doi: 10.1111/j.1468-2370.2009.00272.x a reﬂective review ... · the review of disruptive...

A reflective review ofDisruptive InnovationTheoryijmr_272 1..21

Dan Yu and Chang Chieh HangDisruptive Innovation Theory has created a significant impact on management practices andaroused plenty of rich debate within academia. Copious as the studies are, the scattered andconflicting nature of the literature on disruptive innovation in the last decade may pose a stateof ambiguity for future research, thus necessitating a comprehensive review at this juncture.This paper first clarifies the basic concept and potential misinterpretations of the theory.Believing in the predictive value of the theory on firm performance, the authors thensummarize and critique the research on how to enable potential disruptive innovation frominternal, external, marketing and technology perspectives. The different perspectives inspiredthe authors to identify a number of key research directions within the disruptive innovationresearch domain. Potential future research is also briefly discussed by integrating disruptiveinnovation with other research domains, such as open innovation. Finally, in addition totheoretical contributions, the authors make practical contributions by outlining a series ofpotential inhibitors and enablers of disruptive innovation as managerial ‘take-aways’.

Introduction

One type of technological innovation emergingas strategically important in practice is Dis-ruptive Innovation Theory, popularized byChristensen (1997). Disruptive innovation is apowerful means of broadening and developingnew markets and providing new functionality,which, in turn, may disrupt existing marketlinkages (Adner 2006; Charitou and Markides2003; Christensen 1997; Christensen andBower 1996; Christensen and Raynor 2003;Danneels 2004; Gillbert 2003; Govindarajanand Kopalle 2006). The theory has created asignificant impact on management practicesand aroused plenty of rich debate within aca-demia. Two prominent journals in technologymanagement research, namely the Journal of

Product Innovation Management1 and theIEEE Transactions on Engineering Manage-ment,2 have organized special issues for topicsassociated with disruptive innovation. Copiousas the studies are, the scattered and conflictingnature of the literature on disruptive innovationin the last decade may pose a state of ambigu-ity for future research, thus necessitating acomprehensive review at this juncture.

This paper aims to (1) clarify the concept ofdisruptive innovation and some common mis-interpretations; (2) evaluate the theoretical andempirical developments of Disruptive Innova-tion Theory in order to identify the researchgaps to be addressed in the future; (3) propose aseries of potential inhibitors and subsequentenablers of disruptive innovations as manage-rial ‘take-aways’.

International Journal of Management Reviews (2009)doi: 10.1111/j.1468-2370.2009.00272.x

© 2009 The AuthorsJournal compilation © 2009 Blackwell Publishing Ltd and British Academy of Management. Published by Blackwell Publishing Ltd,9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

International Journal of Management Reviews Volume •• Issue •• pp. ••–•• 1

The review of Disruptive Innovation Theoryis structured by three major themes in thispaper. The first theme is the research on ‘whatis disruptive innovation’, including the evolu-tion and description of the theory and theactual definition of disruptive innovation. Thesecond theme discusses the predictive value ofthe theory. The last theme summarizes the con-tributions on how to enable a disruptive inno-vation from various angles such as internal vsexternal, and marketing vs technology. A seriesof potential inhibitors and enablers of creatinga disruptive innovation are identified based onthe discussion of the last theme.

Evolution and Description ofDisruptive Innovation

Disruptive Innovation Theory, advanced byChristensen (1997, 2006; Christensen andBower 1996; Christensen and Raynor 2003),was built up based on a series of previous tech-nological innovation studies (Figure 1). In1997, Christensen published his influential

book entitled The Innovator’s Dilemma, whichmade him renowned in the study of technologi-cal innovation in commercial enterprises. Thebook, which became a bestseller at that time,articulated the basic theory of disruptive tech-nology in a comprehensive and detailedmanner.

Disruptive innovation happens in a process.According to Christensen, disruptive technolo-gies are technologies that provide differentvalues from mainstream technologies and areinitially inferior to mainstream technologiesalong the dimensions of performance that aremost important to mainstream customers. Heintroduces the important aspects of changingperformance with time, plots the trajectoriesof product performance provided by firmsand demanded by customers for different tech-nologies and market segments, and showsthat technology disruptions occur when thesetrajectories intersect (Figure 2). In its earlydevelopment stage, each product based on acertain disruptive technology could only serveniche segments that value its non-standard per-

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Figure 1. Timeline of evolution of Disruptive Innovation Theory.11

A reflective review of Disruptive Innovation Theory

2 © 2009 The AuthorsJournal compilation © 2009 Blackwell Publishing Ltd and British Academy of Management

formance attributes. Subsequently, furtherdevelopment could raise the disruptive tech-nology’s performance on the focal mainstreamattributes to a level sufficient to satisfy main-stream customers. While improved, the perfor-mance of the disruptive technology remainsinferior compared with the performanceoffered by the established mainstream technol-ogy, which itself is improving as well. In fact,the performance of the mainstream technologycould have exceeded the demand of main-stream customers, resulting in ‘performanceovershoot’ with over-served customers. Themarket disruption occurs when, despite itsinferior performance on focal attributes valuedby existing customers, the new product dis-places the mainstream product in the main-stream market. There are two preconditions forsuch a market disruption to occur: performanceovershoot on the focal mainstream attributes ofthe existing product, and asymmetric incen-tives between existing healthy business andpotential disruptive business. Christensendocumented these technology and marketdynamics in numerous contexts such as harddisk drives, earthmoving equipment and motorcontrols.

In order to resolve the innovator’s dilemmaover how well-managed incumbent firms canavoid dethronement by developing disruptivetechnologies from their sustaining competitiveparadigms, Christensen and Raynor (2003)

published another book entitled The Innova-tor’s Solution. In this book, they replaced dis-ruptive technology with the term ‘disruptiveinnovation’, because they widened the applica-tion of the theory to include not only techno-logical products, but also services and businessmodels innovation, such as discount depart-ment stores, low-price, point-to-point airlinesand online businesses education. Markides(2006) further argued that technological inno-vations were fundamentally different frombusiness model innovations, and he called for afiner categorization within disruptive innova-tion. We also believe that disruptive innovationis a more appropriate term than disruptive tech-nology to describe the entire phenomenon, asbusiness models innovations are heavilyinvolved. Moreover, Christensen refined histheory and emphasized that disruptive innova-tions could be broadly classified into low-endand new-market disruptive innovations (Chris-tensen and Raynor 2003). While low-enddisruptions are those that attack the least-profitable and most over-served customers atthe low end of the original value network, new-market disruptions create a new value network,where it is the non-consumption, not theincumbent, which must be overcome (Chris-tensen and Raynor 2003).

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3© 2009 The AuthorsJournal compilation © 2009 Blackwell Publishing Ltd and British Academy of Management

of management research have generated moreand more critiques, doubts and challenges con-cerning Disruptive Innovation Theory, particu-larly on the fundamental question of what thedisruptive technology actually is.

Definition of Disruptive Innovation

Mainstream studies divide technological inno-vations into two types, but use different termi-nologies for different stages in history. Thereare two general classes of technologies: (1)revolutionary, discontinuous, breakthrough,radical, emergent or step-function technolo-gies; (2) evolutionary, continuous, incrementalor ‘nuts and bolts’ technologies (Florida andKenney 1990; Morone 1993; Utterback 1994).Each categorization serves to explain certainphenomena but suffers from anomalies of itsown. For example, the famous classificationusing competency-enhancing innovations vscompetency-destroying innovations was estab-lished from the company perspective, whichcould explain the success of incumbent firms inthe face of breakthrough innovation, thus con-tradicting the widely accepted statement thatestablished companies tend to do well only inincremental innovation but falter in the face ofbreakthrough innovation (Tushman and Ander-son 1986). The subsequent notable work ofmodular vs architectural innovation (Hender-son and Clark 1990) could further explain whygreat firms fail in the core technological inno-vations, as companies with strong competencesin component technologies might ignore thecompetitive implications of the architecturechanges. Hence, the architectural innovationtheory explained an anomaly that competency-enhancing or destroying theory could notadequately account for. In the same vein, it wasthe anomaly of the hard disk drive industry inrecent decades, which could not be adequatelyexplained by previous research, that motivatedChristensen to develop Disruptive InnovationTheory and to classify innovations as sustain-ing vs disruptive.

In terms of the definition and scope of dis-ruptive technology, a very heated discussion

has been triggered (e.g. Adner 2002; Bennerand Tushman 2003; Bower and Christensen1995; Chesbrough 2001; Christensen andRaynor 2003; Danneels 2004; Gillbert 2003;Govindarajan and Kopalle 2004, 2006; Hend-erson 2006; Husig et al. 2005; Markides 1998,2006; Paap and Katz 2004; Tellis 2006). Someresearchers were supporters of Christensen, ingeneral, but proposed their own slightly differ-ent views. For example, Adner (2002) identi-fied that a critical reason for the switch ofconsumer choices from sustaining to disruptiveinnovation was the decreasing marginal utilityfrom the performance improvements in majordimensions, in addition to the new valuepropositions and affordable prices discussedby Christensen. Meanwhile, others criticizedthe vagueness of the concept of disruptiveinnovation. Danneels (2004) suggested thatseveral authors seemed to think that Chris-tensen did not provide a precise and consistentdefinition of the term disruptive technology.Tellis (2006) challenged that it would be verydifficult to differentiate underperforming tech-nologies from a technology with inferiorperformance but finally ending up being dis-ruptive.

Especially noteworthy is Govindarajan andKopalle’s contribution, which introduces aninnovation measure to include high-end aswell as low-end disruptions, provides a moregeneral view of disruptiveness of innovations,and explores beyond the case of low price/lowperformance (Govindarajan and Kopalle2006). Disruptive innovation (having inferiorperformance in traditional attributes) with ahigh price, which Govindarjan and Kopallereferred to as high end, is indeed a white spacewhere Christensen’s theory (inferior perfor-mance and low unit cost) has not set foot(Figure 3, right-lower quadrant). Cellularphones exemplify such a disruptive innovationwith an initially higher price. The cellularphone was first accepted by corporate execu-tives who appreciated its convenience and port-ability, despite its relatively high price. When itwas introduced, the mainstream market stillpreferred land-line phones because of their



reliability, cost and coverage. Over time,however, further developments in cellular tech-nology allowed it to offer reliable coverageat a price point that satisfied the needs ofmainstream consumers, which caused the dis-ruption. Christensen (2006) expressed hisappreciation of their efforts to define the phe-nomenon even more precisely. A complemen-tary framework recently refined new-marketdisruption into two types, fringe-market low-end encroachment and detached-market low-end encroachment, with the cell phone asthe representative of detached-market low-endencroachment (Schmidt and Druehl 2008).

Govindarajan and Kopalle (2006) performeda series of analyses to establish the reliabilityand validity of the disruptiveness scale. Thereliability measures, exploratory factor analy-sis, confirmatory factor analysis and statisticaltests strongly support their measure. Accordingto their measure, a disruptive innovationshould (i) be inferior on the attributes thatmainstream customers value; (ii) offer newvalue propositions to attract a new customersegment or the more price sensitive main-stream market; (iii) be sold at a lower price;and (iv) penetrate the market from niche tomainstream.

What constitutes a real disruptive innovationdeserves examination through different lenses,and it is crucial to discuss the definition in anyfurther research on disruptive innovation, aswell as clarification of some potential misun-

derstandings. Three of these are highlightedand discussed here. First, disruption is a rela-tive phenomenon. Dell Computers began byselling computers over the telephone or bymail. For Dell, the initiative to begin sellingover the Internet was a sustaining innovationcompared with its previous business model.For Compaq, HP and IBM, marketing directlyto customers was decidedly disruptive becauseof its impact on their retail channel partners(Christensen and Raynor 2003). In anothersituation, online stock brokerage was a sustain-ing innovation (financially attractive) relativeto the business models of discount brokerssuch as Schwab and Ameritrade, because ithelped them discount even better. The sameinnovation was disruptive (financially unattrac-tive) relative to the business model of MerrillLynch (Christensen 2006).

Second, disruptive innovation does notalways imply that entrants or emerging busi-ness will replace the incumbents or traditionalbusiness; it does not imply that disruptors arenecessarily start-ups. In fact, an incumbentbusiness with existing high-end technologiescan still survive by concentrating on how tosatisfy its most demanding but least price-sensitive customers. Although digital camerashave been widely appreciated because of theirlight weight, small size, multiple functions andaffordable price, professional photographerswould still prefer the analog camera inextremely high resolution needs, e.g. uniquesurveillance needs. Indeed, an incumbent busi-ness could still maintain a profitable nichemarket at the very high end without total dis-placement by digital imaging. Hence, a disrup-tive innovation ultimately could have a majorimpact on an existing market without totallydisplacing it (Schmidt and Druehl 2008). Insome cases, incumbent firms played the rolesof smart disruptors. They include IBM’ssuccess in personal PCs, Control Data’ssuccess in 5.25-inch hard disks, Sony’s successin Walkmans, HP’s success in inkjet printers,Kodak’s and Fuji’s success in digital imaging,and Intel’s success in Centrino chip-sets, toname a few well-known cases. Incumbents

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Figure 3. A matrix of technological innovationsbased on cost and key performance dimensions.

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could survive the disruptive wave or even takethe role of disruptors after they have accumu-lated transformational experience4 (experiencerelated to previous market entry) from the past(King and Tucci 2002).

Third, disruptive innovation is not equal todestructive innovation. A technological innova-tion that has superior performance in keydimensions with a relatively low-cost structurewould directly invade the mainstream marketand cause more serious destructive effects thana normal disruptive innovation that focuseson low cost but initially lower performance.IBM’s new generation of communication chipsusing SiGe is a good example. SiGe-basedchips can increase switching speeds by fourtimes and greatly reduce power requirements;furthermore, were they manufactured usingexisting semiconductor fabrication plants, itwould save a great deal of time and reducecosts by saving billions in new capital invest-ment. Owing to the superior performance andmuch reduced costs, the severe destructiveimpacts on its competitors (Lucent, Motorola,Infineon, etc.) forced them quickly to becomefollowers. SiGe has become a mainstreamtechnology for the wireless communicationindustry since then. Hence, SiGe-chip, asshown in the left-upper quadrant of the matrixin Figure 3, caused serious destructive effectson incumbents, but definitely was nota disruptive innovation. In this school ofthought, Utterback and Acee provided a morecomprehensive view of technological innova-tions by adding the third dimension – ancillaryperformance – and what Christensen defined asdisruptive innovation was one of the eightpossibilities (Utterback and Acee 2005). VanOrden et al. (2008) further proposed a compre-hensive framework including three high-endand three low-end encroachment patterns, andemphasized that the three high-end encroach-ment patterns (with destructive effects) are notdisruptive.

As Christensen (2006) has pointed out, heshould have perhaps followed Intel in callingthe phenomenon ‘Christensen’s effect’ to avoidthe possible misinterpretation of disruptive

innovation as radical or destructive innovation.Smith (2005) has commented in his bookreview that the new product development pro-fessionals would be served well to adopt thedefinitions of sustaining and disruptive innova-tions and to avoid the mistake of calling allradical innovations disruptive.

In this section, different categorizations oftechnological innovations have been discussed,and we have observed that each seems able toexplain the anomalies of other categorizations,but suffers from anomalies of its own. That isthe reason why a new theory and terminologyof disruptive innovation have come into exist-ence, and by no means is it a simple replicationor extension of previous terminologies. Inaddition, the heated debate over the precisedefinition and refinement of disruptive innova-tion has been discussed and three potentialmisinterpretations have been outlined.

Predictive Use of the DisruptiveInnovation Theory

Many research scholars have challenged thepredictive use of Disruptive Innovation Theory.Barney argued that ‘it may simply be the casethat some firms are lucky in their technologychoices’. Those firms with lucky choices weresubsequently scrutinized, and a retrospectiverationale for their success was formed (Barney1997). Ex ante predictions involve predictingwhat performance the market will demandalong various dimensions and what perfor-mance levels technologies will be able tosupply. It is not entirely clear what methodsexist for such predictions (Danneels 2004). Ifone must wait until the disruption hasoccurred, what predictive value is there in theconcept (Tellis 2006)?

Christensen (2006) has refuted the assertionof Danneels and Tellis that disruptiveness wasdefined post hoc. The model was derived fromhistories, but the definition of disruptivenessexists independent of the outcomes. Thedethronement of incumbents is frequentlyobserved, but this is not necessarily always theoutcome of disruptive innovation, as disruptive



innovation does not always imply that theentrant business will completely replace theincumbent business and the winners will takeall.

Aside from the criticism, some researchers,in contrast, have made efforts to address thepredictive value of the theory better. Schmidt(2004) proposed a model which may givefirms some tools to use in assessing whether amarket is ripe for disruption. His main idea isthat if the part-worth curves for traditionalattributes show somewhat of an overshoot andare correspondingly underserved in secondaryattributes, then a new lower-cost product mightconceivably be successful by emphasizing thesecondary attributes while sacrificing perfor-mance on the traditional set. If the new prod-uct’s performance could be improved overtime with regard to traditional attributes, even-tually the new product could be expected tomove up market, reflecting low end encroach-ment (Schmidt 2004). Paap and Katz (2004)pointed out general guidance to predict futuredisruption, such as ‘do not ignore your custom-ers, both current and potential’. The issue is toidentify the drivers of the future, those thatemerge when old drivers reach their leveragelimit, and those that emerge when yourcustomers’ environment changes. Danneels(2004) has suggested tailoring extant technol-ogy forecasting methods to forecast potentialdisruptive technology. Govindarajan andKopalle (2006) believe that the disruptive inno-vation framework indeed could help us makeex ante predictions about the type of firmslikely to develop disruptive innovations. Forexample, since Firm A’s ‘willingness to canni-balize’ is higher than that of Firm B, Firm Awould appear more likely than Firm B todevelop disruptive innovations (Druehl andSchmidt 2008; Govindarajan and Kopalle2006). We believe that, based on the causes ofincumbent firms’ success or failure and subse-quent solutions, we may be in a better positionto tell the fate of a firm in a new wave ofdisruptive innovation. The argument that Dis-ruptive Innovation Theory can be applied toanticipate the future of firms supports the

efforts made in the next section to study how toenable a disruptive innovation.

Enabling Potential Disruptive Innovation

Empirical literature has generally found thatdiscontinuous innovations are developed andcommercialized by new entrants (Andersonand Tushman 1990; Christensen and Bower1996; Foster 1986; Henderson and Clark 1990;Tushman and Anderson 1986). The research ondisruptive innovation may reinforce the viewthat entrant firms have a better chance ofsuccess in discontinuous innovation comparedwith incumbent firms because of their smallersizes, shorter (path-dependent) histories, andmore limited commitments to value networksand current technological paradigms (Macherand Richman 2004; Walsh et al. 2002).

Interestingly, a small number of largeincumbent firms managed to identify andexploit a potentially disruptive technologybefore being disrupted by others (Ahuja andLampert 2001; Christensen and Bower 1996;Hill and Rothaermel 2003; Paap and Katz2004; Rothaermel 2001). Hence, the findingshave raised pertinent questions on why mostlarge incumbents failed but some survived.What essentially would decide or contribute tofirms’ success in disruptive innovation?

The review in this section attempts toanswer this by analyzing the literature fromdifferent perspectives: (A) the internal perspec-tive, the business models and organizationalchallenges of incumbent firms; (B) the externalperspective, the context and environment; (C)the marketing perspective, customer orienta-tion under disruptive change; and (D) the tech-nology perspective, technological strategies fordisruptive innovation. These four perspectivesemerged from the attempt of the previous lit-erature to answer two valuable questions,namely why a well-managed incumbent firmcould fail in technology innovations, and how aseemingly inferior technology could grab themarket shares and even replace the dominanttechnology. This also explains a subsequentobservation that the studies turned out to be

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quite unbalanced in favor of perspectives A andC. For the first question on why most incum-bents would fail but some succeed, most of theproblems lie more in the incumbent itself thanin the environment and context. Hence, theinternal perspective carries more weight thanthe external perspective. For the second ques-tion on why inferior technology could win, theentrants with initially inferior technologygenerally win because of innovative businessmodels or a deep understanding of non-consumption. The use of technology that isinitially inferior might also convey the misin-terpretation of simplicity, which further leadsto fewer studies on the enabling roles oftechnology.

Business Models and OrganizationalChallenges of Incumbent Firms

A substantial body of literature has elaboratedon enabling disruptive innovation from theorganization itself. The explanations are sortedinto four aspects: (1) human resources; (2)organizational culture; (3) resource allocation;and (4) organizational structure.

Human resources. There are two sub-aspectswithin the scope of human resources, managersand employees. The manager sub-aspectattributes an organization’s failure in meetingthe challenge of disruptive innovations to thecompetence of its managers. First, senior man-agers may not understand the promise ofdisruptive innovation because their views ofthe world are deeply entrenched and largelyshaped by their current experiences (Hender-son 2006). Most of them were trained inconventional business programs to manageorganizations that served established marketswith well-defined product lines. Therefore, anadditional team at the corporate level isrequired to be particularly responsible for col-lecting disruptive innovation ideas and puttingthem into implementation (Christensen andRaynor 2003). Moreover, long-term-oriented,subjective-based incentive plans should beadopted instead of short-term-oriented,

formula-based incentive plans for key execu-tives (Govindarajan and Kopalle 2006), so thatthe senior managers will not be confined byrigid incentives and avoid the risks of disrup-tive innovation. Second, middle managers alsomatter, since most strategic proposals take theirfundamental shape at the lower levels of hier-archical organizations. As middle managersusually have the most to lose in any basicchange, they are likely to allocate theirresources to sustaining innovations that bolstertheir current fiefdom and careers (Christensenand Raynor 2003; Denning 2005). Third, theremay be different performances betweenfounders and professional managers in disrup-tive innovations. Founders have an advantagein tackling disruption because they not onlywield the requisite political clout but also havethe self-confidence to override establishedprocesses (Christensen and Raynor 2003).The manager aspect discusses the key roles ofboth senior and middle managers as well as thedifferent performances between founders andprofessional managers, explaining why incom-petence of managers could be a main obstacleto a promising disruptive innovation.

Research has also been done to explain thesuccess or failure of disruptive innovationsfrom the employees’ perspective. For example,the team research on a successful disruptiveproject, I-mode in NTT DoCoMo, found thatthe team members were composed of carefullyselected risk-takers and that the firm alsorecruited outside expertise (Murase 2003). Interms of decision-making, Christensen arguedthat capturing ideas for new growth businessesfrom people in direct contact with markets andtechnologies can be far more productive thanrelying on analyst-laden corporate strategy orbusiness development departments – as long asthe troops have the intuition to do the first-levelscreening and shaping themselves. In thefollowing process of implementation for thedisruptive idea, instead of accepting one-size-fits-all policies, executives should spend timeensuring that capable people work in organiza-tions with processes and values that match thetask. Another interesting observation is that



disruptors are usually founded by frustratedengineering teams from established firms(Christensen and Bower 1996). Hence, theincumbent firms should take measures toprevent disruption from outside due to braindrain of talents and disruptive ideas. Onesolution would be establishing spin-offs, asdiscussed in the sub-aspect organizationalstructure.

Organizational culture. A firm’s culture is acritical component of its success. Culture is aneffective way of controlling and co-ordinatingpeople without elaborate and rigid formalcontrol systems (Tushman and O’Reilly 2002).However, culture is a double-edged sword thatsometimes results in the failure of innovation.When great changes such as disruptive innova-tion occur, cases studies have shown that theorganizational culture generates cultural inertiawhich is so difficult to overcome directly that itis a key reason why managers often fail tointroduce timely and substantial change, evenwhen they know that it is needed (Christensenand Raynor 2003; Henderson 2006; Tushmanand O’Reilly 2002). Hence, it is importantfor incumbents to prepare for and instituteorganizational change and unlearn5 deeplyentrenched values6 at the advent of potentialdisruptive innovation. Nevertheless, some inte-gral elements of culture, such as entrepreneur-ship, risk-taking, flexibility and creativity,should be preserved and valued in order todevelop disruptive innovations (Govindarajanand Kopalle 2006; Murase 2003).

Resource allocation. Failure in disruptiveinnovation can also be caused by the resourceallocation process. The primary inhibitor isstructured routines7 (Nelson and Winter 1982)such as the key evaluation factor of financialreturns (Christensen 2006) and traditionalmarket research reports. These structured rou-tines constrain the actions of incumbent firmsand evaluate emerging disruptive projects bythe same criteria applied to existing businesses.Once established, structured routines weredifficult to change. Another arch criminal is

resource dependence,8 which means that firmsare locked into businesses in which they haveaccumulated resources (Christensen 2006) andtend to invest more in the businesses wherefirms have enough resources. As a result, firmsgenerally respond to the emergence of com-petitively threatening technologies by intensi-fying their investments to improve theconventional technologies used by their currentcustomers (Christensen and Bower 1996), thusmissing the opportunity for new disruptiveinnovations. In summary, structured routines(deep-rooted methods to evaluate projects),particularly financial measurements, andresource dependence (investment based on theprofile of existing resources) hinder the devel-opment of potential disruptive innovation.

Some scholars have conducted empiricalresearch to solve the resource allocation diffi-culties. One solution is to use strategic bucketsto manage sustaining vs disruptive projectsindependently (Chao and Kavadias 2007;Hogan 2005). Another is summarized based onthe case study of Good Manufacturing Practice(GMP),9 which has projects in all the differentpipeline phases and manages each phase as amini-project (Hogan 2005).

Organizational structure. The aspect of orga-nizational structure covers discussion on thesizes of firm and business units, debate onspin-offs vs ambidextrous organization, and aproposal on collaboration between incumbentfirms and start-ups.

The first sub-aspect is the relationshipbetween the number and size of business unitsand the success of disruptive innovation. Inno-vation research has largely focused on firm orbusiness unit size as a key determinant of R&Deffectiveness (Cohen and Klepper 1996; Tsaiand Wang 2005) and the recent trend arguesthat R&D investments are more productive forsmall than for large firms when introducingnew products (Lee and Chen 2009; Lejarragaand Martinez-Ros 2008). In the research ondisruptive innovations in particular, both casestudies and surveys in high-tech industrieshave also shown that the size of the firm is

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negatively correlated to the success of disrup-tive innovation (Christensen and Raynor 2003;DeTienne and Koberg 2002; Tushman andO’Reilly 2002). The implication is that a largecorporation should keep its flexibility byhaving smaller business units, so that it cancontinue to keep its decision-makers excitedand take emerging opportunities seriously.Nevertheless, a counter-argument argues thatredundant overhead expenses can be elimi-nated when business units are consolidatedinto much larger entities (Christensen andRaynor 2003). Another counter-view claimsthat organizations must also cope with thedemands of architectural interdependence,which often requires larger, more integratedorganizations.

One of the main proposals by Christensen tosolve the innovator’s dilemma is to set up an‘autonomous organization’ to develop andcommercialize the venture. The key dimen-sions of autonomy relate to processes andvalues (unique cost structure) rather than geo-graphical separation or ownership structure(Christensen and Raynor 2003). He furtherargues that autonomous organizations areessential because, of incumbent leaders whosucceeded at disruption (Chesbrough 2001;King and Tucci 2002), almost all of them hadmaintained their industry-leading positions bysetting up an autonomous business unit orskunk works and giving it unfettered freedomto forge a very different business model appro-priate to the situation (Christensen 2006).

Without an isolated autonomous organiza-tion, can the parent organization equip itselfwith dual resources, processes and values tomanage both sustaining and disruptive innova-tions? Tushman and O’Reilly (2002) proposedthe concept of ambidextrous organizations as asolution to manage discontinuous innovations.From the many successful examples cited,such as HP, J&J, and ABB, Tushman andO’Reilly (2002) tried to promote the abilitysimultaneously to pursue both incremental andradical innovation which would significantlyimprove the technical performance and satisfythe existing customers. However, disruptive

innovation, due to the initial inferior perfor-mance, could not attract the same attentionfrom senior managers and existing customers.Hence, their potentially valuable contributionsmay not be applicable in the case of disruptiveinnovation.

Some other researchers found that OpenInnovation Theory may be applied to manag-ing disruptive innovation (Chesbrough andCrowther 2006; Paap and Katz 2004). Newstart-ups always have innovative and potentialdisruptive technology strengths, but they lackthe complementary assets that belong to theincumbent leaders (Rothaermel 2001). Someresearchers have empirically found thatspin-offs, alliances, market transactions andacquisitions are comparatively optimal forcorresponding points at different stages ofdisruptive innovation (Claude-Gaudillat andQuelin 2006). The empirical multiple casestudies by Macher and Richman (2004) foundthat IBM, Kodak and HP have adopted eitherform or a combination of different forms ofcollaborations to create disruptive innovations.Apart from research on different forms of openinnovation, collaborator attractiveness has alsobeen studied. A survey by Rothaermel (2002)found that a start-up’s new product develop-ment, economies of scope, public ownershipand geographic location in a regional technol-ogy cluster are positively associated with thestart-up’s attractiveness as an alliance partnerto create potentially disruptive innovation.

Context and Environment

Looking beyond the firm-level analysis, somescholars have searched for reasons for beingdisrupted from the context and environmentof the firm because organizations are oftenlocked into commitments reflected in theexpectations of investors and analysts, publicpromises and goals, and existing relationshipswith resource providers and suppliers(Denning 2005). For example, individual tech-nologies cannot become commercializedunless other related technologies have beendeveloped prior to or together with its intro-



duction; thus, relationships with technologicalsuppliers and partners are of great significancefor disruptive products commercialization(Myers 2002).

In addition, early research has found thateffective organizations in environments withsubstantial technological, legal or social uncer-tainty tend to undertake reorientations orquantum innovations that include disruptiveinnovation (Tushman and Anderson 1986).

Finally, it is interesting to compare howdifferent contextual factors may influence thedisruption process. Chesbrough’s (1999)empirical research has shown that the disrup-tion of hard disk drives in the US did nothappen in Japan, mainly because the regula-tions and culture of Japan did not encourageentrepreneurship, and the financing systemwas inefficient to support the development ofdisruptive ideas. There is an insightful casestudy on the Personal Handphone System(PHS), which shows that the PHS failed inJapan, yet later became a very successful dis-ruptive innovation in China.10 The economicconditions and entrepreneurial cultureexplained the distinctive results. These studiesindicate that the success of disruptive innova-tion also depends on the variation in somecontextual factors such as regulation, entrepre-neurship culture and economic conditions ofdifferent countries.

Customer-Orientation underDisruptive Changes

Another major stream of literature has elabo-rated on customer orientation under disruptivechanges, which attempted to seek solutionsfrom the customer’s perspective. Danneels(2002) proposed that a second-order marketingcompetence is the ability to add new customersto address new markets. In the case whereestablished companies are not really blind-sided by the development of new technologicalcapabilities, it is likely that they may fail tolink the development of such technologicaladvances to changes in the marketplace,changes in consumer needs or market condi-

tions. The key to avoiding the negative effectsof disruptive technologies is to focus on whatis happening with customer and operationalneeds. Govindarajan and Kopalle found thatthe higher an SBU’s emerging customerorientation, the more disruptive the innovationsit developed would be (Govindarajan andKopalle 2004).

Other scholars argued that mainstream cus-tomer orientation and emerging customer ori-entation are not two options at opposite ends ofa continuum, but that they are independent ofeach other – suggesting that firms can developboth orientations simultaneously (Baker andSinkula 2005; Narver et al. 2004; Slater andMohr 2006). A customer-oriented firm canserve current customers and also remain vigi-lant of non-consumption in emerging markets(Chandy and Tellis 1998; Day 1999; Slater andMohr 2006).

Henderson (2006) articulated that incum-bent firms failed to respond to disruptive inno-vations because responding appropriatelyrequired building competencies they were ill-equipped to acquire, not because they focusedtoo much on existing customers and high-margin opportunities. It could be true that, insome cases, incumbent firms did identify theneeds of the low-end or emerging customersbut lacked the market-related competencies torespond quickly to disruptive innovation.

As suggested by the above studies from theliterature, we could not emphasize more theimportance of carefully finding the emergingmarket and deeply understanding the custom-ers’ latent needs, because a firm’s disabilitiesin finding new markets for new technologiesmay be its most serious innovation handicap(Christensen and Bower 1996). Next, the ques-tion becomes: how does a firm find the emerg-ing market and understand the potentialcustomers’ needs?

Some scholars have provided several tech-niques for understanding how customersbehave rather than simply how they say theywould behave. Some popular methods includecustomer visit programs, empathic designs,lead-user processes, research on customer’s

•• 2009


customers and targeting developing markets(Mohr et al. 2004; Slater and Mohr 2006).However, no detailed studies have elaboratedon the processes of using each popular methodto identify the latent needs.

Technological Strategies ofDisruptive Innovation

Compared with other dimensions such as busi-ness models, organizational challenges, cus-tomer orientations and environment influencesin disruptive innovation, the technologicaldimension has received very limited coverageto date. This might lead to the perception that itis sufficient to be vigilant and quick to spot theopportunity when such a disruptive technologymay occur at some time in the future. However,in some cases, the creation of certain disruptivetechnologies could indeed be extremely chal-lenging, especially if they are based on newscientific discoveries (Yu and Hang 2008).

There were very few publications on the pur-poseful creation of technologies for disruptiveinnovation at the front end, with Kostoff et al.(2004) and Walsh (2004) being two exceptions.In the first study, Kostoff et al. highlighted thenecessity of proposing a systematic approachto identify or create potential disruptive tech-nologies that was not addressed in the extantliterature. However, they interpreted disruptiveinnovation as innovations that could providedramatic improvements and were more effi-cient with higher unit performance. This failedto observe the essence of disruptive technolo-gies which are initially inferior to the existingtechnologies in traditional attributes. Further-more, while they made great efforts to developa clear-cut road map, they did not realize thatan over-detailed road map might be counter-productive because disruptive innovation isdiscontinuous in nature, and the research hasfocused on the fuzzy front end. In the secondstudy, Walsh (2004) modified the emergingtechnology road-mapping tool to guide thedevelopment and commercialization of dis-ruptive technologies for the microsystems andnanotechnology industry. Nevertheless, the

cases in point of microelectromechanicalsystems and nanotechnology are very debat-able as disruptive technologies. Theseapproaches aimed to address discontinuousinnovations that are different from continuous/incremental types of sustaining innovation.Unfortunately, their findings did not reallyaddress the ‘initially inferior’ disruptive tech-nology creation. The explicit identification ofR&D strategies specific to the creation of dis-ruptive technology or products on purpose hasremained a research gap. We believe theseR&D strategies would provide practical guid-ance to R&D managers, as well as furtherenhance the predictive value of the theory.

Apart from technology road-mapping thatwould purposely create technology or productcandidates for disruptive innovations, analternative strategy may be to scan the techno-logical landscape for new application ordevelopment of existing technology, productsand some modules of products. It remains anunexplored question whether there is anysystematic way to identify new disruptiveopportunities for applying existing technologyor products. For example, the application ofTRIZ, a systematic invention approach11 orpatent analysis (e.g.Yoon and Lee 2008;Younget al. 2008).

Discussion and Directions forFuture Research

It is clear from the previous sections thatDisruptive Innovation Theory has been exten-sively studied in the extant literature. Theextant literature pertaining to disruptive inno-vation has been organized into three majorthemes with a clear logical link in this paper.The evolution, description and clarification ofthe concept of disruptive innovation at thebeginning would serve as a major foundationfor further research in this area. In ‘PredictiveUse of the Disruptive Innovation Theory’, themain conclusion that Disruptive InnovationTheory can be applied to anticipate the futureof firms supports the efforts made to study howto enable a disruptive innovation. In ‘Enabling



Potential Disruptive Innovation’, various per-spectives have been studied. Many inhibitorsand corresponding enablers of disruptive inno-vation have been discussed, and they are sum-marized in Table 1.

Nevertheless, a number of interestingresearch directions deserve further examina-tion within the disruptive innovation domain.Although some of them might be valuable toall discontinuous innovation in a wider scope,as disruptive innovations are discontinuousin nature, we shall limit our discussion to thetheory development of disruptive innovations.Seven of them are briefly discussed as follows.To begin with, many enablers are listed inTable 1. One suggestion for a more completeanalysis of disruption is a larger empiricalstudy which tries to compare precisely whichcombinations of the enablers are most impor-tant. Second, the middle managers are reason-able in voting against disruption because theyhave to defend their current turf and avoidtaking responsibility for risky projects. Is theresuch a mechanism that could encourage middlemanagers to support potential disruptiveprojects while securing their positions andcareers in the company? In addition, companyfounders have been observed to perform betterthan professional managers in disruptive inno-vations, but there are no empirical tests yetto prove this argument. A subsequent questionwould be how to improve the managementeducation programs to equip professional man-agers with the capabilities to initiate disruptivechanges? Third, the literature has shown thatkeeping the size of business units reasonablysmall would contribute to the development ofdisruptive innovation, but this also causes costincreases and difficulties in architectural inter-dependence. How to optimize the number andthe size of business units in a large organiza-tion could be an important topic for futureresearch. Fourth, this aspect of organizationalculture has shown that organizational culturalinertia is indeed detrimental to the promotionof disruptive innovation. When should theunlearning efforts be initiated? If some ele-ments of culture such as entrepreneurship and

risk-taking should be preserved, what elementsshould be eradicated? A longitudinal study offirms on their mechanisms to overcome cul-tural inertia and update the major elements inorganizational culture would offer more prac-tical insights. Fifth, it is advised in the managersub-aspect that a special core team should becreated at the corporate level to be responsiblefor collecting disruptive innovation ideas andputting them into implementation (Christensenand Raynor 2003, 281). It is also suggested thatfrontline employees are a very good source ofdisruptive ideas, since they are in direct contactwith markets and technologies (Christensenand Raynor 2003, 282). Therefore, futureresearch could compare the roles played byfrontline employees and the core team to findwhether they are contradictory or complemen-tary. Is the importance contingent on differentconditions such as project stage and businessnature? Another future research direction isdealing with the problem of disruption fromoutside due to brain drain. Spin-offs are aneffective method and it could be investigatedwhether there are any other methods moreeffective than spin-offs. Sixth, potential disrup-tive technologies could not be commercializedunless complementary technologies are readyor partners (e.g. suppliers) do share a similarview of the disruptive potential. More researchis needed to study the interorganizationallinkage behind the collective efforts for dis-ruptive innovation (Denning 2005). Finally,studies on different contexts in different coun-tries could also be useful in understanding howto make a potential disruptive innovation suc-cessful, taking into account contextual factorssuch as regulation and entrepreneurshipculture.

In addition, four new areas of research couldbe initiated by integrating the literature of dis-ruptive innovation and that of other relatedresearch domains. First, an implication fromthe literature of open innovation may be thatdisruptive innovations could benefit from col-laboration between incumbents and start-upfirms; however, the existing literature has notclearly discussed the fundamental motivations

•• 2009


Tab

le1.

Pote

nti

alin

hib

ito

rsan

den

able

rso

fd

isru

pti

vein

no

vati

on

Pers

pec

tive

sA

spec

tsSu

b-a

spec

tsIn

hib

ito

rs/p

rob

lem

sEn

able

rs/s

olu

tio

ns

Inte

rnal

Hu

man

Res

ou

rces

Man

ager

s(1

)Se

nio

rm

anag

ers

are

limit

edb

yth

eir

curr

ent

exp

erie

nce

s.(2

)Se

nio

rm

anag

ers

wer

etr

ain

edto

man

age

wel

l-d

efin

edp

rod

uct

lines

.(3

)M

idd

lem

anag

ers

hav

eth

em

ost

tolo

sein

dis

rup

tive

chan

ge.

(4)

Pro

fess

ion

alm

anag

ers

follo

wro

uti

nes

tom

anag

ees

tab

lish

edb

usi

nes

s.

(1)

Cre

ate

aco

rete

amto

colle

ctd

isru

pti

veid

eas

and

pu

tth

emin

toim

ple

men

tati

on

.(2

)D

esig

nlo

ng

-ter

m-o

rien

ted

,su

bje

ctiv

e-b

ased

ince

nti

vep

lan

sin

stea

do

fsh

ort

-ter

m-o

rien

ted

form

ula

-bas

edin

cen

tive

pla

ns

for

key

exec

uti

ves.

(3)

Fou

nd

ers

are

bet

ter

po

siti

on

edto

tack

led

isru

pti

on

.

Emp

loye

es(1

)K

no

wle

dg

ela

ckan

dri

sk-a

vers

eat

titu

de

of

emp

loye

es.

(2)

Rep

lyo

nan

alys

t-la

den

corp

ora

test

rate

gy

toco

llect

or

crea

ted

isru

pti

veid

eas.

(3)

Dis

rup

tio

nfr

om

ou

tsid

ed

ue

tob

rain

dra

ino

fta

len

tsan

dd

isru

pti

veid

eas.

(1)

Team

mem

ber

sar

eco

mp

ose

do

fca

refu

llyse

lect

edri

sk-t

aker

san

dth

eyal

sore

cru

ito

uts

ide

exp

erti

se.

(2)

Cap

turi

ng

dis

rup

tive

idea

sfr

om

peo

ple

ind

irec

tco

nta

ctw

ith

mar

kets

and

tech

no

log

ies.

(3)

Spin

-off

sas

on

ep

oss

ible

solu

tio

nto

pre

ven

tb

rain

dra

inan

dp

rote

ctd

isru

pti

veid

eas.

Org

aniz

atio

nal

Cu

ltu

re(1

)Th

ecu

mu

lati

vecu

ltu

reb

eco

mes

cult

ura

lin

erti

aw

hic

his

sod

iffi

cult

toat

tack

dir

ectl

y.(1

)Pr

epar

efo

ran

din

stit

uti

ng

org

aniz

atio

nal

chan

ge

and

un

lear

nit

sd

eep

lyen

tren

ched

valu

es.

(2)

Som

ein

teg

ral

par

tso

fcu

ltu

resh

ou

ldb

ep

rese

rved

and

valu

edsu

chas

entr

epre

neu

rsh

ip,

risk

-tak

ing

,fl

exib

ility

and

crea

tivi

ty.

Res

ou

rce

Allo

cati

on

(1)

Stru

ctu

red

rou

tin

esar

eu

sed

toev

alu

ate

bo

them

erg

ing

dis

rup

tive

pro

ject

san

dex

isti

ng

bu

sin

esse

s.(2

)Fi

nan

cial

resu

lts

are

ap

arti

cula

rly

bad

too

lfo

rm

anag

ing

dis

rup

tio

n.

(3)

Res

ou

rce

dep

end

ence

lock

edfi

rms

into

exis

tin

gb

usi

nes

san

dp

ush

firm

sto

inve

stm

ore

on

con

ven

tio

nal

bu

sin

ess

wh

enth

reat

ened

fro

mlo

wen

d.

(1)

Less

form

al,

allo

wm

anag

ers

top

roce

edin

tuit

ivel

yra

ther

than

hav

ing

tob

eb

acke

du

pb

yca

refu

lre

sear

chan

dan

alys

is.

(2)

Stra

teg

icb

uck

ets

tose

par

atel

ym

anag

esu

stai

nin

gan

dd

isru

pti

vep

roje

cts.

(3)

Man

age

ala

rge

pro

ject

asth

esu

mo

fse

vera

lse

qu

enti

alm

ini-

pro

ject

s.

Org

aniz

atio

nal

Stru

ctu

reO

rgan

izat

ion

alsi

ze(1

)Th

esi

zeo

fth

efi

rman

db

usi

nes

su

nit

sw

illb

en

egat

ivel

yre

late

dto

dis

rup

tive

inn

ova

tio

n.

(1)

Larg

eco

rpo

rati

on

ske

epth

efl

exib

ility

toh

ave

smal

lb

usi

nes

su

nit

sw

ith

inth

em,

soth

eyca

nco

nti

nu

eto

hav

ed

ecis

ion

-mak

ers

wh

oca

nb

eco

me

exci

ted

abo

ut

emer

gin

go

pp

ort

un

itie

s.

Spin

-off

so

ram

bid

extr

ou

so

rgan

izat

ion

(1)

Au

ton

om

ou

so

rgan

izat

ion

mea

ns

geo

gra

ph

ical

sep

arat

ion

and

ow

ner

ship

chan

ge.

(2)

Spin

-off

sco

uld

be

tric

ksto

get

the

dis

rup

tio

no

ffth

em

anag

ers’

agen

da.

(1)

Typ

ical

form

of

auto

no

mo

us

bu

sin

ess

un

its

issp

in-o

ffs

or

sku

nk

wo

rks,

bu

tes

sen

tial

lyis

ad

iffe

ren

tse

to

fp

roce

sses

and

valu

es.



Tab

le1.

Co

nti

nu

ed

Pers

pec

tive

sA

spec

tsSu

b-a

spec

tsIn

hib

ito

rs/p

rob

lem

sEn

able

rs/s

olu

tio

ns

Co

llab

ora

tio

nb

etw

een

incu

mb

ent

firm

san

dst

art-

up

s

(1)

An

inn

ova

tive

idea

wit

hd

isru

pti

vep

ote

nti

alb

ut

inla

cko

fco

mp

lem

enta

ryas

sets

.(1

)C

olla

bo

rati

on

bet

wee

nin

cum

ben

tsan

dst

art-

up

sin

vari

ou

sfo

rms

such

aslic

ensi

ng

IP,

allia

nce

s,m

arke

ttr

ansa

ctio

nan

dac

qu

isit

ion

atd

iffe

ren

tst

ages

of

dis

rup

tive

pro

ject

s.(2

)A

sa

star

t-u

p,

incr

ease

ow

nat

trac

tive

nes

sfo

rp

ote

nti

alco

llab

ora

tio

nb

yim

pro

vin

gn

ewp

rod

uct

dev

elo

pm

ent

per

form

ance

,ec

on

om

ies

of

sco

pe,

pu

blic

ow

ner

ship

and

geo

gra

ph

iclo

cati

on

toa

tech

no

log

ycl

ust

er.

Exte

rnal

(1)

Org

aniz

atio

ns

lock

edin

toth

ere

lati

on

ship

wit

hre

sou

rce

pro

vid

ers

and

sup

plie

rsw

hic

hp

reve

nt

them

fro

md

evel

op

ing

dis

rup

tive

pro

ject

s.(2

)C

om

ple

men

tary

tech

no

log

ies

hav

eto

be

dev

elo

ped

pri

or

too

rto

get

her

wit

hin

tro

du

ctio

no

fp

ote

nti

ald

isru

pti

vep

rod

uct

s.(3

)Po

or

fin

anci

ng

syst

ems,

lack

of

entr

epre

neu

rs.

Mar

keti

ng

(1)

Fail

tolin

kth

ed

evel

op

men

to

fte

chn

olo

gic

alad

van

ces

toch

ang

esin

the

mar

ket.

(2)

Focu

sto

om

uch

on

exis

tin

gcu

sto

mer

san

dh

igh

-mar

gin

op

po

rtu

nit

ies.

(1)

Focu

so

nw

hat

ish

app

enin

gw

ith

cust

om

eran

do

per

atio

nal

nee

ds.

(2)

Emer

gin

gcu

sto

mer

ori

enta

tio

n(3

)M

ain

stre

aman

dem

erg

ing

cust

om

ero

rien

tati

on

can

coex

ist.

(4)

Dev

elo

pte

chn

iqu

esto

un

der

stan

dn

eed

so

fn

ewcu

sto

mer

s.

Tech

no

log

y(1

)A

no

ver-

det

aile

dro

ad-m

apm

igh

tb

ed

isas

tro

us

asd

isru

pti

vein

no

vati

on

isd

isco

nti

nu

ou

sin

nat

ure

and

the

rese

arch

has

focu

sed

on

the

fuzz

yfr

on

ten

d.

(1)

Stra

teg

ies

for

pu

rpo

sefu

lcr

eati

on

of

tech

no

log

ies

aso

pti

on

sfo

rp

ote

nti

ald

isru

pti

vein

no

vati

on

.(2

)Fi

nd

new

app

licat

ion

of

exis

tin

gte

chn

olo

gy,

pro

du

cto

rke

ym

od

ule

so

fp

rod

uct

.

•• 2009


of collaboration. Is it because of complemen-tary assets or appropriability? What are thefactors that incumbents and start-ups shouldbalance separately when making decisions tocollaborate? Will these factors be significantlydifferent from those of the collaborations forsustaining innovations? Furthermore, regard-ing the specific forms of collaborations, apartfrom stake ventures, joint ventures and evenacquisitions, how about other forms such assharing and intellectual property (IP) licens-ing? What are the potential challenges in thecollaboration for disruptive projects using theform of IP licensing?

Second, the review on marketing perspectivehas suggested that the behavior of only gather-ing information on mainstream customers’needs and responding to such needs was detri-mental to disruptive innovations, whereas ori-entation towards small but emerging customersegments might aid in the development ofdisruptive innovations. How to find emergingmarkets and understand the needs of newcustomers is still a question of tremendousinterest. Fortunately, the techniques of under-standing customer needs such as focus groupsand customer visit programs in the marketingliterature may provide potentially effectivetools for finding emerging markets and under-standing the latent needs of customers. Whatare the weaknesses of these existing techniquesin understanding latent customer needs? Arethey helpful to new customer identification?Future research could tailor the existing tech-niques of marketing literature to addressemerging customer orientation for disruptiveproducts and services.

Third, among the four perspectives ofenabling potential disruptive innovation, thetechnology perspective has received the leastcoverage and needs to be investigated, sincethe enabling role of technologies is also criticalto the success of disruptive innovation. Thisperspective may be addressed by integratingthe literature in technology forecasting. Forexample, one research direction is the purpose-ful creation of technology candidates forpotential disruptive innovation. Another direc-

tion is to identify possible new applications ofexisting technologies. Both directions might berealized by developing methods using tech-niques in technology forecasting, such as tech-nology road-mapping, TRIZ, patent analysisand data mining. Future research could striveto apply existing techniques to creating apotential disruptive technology or find newapplication for existing technology andproduct.

Fourth, we have observed cases where thesuccess of disruptive innovation may be influ-enced by one contextual factor – economicconditions in the ‘Context and Environment’subsection. It implies another convergence ofliterature between disruptive innovation andthe ‘Bottom of the Pyramid’ (Prahalad 2004).The Pyramid, also called the EconomicPyramid, refers to the categorization of theworld population according to their purchasingpower parity. The majority of the world popu-lation resides at the bottom of the pyramid,while a very small number of the population sitat the top. At an individual level, the purchas-ing power parity at the top is over 13 timesmore than that at the bottom. However, bymultiplying the population at group level, thepotential market revenue at the bottom is overthree times more than that at the top. There-fore, the poor represent latent market segmentsfor firms’ new growth. In fact, the bottom ofthe pyramid could be an ideal target market fordisruptive technologies because the low-endmodel appeals to the most price-sensitive cus-tomers, who usually live at the bottom of thepyramid. In addition, disruptive innovatorshave to compete initially against non-consumption, which firms may easily find at ornear the bottom rather than at the top of thepyramid. Firms such as Honda, Toyota andGeneral Motors were studied to support theidea of possible disruption from the bottom(Hart and Christensen 2002). Future researchcould study how to use disruptive innovation asone approach to tap the business potential ofthe majority at the bottom.

In addition to the potential research withinthe disruptive innovation domain and integra-



Tab

le2.

Futu

rere

sear

chto

pic

so

fd

isru

pti

vein

no

vati

on

Pers

pec

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•• 2009


tion with other domains, the research so far hasmostly been based on the question of whyincumbent firms fail and how to preventdethronements. Research on the entrant firmshas focused only on the attractiveness of start-ups as collaborators. Since the incumbentshave been guided to take action against start-ups, how should start-ups respond whenincumbents fight back instead of fleeing awayto the high end? More research is needed toguide start-ups, as they are generally weakerand smaller.

The final discussion on future researchdirections is on methodology. Most of thestudies were case-based and qualitative innature, and very few papers were written basedon quantitative methods such as modeling(Adner 2002; Schmidt and Druehl 2008) andsurvey (Govindarajan and Kopalle 2006; Roth-aermel 2002). In addition, the theoreticalimplications from many case-based studieswould need further empirical evidence. Thedevelopment of a scale to measure the disrup-tiveness of innovation by Govindarajan andKopalle (2006) has paved the way for moreempirical testing of existing implications usingquantitative methods, such as method triangu-lation, to increase the robustness or correctwrong conclusions. All the above potentialresearch directions are summarized in Table 2.

Conclusion

In this paper, a reflective review of the extantliterature on Disruptive Innovation Theory hasbeen presented. To begin with, the definitionand three potential misinterpretations of theconcepts were discussed to clarify the basicunderstanding of disruptive innovation. Believ-ing in the predictive value of the theory on firmperformance, we subsequently summarizedand critiqued the research on how to enablepotential disruptive innovation from internal,external, marketing and technology perspec-tives. Although the research to date has sub-stantially studied this topic, there is still roomfor future improvement in different aspects,which is natural for almost all theory-building

processes. Seven potential future researchdirections were identified within the disruptiveinnovation research domain. In addition, webriefly discussed potential integrations withother research domains such as open innova-tion and others, further research on start-upfirms and research methodology. Finally, inaddition to theory building, managerial impli-cations were pointed out by extracting theinhibitors and enablers of disruptive innova-tions from the pool of literature. Our hope is tomake the widely scattered literature on disrup-tive innovation more systematic and tractableto scholars and to stimulate future research onthese proposals.

Acknowledgments

The authors would like to gratefully acknowl-edge the helpful comments from the Editor,two anonymous reviewers, Wim Vanhaverbekeand Kah Hin Chai. All remaining errors andomissions are entirely their own.

Notes

1 Special issue on Disruptive Innovation in Journalof Product Innovation Management, Vol. 23, No.1, 2006. There were seven papers on pp. 2–55.

2 Special issue on Disruptive Innovation in IEEETransactions on Engineering Management,Vol. 49, No. 4, November 2002. There were eightpapers on pp. 319–397.

3 This figure was summarized based on the earlyliterature of technology discontinuity as well ason the papers and books of Christensen.

4 King and Tucci (2002) differentiated two types ofexperience in their paper, static experience andtransformational experience. Static experience isgained from further elaboration of existing struc-tures, positions and strategies. Their example ismarket positioning. The more a firm gains expe-rience producing and selling products to its exist-ing customers, the less likely it would be to enternew markets (This is consistent with Christens-en’s argument on over-attention to existing cus-tomers.) However, transformational experience isgained from changing these attributes. The more afirm gained experience reorganizing or redirect-ing its effort to new markets, the more likely itwould be to continue to do so.



5 Unlearning is defined as the process by whichpeople and firms eliminate old logic and substi-tute it with something fundamentally new (Bakerand Sinkula 2005).

6 An organization’s values are the standards bywhich employees make prioritization decisions,those by which they judge whether an order isattractive or unattractive, whether a particularcustomer is more important or less important thananother, and whether an idea for a new product isattractive or marginal. Values often represent con-straints; they define what the organization cannotdo (Christensen and Raynor 2003).

7 Nelson and Winter asserted that firms built com-petitive advantage by developing better routinesthan other firms and that superior routines weredeveloped only through the faithful replication ofeffective behaviors.

8 Resource dependence means that organizationsare dependent on critical resources, thoseresources that are necessary for the survival of theorganization. Or formulated differently, resourcedependence controls whether and to what extentvarious resources should be allocated to innova-tive activities (Pfeffer and Salancik 1978).

9 Good Manufacturing Practice or GMP is an orga-nization developing and commercializing novelpharmaceutical, medical device and diagnostictechnologies. The firm’s website is at http://www.gmpcompanies.com/

10 The case study was conducted by the Center forManagement Research, Indian Council for Inter-national Amity, particularly on UTstarcom, casecode BSTR184, 2005.

11 For more information on TRIZ as a technology-forecasting tool, please refer to papers in the TRIZJournal. http://www.triz-journal.com/

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•• 2009


doi: 10.1111/j.1468-2370.2009.00272.x a reﬂective review ... · the review of disruptive...

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