Archetypes of incumbents’ strategic responses to digital innovation
| DOI | https://doi.org/10.1108/JIC-04-2019-0065 |
| Pages | 662-679 |
| Date | 24 September 2019 |
| Published date | 24 September 2019 |
| Author | Beatrice D’Ippolito,Antonio Messeni Petruzzelli,Umberto Panniello |
| Subject Matter | Information & knowledge management |
Archetypes of incumbents’
strategic responses to
digital innovation
Beatrice D’Ippolito
The York Management School, University of York, York, UK, and
Antonio Messeni Petruzzelli and Umberto Panniello
Polytechnic University of Bari, Bari, Italy
Abstract
Purpose –The purpose of this paper is to explore how incumbents adapt their business models in response
to digital innovation whose impact is either incremental or radical and source industry is either their own
industry or other industries. The authors propose a conceptual matrix that is built on these two dimensions.
Design/methodology/approach –The authors build examples of four multinational incumbentsoperating
in different sectors and known for their forefront approach to digital innovation to populate the matrix. Cases
were chosen because of their polar nature that could provide variation in the two dimensions. The authors
draw on a variety of qualitative secondary data sources to build the cases.
Findings –The study reveals how incumbents’response to digital technologies (DTs) may differ depending
on the resources or assets (including knowledge-based ones) that need mobilising. Business model changes
and innovations may require full reconfiguration of a firm’s activity system; hence, one business model may
be preferred to others depending on how burdensome the reconfiguration process will be.
Research limitations/implications –As the study is exploratory in nature, the anecdotal evidence
provided in the paper are only some of the possible strategic responses of firms. Future studies may further
into the dimensions the authors identified by empirically testing their validity with primary data.
Practical implications –The research offers managers and executives of incumbent firms a clear
indication as to which elements of their business model ought to be adapted given the opportunities as well as
the challenges brought about by DTs.
Originality/value –This research has explored incumbents’response to DTs by primarily focusing on the
nature and source industry of the underpinning innovation, besides any consideration of the drivers or
processes that may lead to business model change.
Keywords Business model innovation, Strategic response, Digital innovation,
Incremental and radical innovation, Incumbents
Paper type Research paper
1. Introduction
This paper exploreshow incumbents adapt their businessmodels when dealing with a digital
innovationthe impact of which is either incrementalor radical and that may come from either
their own industry or indeed other industries. Digital technologies (DTs hereafter) have
disrupted companies for over a decade, driving changes of industrial and organisational
activities, as well as of the underlying processes, competencies and intellectual capital
strategies(Rindfleisch et al., 2017; Nickersonand Silverman, 1997).Despite the breadth of DTs,
one of the main challenges rests on exploring how these technologies are transforming
organisations.Firms are facing strong competitionfrom direct competitors who mayopt for a
low-cost strategyor competitors from other sectors that rely onnew or different technologies
and/or business models (Markides, 2015; Teece, 2010; Tongur and Engwall, 2014).
Traditionally, firms tend to either converge towards the disruptor by providing low-cost
or technologically advanced products and services or diverge from the competition by
trying to create more or better value for their customers, for instance by providing
additional services (Cusumano et al., 2015; Saebi et al., 2017). However, DTs are not only
encouraging firms to experiment with the technology different pathways for value creation,
Journal of Intellectual Capital
Vol. 20 No. 5, 2019
pp. 662-679
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-04-2019-0065
Received 3 April 2019
Revised 10 July 2019
Accepted 1 August 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
662
JIC
20,5
but can also facilitate firms’efforts to experiment around the technology, in order to shape
the role that the various actors along the value network play in influencing the
commercialisation of an innovation (Chesbrough and Rosenbloom, 2002). Because these
changes are often invisible to the outside world, changing the business model can bring
advantages that are hard to copy (Girotra and Netessine, 2014), which often results in firms
redesigning their strategies. In particular, we argue that the firm’s intellectual capital can be
instrumental to the generation of new value (Sullivan, 1999) or the processes of running new
businesses (Nickerson and Silverman, 1997); therefore, firms’effort to tackle digital
disruption may as well entail a redefinition of their knowledge management strategies
(Buenechea-Elberdin et al., 2018; Cabrilo and Dahms, 2018).
This research takes on a strategic perspective to examine the impact of digital innovation
on business models.A business model is hereby conceivedas the set of choices made by firms
to create valuevia customer engagement and appropriate the subsequentoutcomes (Zott et al.,
2011). Because it describes the way firms organise their business, it is inherently subject to
change over time and indifferent directions (Amit and Zott, 2001). We focus our research on
incumbents in order to explore how firms mobilise their existing resources, capabilities and
intellectual capital, altering their business models, to handle external competitive forces of
different nature. In order to do so, we propose a conceptual matrix that characterises digital
innovation along two dimensions: the extent to which the impact of the digital technology is
incrementalor radical and whether the industryof origin of the digital technology is thesame
or a differentone from the focal firm. The former dimensionis indicative of the extent to which
the firm has to incrementally or radically adapt its internal resources and capabilities in
response to the given DT (Christensen,2002). The latter dimension is indicative of the nature
of the competition (direct vs indirect) and of the distance between the new DT and the
technologicalpath of the focal firm, providing furtherinsight on the firms’adaptation process
(Snihur and Zott, 2013). We complement the above theoretical development with illustrative
examples offour multinational incumbentsthat operate in different sectorsand are known for
their forefront approach to embracing digital technological innovation. We propose four
archetypes of strategic responsesdepending on the nature of the innovation –incremental vs
radical –underpinning a given digital technology. By drawing attention to this interplay
between the natureof (digital) innovation and firms’strategic decisionabout how to innovate
their business model, we maintain that our results contribute ongoing debates within the
business model scholarship by bridging the gap between what we understand the impact of
digital technologies being and the broader strategic remit of firms.
The rest of the paper is organised as follows. In Section 2, we review the main literature
on DTs, on the dynamics of business model innovation, and on the incumbents’response to
technological innovation. In Section 3, we present a series of archetypes of firms’responses
to digital innovation through four illustrative case studies. Finally, Section 4 illustrates the
main implications, limitations of our work and avenues for future research.
2. Theoretical background
In this section, we review the main literature on digital technologies and their impact on
business models. In particular, we discuss prior works on incumbents’response to different
types of technological innovation.
2.1 Digital technologies and the dynamics of business model innovation
The disruptive effect of DTs on firms’processes and competencies (see Petzold et al., 2019,
for a literature review on disruptive innovation) as well as the changes that these
technologies drive on industrial and organisational activities has recently received growing
academic interests. DTs include a vast set of technologies, such as the Internet of Things
(IoT), Additive Manufacturing, Big Data, Artificial Intelligence, Clou d Computing,
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Incumbents’
strategic
responses
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