An increasing number of journalistic articles and academic literature deal with the struggle of established companies to fend off the attacks by industry newcomers such as Airbnb, Spotify, Netflix, Google and many others. These companies enter traditional industries with innovative business models and compete in a manner, which makes it challenging for incumbent firms to understand their novel competition and respond effectively. This study introduces a typology of three stages of industry disruption that classify the newcomer’s developmental stage and describe the incumbent’s competitive position in terms of competition intensity and remaining time to respond. It is demonstrated how incumbents may conduct their strategic reasoning along these stages to arrive at a strategic goal and evaluate possible counter-measures.
Table of Contents
1 Introduction
2 Understanding Competition through Disruptive Business Models
2.1 The Distinctive Features of Disruptive Business Models
2.2 The Three-Stage Model of Industry Disruption
3 Evaluation of Strategic Options along the Three Stages of Industry Disruption
3.1 Strategic Options at the Niche Construction Stage
3.2 Strategic Options in the Niche Overlap
3.3 Strategic Options in the Mainstream Spillover
4 Model Implications, Limitations and Recommendations
5 Conclusion
Objectives and Topics
This paper aims to address the strategic challenges incumbents face when confronted with disruptive business models by designing a comprehensive framework. The primary research goal is to facilitate the anticipation of competitive threats and help traditional firms evaluate their strategic positioning through a typology of industry disruption stages.
- Evolutionary biological principles as an analogy for competitive dynamics
- Typology of three industry disruption stages: Niche Construction, Niche Overlap, and Mainstream Spillover
- Strategic assessment criteria for incumbent firms
- Analysis of incumbent response strategies to disruptive innovation
- Business model innovation as a tool for competitive survival
Excerpt from the Book
2.2 The Three-Stage Model of Industry Disruption
Driven by the extendable core explained above, disruptors like Airbnb and Spotify display a specific growth pattern that is observed in several industries. Skype (communication), Amazon (bookselling), Netflix (television), Uber (car rental), booking.com (travel agencies) and eBay (retail) represent just a tiny fraction of DBMs that currently disrupt traditional industries and all inhibit a similar growth pattern.
As depicted in Figure 1 overleaf, this pattern is translated into a generic model consisting of three developmental stages: Niche Construction, Niche Overlap and Mainstream Spillover. The diagram at hand is designed in correspondence to the assumption that companies employing DBMs represent an entirely new “species”, which cannot be treated as regular competition. It provides a macro-level perspective to gain an overview of the actual competition that takes place between DBMs and TBMs.
The reason for this approach lies in the argument that the entrance of a new species triggers certain competitive effects that must be analysed in more detail. More explicitly, this paper argues that the evolutionary biological concepts of inter- and intra-specific competition (Connell, 1983; Townsend, Begon and Harper, 2008) form an analogy to recent phenomena in the business world and thus offer valuable insights on the competitive dynamics that affect the strategic maneuvers of market incumbents.
Summary of Chapters
1 Introduction: Provides an overview of the challenges established firms face due to digitalization and outlines the study's objective to design a strategic framework based on biological analogies.
2 Understanding Competition through Disruptive Business Models: Defines disruptive business models (DBM) and introduces a three-stage model of industry disruption to categorize the growth and impact of new market entrants.
3 Evaluation of Strategic Options along the Three Stages of Industry Disruption: Analyzes specific strategic response options for incumbents, ranging from establishing entry barriers to business model re-invention across three different stages of disruption.
4 Model Implications, Limitations and Recommendations: Discusses how the proposed model assists in strategic decision-making and acknowledges the limitations and the complexity of implementing dual business models.
5 Conclusion: Summarizes the study's findings, emphasizing that competition with disruptive business models is a continuous strategic process rather than a singular event.
Keywords
Disruptive innovation, business model competition, competitive dynamics, strategy evaluation, inter-species competition, intra-species competition, industry disruption, strategic management, niche construction, niche overlap, mainstream spillover, incumbents, market entrants, business model re-invention, value proposition.
Frequently Asked Questions
What is the core focus of this research?
The study focuses on the challenges established companies face when competing against disruptive business models and provides a framework to anticipate and respond to these threats.
What are the central themes discussed in the paper?
The central themes include business model competition, the dynamics of industry disruption, the strategic adaptation of incumbents, and the application of evolutionary biology concepts to business strategy.
What is the primary research goal?
The goal is to design a strategic framework that facilitates the anticipation of competitive threats and helps traditional firms evaluate their competitive position within a disrupted industry.
Which methodology is used to explain the competition?
The author employs an analogy to evolutionary biological principles, specifically inter-specific and intra-specific competition, to classify the dynamics between established firms and market disruptors.
What does the main body of the paper cover?
The main body covers the definition of disruptive business models, the three-stage model of industry disruption (Niche Construction, Niche Overlap, Mainstream Spillover), and a detailed evaluation of strategic options for incumbents at each stage.
Which keywords best characterize this work?
Key terms include disruptive innovation, competitive dynamics, industry disruption, business model competition, and strategic adaptation.
How does the "Niche Construction" stage differ from "Mainstream Spillover"?
In the Niche Construction stage, competition is low as the disruptor occupies a market periphery, whereas in the Mainstream Spillover stage, the disruptor has expanded, and competitive pressure on the incumbent reaches a critical level.
What role do "extendable cores" play in disruptive success?
An extendable core allows disruptors to scale their operations and improve their value proposition simultaneously, enabling them to move upmarket and compete directly with traditional firms.
What is the significance of the "hockey-stick" expansion in this context?
It represents the exponential growth rate of disruptive business models once they move from the niche construction phase into the mainstream market, drastically reducing the incumbent's time to respond.
What advice does the author give to incumbents regarding business model innovation?
The author suggests that while business model innovation is a powerful tool, it is complex and often requires significant resources, making it an "art" rather than a simple science for incumbent managers.
- Quote paper
- Nils Berkemeyer (Author), 2015, Competing with Disruptive Business Models in Traditional Industries. Conceptualisation of a Strategic Framework, Munich, GRIN Verlag, https://www.grin.com/document/321701
