Symmetric Assumptions in the theory of disruptive innovation

In December 2014, I published a paper together with Henrik Berglund and Mats Magnusson, discussing the theoretical assumptions underpinning current theory theory on disruptive innovation. The paper can be read here, below an abstract:

The literature on disruptive innovation has convincingly explained why many established firms encounter problems under conditions of discontinuous change. Incumbents fail to invest in new technologies that are not demanded by their existing customers. This argument is grounded in resource dependency theory and the associated assumption that existing customers control a firm’s internal resource allocation processes. While the problem of disruptive innovation has been convincingly explained, there is still a need for managerial solutions. We argue that a key reason why such solutions are lacking can be found in the asymmetric assumptions made in the original theory of disruptive innovation. Specifically, we identify two related forms of asymmetry. First, the focal (incumbent) firm is treated as a collection of heterogeneous actors with different preferences, incentives and competencies, whereas firms in the surrounding environment are treated as if they contained no such heterogeneity. Second, the theory of disruptive innovation describes incumbents as controlled by their environment, but has failed to recognize that the environment can also be influenced. In this paper we argue that a more symmetric theory of disruptive innovation – i.e. one that treats all similar entities in the same way – opens up for a range of interesting managerial solutions.

Seminar on Disruptive innovation and Nokia at Francisco Marroquin University in Guatemala

Today I had the opportunity to present some preliminary research to professors at Francisco Marroquin University (UFM). Among other things, UFM has a great reputation for its openness and interest in evolutionary perspectives on markets.

The seminar concerned the decline of Nokia and its implications for theory development. The overall argument I brought forward is related to the introduction of smartphones and how Nokia’s struggle in recent years can be explained. Preliminary findings suggest that while smartphones were highly appreciated by consumers, operators were more skeptical as it would erode their position in the supply chain. Nokia was therefore put in an awkward position where they had to cater to demands of operators. Apple, on the other hand, was an entrant firm and could therefore push the introduction of smartphones. As consumers adopted it quickly, operators were now progressively forced to also do so, leaving Nokia behind.

The main theoretical implication of these findings is related to the observation that whether a technology is disruptive or not depends on which actor that is concerned. In the case of smartphones, it was disruptive to operators, but sustaining to consumers. Such heterogeneity in terms of incentives has largely been overlooked by existing theory on the topic.

The following discussion concerned Nokia’s decline and how markets can be conceptualized from an Austrian perspective. Strategic implications for universities dealing with the ongoing shift to online education were also covered.

Having heard that UFM has a unique culture, I was nevertheless overwhelmed by the hospitality, intellectual curiosity and friendly atmosphere surrounding the seminar. UFM is a fantastic institution.

For more information, see the slides below:
Nokia’s Decline and disruptive technologies

Francisco Marroquin University