecture integrates two main features that are usually treated in different contexts and time frames in the literature: (i) the reusability of components and sub-systems (typically in the automotive industry); and (ii) the openness of the platform to external actors in order to drive innovation in the industry (typically in the ICT industry). BT21CN emerged as an industry platform, made possible by the maturation of the Internet Protocol (IP) as a common technology able to transport not only data, but also real time voice and video, with an acceptable quality of service (QoS). Reusability can help reducing costs and decreasing time-to-market for new products and services. However, openness of the platform to external actors has still limited impact due to the limited success of BT (and incumbent telecom operators in general) in their process of internationalisation. Thus, in the context of BT (and of potentially other incumbent telecom operators), the limitations in their process of internationalisation have a negative impact on the evolutionary dynamics of the platform-based approach.

The diffusion of various forms of digital technologies has acted as a disrupting force in several industries, promoting open and distributed innovation processes. In this paper we argue that the supplier in open innovation networks tends to get a more active role as a creative peer producer, rather than merely a contractual deliverer. A comparative case study of the mobile phone platforms iPhone and Android is used to analyze this shift in innovative value creation. The notion of generative capacity is introduced to the research on open innovation, suggesting that it is generativity rather than openness that drives the platforms’ aggregated wealth. The two cases from the mobile phone industry illustrate that innovation initiatives can successfully approach generativity in different ways and that both openness and control are important to facilitate supplier contributions.

Extant literature suggests that market disruptions take place because of two main reasons: technological disruption or institutional change. In view of these two alternative explanations, this paper aims to explore how the recent rise of the collaborative consumption platform Uber is perceived by consumers and whether this platform is primarily regarded as a technological innovation or as an institutional disruption. Drawing from a dataset of more than 6500 user-generated contents in social media, our findings suggest that Uber is not primarily perceived as a technological innovation, but rather as an institutional disruption.