Managing in the face of disruption: how do companies manage business model innovation along the process of disruptive innovation?

In a world of continuous change, companies’ conventional modes of doing business are being disturbed at an ever-increasing pace. Hence, scholars from the innovation and management domains are discussing innovation-induced market changes. The concept of disruptive innovation captures a portion of these changes. Disruptive innovation describes how new entrants gain a foothold in a niche market before moving upmarket and challenging powerful incumbents. From its emergence in the mid-1990s, the concept of disruptive innovation was first theorised with a focus on technology. Since 2006, the debate has shifted focus, and the business model is acknowledged as the decisive vehicle that spurs related market dynamics. Given the complexity of disruptive innovation, this thesis builds on multiple theoretical streams to further extend our understanding of companies’ strategic management choices in the face of disruptive innovation. An integration of elements from business model innovation, strategic alliances, platform development and growth, and dynamic capabilities enables a complementary picture of the levels of disruptive innovation. This research is guided by the following question: ‘how do companies manage business model innovation along the process of disruptive innovation?’ Following a sequential mixed methods approach, this research uses publications, interview data, archival data, and survey data. Chapter 2 presents a consolidation of lessons learned from previous waves of disruption. It furthers understanding of disruptive innovation by reviewing disruptive business models that have been discussed in the academic literature. Based on a qualitative content analysis, a classification framework proposes five archetypes: 1) matchmakers, 2) standardisers, 3) service providers, 4) open collaborators, and 5) performance reducers. Chapter 3 adds to discussions on theorising the entrant as a proactive strategic actor. Drawing on the strategic alliance literature, the chapter explores how entrants strategically configure an alliance portfolio to pursue a disruptive path despite an interplay with incumbents. Based on longitudinal research, the development trajectories of two disruptive entrants in the German fashion retail and insurance industries are studied. The findings demonstrate how entrants engage in early network building by configuring an alliance portfolio with partners unaffected by the disruption. Furthermore, how entrants have used the power of their alliance portfolios to combine social and timing defence mechanisms to manage the interplay with incumbents and guard against dissuading influences is discussed. In Chapter 4, the discussion of the entrant as a strategic actor is extended. Specifically, dynamics involved in developing and growing a multi-sided disruptive platform are investigated. The longitudinal study proposes three mechanisms through which the entrant leverages relationships with its multiple platform sides. 1) ‘Guarded inception’ involves collaboration with a knowledgeable partner unaffected by disruption to overcome the chicken-and-egg problem quickly. 2) ‘Activating force multipliers’ entails the strategic orchestration of complementors contractually tied to the entrant and working to extend the entrant’s value network. Enabled by these two mechanisms, the entrant is 3) ‘building on others’ to develop the platform along a disruptive path while circumventing internal limitations and external resistance. Chapter 5 presents a general model in which relationships are integrated, as has been called for in disruptive innovation debates. According to survey data on German companies, it can be suggested that value proposition innovation activities regarding new offerings and channels fully mediate the relationship between dynamic capabilities and disruptive innovation. This thesis explores under-theorised facets of the disruptive innovation phenomenon while supporting attempts to generalise more established theoretical statements further. In addition to contributing to the construction of a theory of disruptive innovation, the thesis delivers prescriptive guidelines for corporate managers and entrepreneurs on how to manage business model innovation. This work thus paves the way for further studies on disruptive innovation, ultimately fostering this emerging intellectual field.