Exploring ‘the innovator’s solution’ to disruptive changes

in the Dutch publishing industry

Hans van Moorsel¹ & Theo Huibers¹ ² (Januari 2012) 

¹Thaesis B.V., Utrecht, the Netherlands² University of Twente, Twente, the Netherlands

12th IAMB Conference, Warsaw Poland24 April 2012

Media and technology

Education

Retail

Research

IntroductionHans van Moorsel

Strategy Consultant at

corporate/executive advice

research

International economics and business

Strategic Management

Disruptive innovations 51%

10%7%

32%

⅔⅓

The context

Methodology

The findings

Analysis and discussion

Outline of the presentationPart

1

Part

2

Part

3

Part

4

Part

1Part

2Part

4Part

3

The context

Better understanding of how firms deal with disruptive changeDisruptive changes are potentially transforming many important (global) industries and ushering in a new era where entrepreneurial startups compete head-to-head with established incumbents.

By building on extensive studies on disruptive innovatione.g. Christensen, 1993; Christen & Rosenbloom, 1995; Bower & Christensen, 1995; Christensen & Bower, 1996; Christensen, 1997; Christensen & Overdorf, 2000; Adner, 2002; Charitou & Markides, 2003; Christensen & Raynor, 2003; Gilbert, 2003; Govindarajan & Kopalle, 2006; Hwang and Christensen, 2008.

To test and exploreIs Christensen’s primary ‘innovator’s solution’ for dealing with disruptive innovations, being adopted in the Dutch publishing industry? And if not for what reasons?

Purpose of this study

Developments in publishing sector

Disruptive examples

• new media technologies• new entrants from outside the

industry• innovations from existing

information and communications companies

• changes in consumer behavior• new online and free channels for

information

• Declining circulation, advertisement and revenuePublishing industry offers good

context

Development over time Characteristics

• Emphasize different attribute sets

• Lower performance on traditional attributes

• Simpler, cheaper, more accessible

• Valued by other market segments

• Improve over time to satisfy minimal demands in mainstream market

Disruptive innovations defined

Time

Perf

orm

an

ce

Source: Christensen and Raynor (2003)

Create a separate and autonomous BU

…to ensure

“In our research on disruptive innovation, the only instances when an original market leader successfully transitioned to becoming a leader in the new disruptive plane of competition occurred when the incumbent established an entirely autonomous business unit organized around the disruptive value proposition.”

(Hwang and Christensen, 2008)

1. Effective resource allocation process

2. Protection of resources, processes and values

Christensen’s primary ‘innovator’s solution’

Part

1Part

2Part

4Part

3

Methodology

Data collection

11 exploratory case studies

Nine years of research

Per case study, several semi-structured interviews were held with the CEO and top managers

Interviews aimed at finding:• How the company

percieved challenges posed by digital media

• How the company tried to deal with these challenges over time

• What organizing strategy was used for innovation projects

Annual publication based on a survey with over 100 respondents and interviews in the publishing sector

Part

1Part

2Part

4Part

3

The findings

Results from survey Results from cases

The percentage of publishers that creates a seperate business unit for dealing with digital media is fairly stable at 25%

Only three of the eleven case studies created a separate business unit

Majority of publishers does not seperate

8

3

2005 2006 2007 2008 2009 2010 2011 20120%

10%20%30%40%50%60%70%80%90%

100%

Percentage of publishers with seperate business unit for

digital media

Exploring their response

strategy in more detail

Graphical representation of findings

1: Totally integrated 5: Totally separated

1: Same business model 5: Different business model

1: Existing business customers 5: New business customers

1: Existing readers 5: New readers

1: Existing personnel 5: New personnel

1: Reactive 5: Proactive

1: Focus on development 3: Focus on Alliances 5: Focus on acquisitions

1: No conflict 5: Large conflict with existing business

0

1

2

3

4

5

Response strategy archetypes

The attacking changer

Large variation in response strategy

1: Totally integrated 5: Totally separated

1: Same business model 5: Different business model

1: Existing business customers 5: New business customers

1: Existing readers 5: New readers

1: Existing personnel 5: New personnel

1: Reactive 5: Proactive

1: Focus on development 3: Focus on Alliances 5: Focus on acquisitions

1: No conflict 5: Large conflict with existing business

0

1

2

3

4

5

Response strategy archetypes

The attacking changer

Large variation in response strategy

1: Totally integrated 5: Totally separated

1: Same business model 5: Different business model

1: Existing business customers 5: New business customers

1: Existing readers 5: New readers

1: Existing personnel 5: New personnel

1: Reactive 5: Proactive

1: Focus on development 3: Focus on Alliances 5: Focus on acquisitions

1: No conflict 5: Large conflict with existing business

0

1

2

3

4

5

Response strategy archetypes

The attacking changer The fortifying defender

Large variation in response strategy

1: Totally integrated 5: Totally separated

1: Same business model 5: Different business model

1: Existing business customers 5: New business customers

1: Existing readers 5: New readers

1: Existing personnel 5: New personnel

1: Reactive 5: Proactive

1: Focus on development 3: Focus on Alliances 5: Focus on acquisitions

1: No conflict 5: Large conflict with existing business

0

1

2

3

4

5

Response strategy archetypes

The attacking changer The fortifying defender

Influenced by firm-specific attributes

Factors of influence Account for heterogeneity

Response strategies were found to be influenced by various incumbent-specific characeristics, such as:

• Overall strategy• (Financial) resources• Relative disruptiveness• Influence and values of staff• The customer segment• The type of ownership• Past experience• Time pressure• The vision of leaders

Our cases highlight the complexity and multi-facetted issues that play a role in the way incumbents respond to disruptive innovations.

It seems previous studies on disruptive innovation do not account sufficiently for this variation in incumbent’s responses to disruptive change and have downplayed the role of incumbent heterogeneity.

Part

1Part

2Part

4Part

3

Analysis and discussion

‘Cramming’

Observations • Publishers often used an one-size-fits-all organizing

strategy for innovation projects (internal light weight teams)

• Their innovation strategy was characterised by primarily editorial-driven product innovation

• They often failed to link disruptive innovations to new (disruptive) business models

Contingency approach

Observations • Publishers often used an one-size-fits-all organizing

strategy for innovation projects (internal light weight teams)

• Their innovation strategy was characterised by primarily editorial-driven product innovation

• They often failed to link disruptive innovations to new (disruptive) business models

The injunction to spin off new businesses might be too narrow• Strategic similarity, synergies and timing• Companies can be (temporarily) shielded by their specific

customer segment• A disruptive innovation does not necessarily takes over the

entire market• Disruptive is a relative term and potential conflicts should

be viewed from the perspective of each company individually

Managerial implications

Questions to answer in decision making process

• De we want/need to respond by embracing the disruptive innovation? (e.g. Markides, 2006)

• What would the ideal business model look like to exploit this innovation? (e.g. Hwang and Christensen, 2008)

• What kind of conflicts would this business model create in terms of processes and values in the existing business? (e.g. Christensen & Overdorf, 2000)

• What kind of synergies can be realized between the new business model and the existing one? (e.g. Markides & Charitou, 2004)

• How do we access the new required capabilities?

Managerial implications

When choosing to integrate it is important to:

• Have personal attentive oversight of the CEO• Shield the project from the existing standards and policies• Focus on exploiting synergies with the traditional business

not imitating disruptive entrants• Prevent rigid threat induced behaviour, look at it as an

opportunity

Future research

Topics for future research

• Linking response strategies to the likelihood of survival/higher performance

• Identifying the relevant variables for successful strategies in disruptive environments

• Investigating in more detail the effectiveness of different approaches for bridging the capability gap (current organization, new staff, alliances, acquisitions)

Future research

Thaesis current research activities

• Dealing with tipping points and industrial convergence• Striking the right balance between exploitation and

exploration (ambidexterity)• Effectiveness and appropriateness of different strategies to

bridge the capability gap

Thaesis overall research goal

• Identifying the set of conditions that influences the appropriate adapting strategies that will ensure the continuity of different organizations in turbulent environments.

Thank you…for your attention. For any questions please feel free to contact us.

Strategy consultancy Thaesis Hans van Moorsel

Since 2006 Kanaalweg 17L-A

Hans.van.moorsel@thaesis.nl

www.thaesis.nl 3526 KL Utrecht, The Netherlands

+316-50585953

info@thaesis.nl +3130-267 3514

@HvMoorsel