Breakthrough Innovation Dilemmas: Although Large, Incumbent Firms Have Demonstrated an Ability to Succeed at Breakthrough Technology Innovation, They Too Often Fail at Business-Model Innovation That Requires Them to Move into New Market Spaces. This Group Is Working to Identify the Factors That Make Business-Model Innovation So Difficult for Large Companies
2010; Taylor & Francis; Volume: 53; Issue: 6 Linguagem: Inglês
ISSN
1930-0166
AutoresPeter A. Koen, Heidi M. J. Bertels, Ian Elsum, Mike Orroth, Brenda L. Tollett,
Tópico(s)Private Equity and Venture Capital
ResumoAlthough large, incumbent firms have demonstrated an ability to succeed at breakthrough technology innovation, they too often fail at business-model innovation that requires them to move into new market spaces. This group is working to identify the factors that make business-model innovation so difficult for large companies. While large firms have demonstrated their ability to succeed in breakthrough technology innovations, they have difficulty succeeding with breakthrough business-model innovations. Sony changed the way people listen to music with their Walkman and Discman portable music players, but allowed Apple to take over the MP3 market with the iPod and iTunes; Microsoft made a computer in every home a reality but has ceded the search market to Google; Xerox photocopiers reconfigured the business environment but the company hasn't been able to keep Canon from dominating the small, home-copier market. In each of these cases, the incumbent firms had adequate resources, in-depth market understanding, and the required technical core competencies to extend their domination to new or adjacent markets, but new entrants disrupted them with innovative business models. Many believe that these failures can be explained by Christensen's (1997) model, which explains how disrupters can gain market share through a low-price business model. But none of the disruptions described relied on a low-price business model. This ROR project is exploring why business-model innovation is so difficult for large incumbent firms. We have completed preliminary research, developed a new, unified innovation typology that accounts for the additional factors affecting business-model innovation, and are now engaged in a series of case studies to examine how companies manage the dilemmas that undermine efforts at business-model innovation. A Unified Innovation Typology Current innovation typologies that categorize innovation, for instance, as incremental vs. radical (Wheelright and Clark 1992), sustaining vs. disruptive (Christensen 1997), or exploitative vs. exploratory (March 1991), cannot explain the failure of incumbents to deliver radical innovation in spaces adjacent to their core businesses. These binary definitions classify innovation projects along a one-dimensional continuum, which is inadequate to capture the complex nature of market and technology factors invoked when companies attempt to develop new business models. Working from research in the literature and from our own experience with business-model innovation, the group has developed a new innovation typology (Figure 1) that allows us to distinguish why large incumbent firms have difficulty with new business models. The model, which builds on the work of Christensen and Raynor (2003) and Smith and Tushman (2005), has two dimensions- technology and value network.1 The innovation space is further divided into two areas-sustaining innovation, where large incumbent firms succeed in technology innovation, and business-model innovation, where incumbents often fail. The value network dimension encompasses how a firm identifies, interacts with, and reacts to its customers, suppliers, and competitors. Historically, most descriptions of the innovation space have considered only the newness of the market and the technology (Smith and Tushman 2005). The value network dimension is more comprehensive, embracing the unique relationship that a company builds with both its upstream and downstream channels. Relationships in these channels provide a competitive advantage. A new business model often requires a new value network, which in turn may require a new relationship that has the potential to disrupt existing ones. This new model is guiding our follow-on research, which is exploring how business-model innovation succeeds or fails using a paired case study methodology. Business Model Dilemmas A second current in our preliminary research identified five key dilemmas that companies face in pursuing business- model innovation. …
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