Market Susceptibility Toward Disruptive Business Model Innovation

University essay from KTH/Industriell ekonomi och organisation (Inst.)

Abstract: This paper discusses the conditional factors indicating market susceptibility toward disruptive innovation. There is a need to separate the different forms of disruptive innovation into segments targeting; technology, product or business model disruption. The concepts are fundamentally different and the literature to date is very one sided toward disruptive technology/product innovation. A shortage of studies on disruptive business model innovation has been discovered. This study therefore presents a framework for evaluating the market susceptibility toward disruptive business model innovation. This paper is a case study looking at two historical cases in the Swedish telecom industry. One case was a highly successful disruptive business model whilst the other has not reached the potential success it could have. The cases are investigated through interviews from persons with strategic positions in the telecom industry during the launch of the business models presented in the cases. This is backed with survey results and statistics from market research conducted by the Swedish post and telecom authority. Conditional factors applied to disruptive technology/product innovations, found in previous studies and theory, are applied to the business model disruption cases. The conditional factors are tested in order to establish to what extent they can be applied on business model disruption. This study also aims to find new conditional factors not covered in previous theory. This study is concluded by presenting 10 conditional factors important for evaluating susceptibility toward disruptive business model innovation. This paper analyses 11 conditional factors from previous theory applied on disruptive technology/product innovation. Out of these, 7 conditional factors can be transferred from disruptive technology/product innovation to disruptive business model innovation theory, whilst 4 conditional factors are dismissed entirely. In addition, 3 conditional factors are added from the empirical findings. The study found that the “change of actors in the value chain” and “high entrance barriers” did not seem to be as important for business model disruption. Market susceptibility in these cases seemed to be more dependent on cost, end customer focus, high margins and scalability. There were however also many conditional factors which have importance both for disruptive business model innovation and disruptive technology/product innovation. These conditional factors concerned the market distribution, the current product, the profitability of the market and the current value chain. Differences between disruptive business model innovation and disruptive technology/product innovation are discovered. The differences are proven crucial when evaluating the market susceptibility toward disruptive innovation. Mainly differences being that business models; are more agile, are not seen as big threats, and seem to be more pull than push oriented.

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