When is a disruptive innovation disruptive pdf

The second axis emphasizes modification of the value chain; this axis, less explored in work on disruptive innovation, requires in-depth knowledge of how the business operates. The principle is to rethink the value chain in the broad sense, including partners.

This approach can result either in carrying out a step in the value chain differently radically modifying its mode of production or distribution or in reorganizing these steps, or even by removing or adding some Lehmann-Ortega et al.

We could cite the example of companies that have radically changed their mode of distribution by turning to digital. The literature has also examined the reasons that encourage companies to take the initiative of disruptive innovative see Christensen et al.

However, to be efficient in these contexts, companies must be able to trigger disruptive actions Hughes-Morgan et al. The innovative firm would be better motivated and more willing to mitigate the risk of being relegated to a disadvantage position by a dissimilar rival. The creation of such a disruptive dynamic has been addressed among others by authors including in particular Nadkarni, Pan, and Chen ; Le and Lei ; and Pancaningrum, Sukoco, and Ratmawati According to these authors, it is recommended that companies be the first to take roundabout paths and not hesitate to distort the rules of the game, by leading their organization towards virgin territories, putting up to date with new technologies, products, and markets.

Such differences across passivity and disturbance pinpoint the value of studying disruptive innovations in the context of dynamic environment in addition to the traditional disruptive innovation research. The editorial of a recent special issue on disruptive innovation corroborates this assessment as it reflects on the state of the literature:. The establishment and diffusion of disruptive technologies in markets are mainly driven by incumbent large firms with a strong market power.

However, small entrant firms can generate radical innovations but they have to cope with high economic resources needed for developing new technology cf. Caner et al. This financial issue explains the strategic alliances and partnerships between some incumbent and entrant firms to develop disruptive technologies. These collaborations mark a new phase in business development of innovations. Coccia, : The intensity of competitive movement dynamics incites all competitors to adopt a disruptive innovation.

Figure 1 presents the market share of the five companies. Market share of the five companies. Source: prepared from the internal documents pertaining to the five companies. Regarding the field of study, as our initial idea is to activate our research object in a context where competition is fierce, we chose the fresh dairy product sector FDP in Algeria and particularly the yoghurt industry because this sector is characterized by strong competitive dynamics, and it includes operators with different competitive positions: leaders, challengers, and followers cf.

These firms are either already established in the area or are new entrants, and thereby, this sector presents a context particularly rich in terms of lessons that may be drawn from the dynamics of strategic postures among the existing firms and the new actors. Regarding the selected industry players, we have decided to conduct our study on companies that dominate the yoghurt sector. Thus, five 5 case studies were identified to conduct our research, as Table 1 shows.

Table 1 presents the five main actors in the yoghurt sector in Algeria. The choice of research method focused on exploratory study, structured around case studies. Several criteria associated with our research justify the interest in retaining this methodological option. Then, according to the work of Roy , it is one of grasping a dynamic phenomenon that of understanding the dynamics of competitive movements, and the case study appears to be an appropriate search strategy.

Our interviews took place between 8 September and 12 June They lasted on average an hour and a half. We have several categories of respondents: the informants in the company who are only the directors of various functions production process manager, health, safety, and environment manager; director of human resources; head of raw milk collection; director of research and development; sales analysis department manager, etc.

The nature of the questions of our research requires focusing exclusively on directors. We have also conducted interviews with external partners of the companies suppliers, etc.

The same person might be interviewed many times with different questions; these questions are determined in the development of our interviews. Interviews were recorded and fully transcribed. The data collected were analyzed manually without any software and have given rise to identification codes, themes, and categories.

The focus in the initial step is placed on open coding the interview to discern common terms or labels the respondents provided in relation to the dynamic context and disruptive innovation. In the next step, we began to identify links within the categories in order to bring out the divergence and convergence between the five case studies in terms of the new innovation applicable in different services.

The final step involved generating general illustrative conclusions that connect data and codes at a higher level of abstraction. These interviews enabled us to collect information as well as qualitative and quantitative data. Data analysis focuses mainly on the period — The choice for the interviewees was essentially to concentrate on the key people in the company, and most of the interviews were realized with all the heads of the companies studied.

This section has two sub-sections. In the first, we discuss the key disruptive innovation applications that have driven change in the FDP sector. In the second sub-section, we present the intersection of the FDP disruptive innovation with the competitive dynamics roadmap based on a longitudinal perspective.

Processing of our data shows that the current market leader is very aggressive, as it was it which initiated several radical actions in the sector. It created the disruptive event Withers et al. Thanks to this strategic policy initiative, Soummam created instability Pancaningrum et al. Insofar as the strategic choices of the market leader affect all actors, all the companies in the FDP industry were obliged to follow the rhythm of aggression and rivalry.

Indeed, our empirical research shows that DDA, Hodna, and Ramdy have all taken aggressive postures through innovative disruption. Following this radical change in the product value, DDA as a challenger has maneuvered to dominance, prevailing in the sector by imposing its own rules. The product is ranked first in sales, with more than 3 billion dinars cf.

The main sales by product of DDA in Figure 2 presents the main sales by product of DDA in Following this disruptive innovation, Hodna benefited from its preemption of the market associated with the new value proposition to customers Withers et al. Figure 3 presents the evolution profit over time of Ramdy firm in DA.. Evolution profit over time of Ramdy firm in DA. Third, Ramdy is the second new entrant to penetrate the yoghurt market.

Footnote 2 As a result of this strategic disruptive innovation, Ramdy upsets the established order by creating a new segment where it is the only company on the national level to make the fruit yoghurt and yoghurt mini-price.

That enabled it to benefit from a regeneration activity and an extension of the potential market of the yoghurt cup Alsharif, ; Williamson and al. To this first series of aggressive actions is added another national initiative, this time concerning the commercial variable. DDA has disrupted the rules of the competitive game to its advantage thanks to the radical change in its value chain, choosing the link of marketing and distribution as a new competitive avenue.

It managed to create an imbalance by rationalizing its commercial resources Soummam uses triple of those of DDA. Table 2 explains this tactic, by showing empirical example of innovative disruption led by DDA via the marketing and distribution link in the value chain. Indeed, although it is the oldest company in the sector, it did not take initiatives to innovate and disrupt the competitive game.

This was a company that followed the market; it simply reacted to the actions of competitors, imitating what was already on the market, either in terms of customer value or its value architecture.

The lack of aggression, and therefore of disruptive innovation, led to a complete decline for the company, as highlighted in the Fig. The company was the subject of aggressive maneuvers, and as a result, it lost its leading position, overtaken by recent competitors in the sector. The intensity competition concerns numerous companies and sectors in the world and specifically in Algeria Arabeche, The development of dynamic competition through the emergence of thousands of start-ups in the FDP sector has brought significant changes to this industry.

We find evidence that a dynamic competition, as it emerges, has a systematic and hard-hitting impact on all companies in the sector. Specifically, with the passage of Algeria to a market economy, the dairy sector has experienced increasing competitive intensity due to several factors, which are as follows:. The emergence of a dynamic fabric of private companies that have invested heavily in milk production and dairy products.

The increase of the overall consumption of yoghurt in Algeria amounted to A development of competitive intensity can also attract greater talent and generate more business ideas, leading to the growth of opportunities in a variety of the sectors including new products, radical processes, attractive services, and new subsectors.

The competitive dynamics created three stages of disruptive innovation. One example is the introduction of new preparations with new ingredients in the entire fresh dairy product to offer new products.

These actions have allowed the enrichment of products which has resulted in an enlargement of customer choice and has allowed incumbent firms to use existing complementary capabilities such as their salesforce and brand value. In this period, there are few new ventures, and financial support for the new ventures tends to be limited.

These innovations are largely driven by adaptation and exploitation by the new ventures. The increasing volume of radical change has led to a new trend in consumption mode whereby traditional consumption patterns have been replaced, in which dairy products have become an essential element in the quotidian diet of the consumer.

But on the other side of the coin, the industry landscape in this particular stage tends to be highly disrupted, uncertain, and extremely aggressive. The third stage —until now is industry resilience and the very prominent role of new entrants that take over and reshapes the industry, where incumbents face the risk of being replaced. During this stage, the industry is transformed with incumbent firms confronted with diminishing influence and new ventures exerting increasing influence.

With the accelerating pace of radical innovation, there is a high degree of product quality and efficiency improvements in processes that saves time and money. Many previously unique and high-value-added products disappear, and new kinds of customer needs emerge. With increasing customer maturity and adaptation to new offers more practical to wear and consume, customers start to seek new kinds of products such as highly customized offerings as organic fresh dairy products or Bifidus yoghurt.

However, with intelligent distribution policy, many new ventures are able to grow and dominate. The studies in this field have searched for how disruptive firms impact existing incumbents via disruptive actions, whether in products, business models or processes, or exploring and applying a radical strategy in the market for a review see Christensen et al.

This omission is the focus of this research paper. Such a view provides a larger picture of systemic impact. Previous research has neglected the link between disruptive innovation and competitive dynamics and the broader effect of competitive intensity that pushed companies to pursue disruptive innovation in industry or product domains.

An understanding of the underlying dynamic context where disruptive innovation occurs could help the research community to interpret and analyze the competition conditions that promote a different value proposition for incumbent companies and new entrants Christensen et al.

In this context, we maintain that existing researches have overemphasized the impact of disruptive innovation companies compared to the impact of disruptive innovation in a dynamic context.

This omission has been treated by our study by exploring the link between disruptive innovation and competitive dynamics. We maintain that a comprehension of this link is important for the research of disruptive innovation.

We define the link and outline how it occurs through an empirical study of the global fresh dairy product sector that has transformed and outcompeted an entire sector of incumbents and new entrants. Ultimately, the aim of this paper is to discuss how the link of dynamic competition and disruptive innovation contribute to the study of disruptive innovation and the growing stream of dynamic competition research.

As the importance of dynamic competition for disruptive innovation multiplies, the knowledge gaps that persist become increasingly detrimental and inhibiting. For this reason, we focused specifically on strategic behavior in the FDP sector in Algeria. Indeed, this competitive context involves a multiplicity of companies, whether national or multinational, which led to the growth in competitiveness, and the appearance of disruptive innovation, of the rules of the competitive game.

The longitudinal study conducted in this sector between and offers two principal contributions:. First, increased competition leads companies to redefine the status quo, and this strategic choice is imposed on all businesses. From this perspective, disruptive innovation, which is part of this vision, is a source of competitive advantage. A posteriori, first, the performance of the four aggressive operators, namely, Soummam, DDA, Hodna, and Ramdy, during the study timeframe, is explained by the adoption of this behavior, which allowed these players to be leaders in the segment where the disturbance occurred.

This strategy is, indeed, of great interest, both for existing actors as the case of Soummam and DDA and for new actors like Ramdy and Hodna if we consider the gains earned for the two types of actors. It has enjoyed a significant performance gap over its competitors, despite the presence of multinational firms in the sector. This confirms the performance of innovative disruption see Fig. Evolution of turnover and profit growth of four companies from to Source: established by authors from the data collected from the managers of the 5 companies.

Figure 5 shows the evolution of turnover and profit growth of four companies from to The object of the reflexion being undertaken is disruptive innovation and particularly by demonstrating its performance as a vital strategic choice in a highly competitive dynamics context.

With this in mind and observing retrospectively competitive behavior carried by the operators in the sector and their implications during the period under review, it should be noted that disruptive innovation has become a vital strategic option for existing actors and for new entrants. Our results reinforce therefore the idea that actors have an interest to take part actively in the transgression of the rules of the competitive game and the referents associated with them Chen et al.

The quest of inertia, prescribed by Porter , lies here somewhat challenged by the behavior of operators over the study period. Table 3 presents a synthesis of foundation of the innovative disruption and implication at the level of 5 case studies.

The theoretical value of this study lies in its originality, in the fact that this research unites two themes, which have never been considered jointly before, namely: competitive dynamics and disruptive innovation. The theoretical implications.

These contributions contribute clearly to enrich the theoretical repertoire. For the managerial contribution, this research answers to the lack of a reference on which the managers can rely on, to the extent that the traditional models are still static and aggregated. Thanks to the in-depth work in the theoretical and practical parts, the strategic perturbation was explained in a clear and complete manner and applied in the five case studies.

The practical implications. In fact our research highlights the competitive dynamics that reigns in the yoghurt sector with detailed analysis of strategic actions taken by the firms. Finally, we hope that this work opens the way to other researchers in order to further study the intersection of competitive dynamics and innovative disruption. As in any research endeavor of this nature, certain limitations should be noted.

First, as our study is in an exploratory stage, competitive dynamics and innovative disruption bear significant theoretical implications and great potential of contributing to the literature.

Future research is encouraged to conduct in-depth investigations of the dynamic and historical dimensions of innovative disruption. Furthermore, we believe that findings from the yoghurt industry case will have generalizability in settings where a government does not take any intervention in the market. However, differences in the terms of the competitive dynamics between organizations in emerging economies and developed economies should certainly be noticed.

We encourage future research to test the generalizability of the findings in other research contexts, particularly those where there is free competition, whether in developed economies or emerging economies. Finally, since this study is solely based on data from one industry, we did not have a large enough sample to statistically test the proposition. Future empirical research might collect data on multiple industries as quantitative evidence.

At a time that is simultaneously characterized by the emergence of competitive context and by a growing number of disruptions, little attention has been paid in the literature to the impact of competitive dynamics in the emergence and development of disruptive innovations.

To overcome the consequent limitation in our knowledge, this current study has developed the link of disruptive innovation in a competitive context and has illustrated this intersection using the example of the disruption in the competitive fresh dairy product sector.

We further indicate some avenues for future research on disruptive innovations and competitive dynamics. Generally, preliminary conclusions have been presented for our research but encouraging support for the idea that disruptive innovation in competitive contexts merit more consideration. We wish that our insights inspire researchers to undertake further theoretical and empirical work at the intersection of disruptive innovation and the competitive dynamics.

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Arthur, K. Puplampu Eds. International Political Economy Series. Palgrave Macmillan: Cham. Hughes-Morgan, M. This article is part of an effort to capture the state of the art. We begin by exploring the basic tenets of disruptive innovation and examining whether they apply to Uber.

We go on to trace major turning points in the evolution of our thinking and make the case that what we have learned allows us to more accurately predict which businesses will grow. Specifically, as incumbents focus on improving their products and services for their most demanding and usually most profitable customers, they exceed the needs of some segments and ignore the needs of others.

Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price.

Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Founded in , the company has enjoyed fantastic growth it operates in hundreds of cities in 60 countries and is still expanding. Uber is clearly transforming the taxi business in the United States. But is it disrupting the taxi business?

According to the theory, the answer is no. Disruptive innovations are made possible because they get started in two types of markets that incumbents overlook. Low-end footholds exist because incumbents typically try to provide their most profitable and demanding customers with ever-improving products and services, and they pay less attention to less-demanding customers.

In the case of new-market footholds, disrupters create a market where none existed. Put simply, they find a way to turn nonconsumers into consumers. For example, in the early days of photocopying technology, Xerox targeted large corporations and charged high prices in order to provide the performance that those customers required.

School librarians, bowling-league operators, and other small customers, priced out of the market, made do with carbon paper or mimeograph machines. Then in the late s, new challengers introduced personal copiers, offering an affordable solution to individuals and small organizations—and a new market was created. From this relatively modest beginning, personal photocopier makers gradually built a major position in the mainstream photocopier market that Xerox valued.

A disruptive innovation, by definition, starts from one of those two footholds. But Uber did not originate in either one. It is difficult to claim that the company found a low-end opportunity: That would have meant taxi service providers had overshot the needs of a material number of customers by making cabs too plentiful, too easy to use, and too clean. But disrupters start by appealing to low-end or unserved consumers and then migrate to the mainstream market.

Uber has gone in exactly the opposite direction: building a position in the mainstream market first and subsequently appealing to historically overlooked segments. These improvements can be incremental advances or major breakthroughs, but they all enable firms to sell more products to their most profitable customers.

Typically, customers are not willing to switch to the new offering merely because it is less expensive. Instead, they wait until its quality rises enough to satisfy them. This is how disruption drives prices down in a market. Booking a ride requires just a few taps on a smartphone; payment is cashless and convenient; and passengers can rate their rides afterward, which helps ensure high standards. Furthermore, Uber delivers service reliably and punctually, and its pricing is usually competitive with or lower than that of established taxi services.

And as is typical when incumbents face threats from sustaining innovations, many of the taxi companies are motivated to respond. Readers may still be wondering, Why does it matter what words we use to describe Uber?

Applying the theory correctly is essential to realizing its benefits. For example, small competitors that nibble away at the periphery of your business very likely should be ignored—unless they are on a disruptive trajectory, in which case they are a potentially mortal threat. And both of these challenges are fundamentally different from efforts by competitors to woo your bread-and-butter customers. As the example of Uber shows, identifying true disruptive innovation is tricky.

Yet even executives with a good understanding of disruption theory tend to forget some of its subtler aspects when making strategic decisions. The first minicomputers were disruptive not merely because they were low-end upstarts when they appeared on the scene, nor because they were later heralded as superior to mainframes in many markets; they were disruptive by virtue of the path they followed from the fringe to the mainstream.

Most every innovation—disruptive or not—begins life as a small-scale experiment. Disrupters tend to focus on getting the business model, rather than merely the product, just right.

This process can take time, and incumbents can get quite creative in the defense of their established franchises. For example, more than 50 years after the first discount department store was opened, mainstream retail companies still operate their traditional department-store formats. Complete substitution, if it comes at all, may take decades, because the incremental profit from staying with the old model for one more year trumps proposals to write off the assets in one stroke.

The fact that disruption can take time helps to explain why incumbents frequently overlook disrupters. Netflix had an exclusively online interface and a large inventory of movies, but delivery through the U. Because disruption can take time, incumbents frequently overlook disrupters.

And it got there via a classically disruptive path. But failing to respond effectively to the trajectory that Netflix was on led Blockbuster to collapse. Consider the health care industry. The product that Apple debuted in was a sustaining innovation in the smartphone market: It targeted the same customers coveted by incumbents, and its initial success is likely explained by product superiority. This was achieved not merely through product improvements but also through the introduction of a new business model.

By building a facilitated network connecting application developers with phone users, Apple changed the game. A third common mistake is to focus on the results achieved—to claim that a company is disruptive by virtue of its success. But success is not built into the definition of disruption: Not every disruptive path leads to a triumph, and not every triumphant newcomer follows a disruptive path. For example, any number of internet-based retailers pursued disruptive paths in the late s, but only a small number prospered.

The theory says very little about how to win in the foothold market, other than to play the odds and avoid head-on competition with better-resourced incumbents. This creates a danger: Managers may mix and match behaviors that are very likely inconsistent with one another and thus unlikely to yield the hoped-for result. But Uber, true to its nature as a sustaining innovation, has focused on expanding its network and functionality in ways that make it better than traditional taxis.

Apple, on the other hand, has followed a disruptive path by building its ecosystem of app developers so as to make the iPhone more like a personal computer. Instead, they should continue to strengthen relationships with core customers by investing in sustaining innovations.

In addition, they can create a new division focused solely on the growth opportunities that arise from the disruption. Our research suggests that the success of this new enterprise depends in large part on keeping it separate from the core business.

That means that for some time, incumbents will find themselves managing two very different operations. Of course, as the disruptive stand-alone business grows, it may eventually steal customers from the core. But corporate leaders should not try to solve this problem before it is a problem. It is rare that a technology or product is inherently sustaining or disruptive.

And when new technology is developed, disruption theory does not dictate what managers should do. Instead it helps them make a strategic choice between taking a sustaining path and taking a disruptive one. The theory of disruption predicts that when an entrant tackles incumbent competitors head-on, offering better products or services, the incumbents will accelerate their innovations to defend their business. Either they will beat back the entrant by offering even better services or products at comparable prices, or one of them will acquire the entrant.

When new technology arises, disruption theory can guide strategic choices. According to disruption theory, Uber is an outlier, and we do not have a universal way to account for such atypical outcomes. Market entry and prices are closely controlled in many jurisdictions. Consequently, taxi companies have rarely innovated. Individual drivers have few ways to innovate, except to defect to Uber.

So Uber is in a unique situation relative to taxis: It can offer better quality and the competition will find it hard to respond, at least in the short term.

This lower price imposes some compromises, as UberSELECT currently does not include one defining feature of the leading incumbents in this market: acceptance of advance reservations. Consequently, this offering from Uber appeals to the low end of the limousine service market: customers willing to sacrifice a measure of convenience for monetary savings.