Reflections on the guidelines 75 

The guidelines provided above can help firms to identify and handle challenges related to disruptive innovation. They may initially appear rather broad and not necessarily relevant only to disruptive innovations. It should be underlined here that the guidelines deal with how the firm can manage its surrounding networks, not its own resources and capabilities. Therefore, these guidelines do not address the challenges related for instance to competence destruction, architectural innovation, or the role of complementary assets. Rather they focus explicitly on identifying and managing the challenges that lie beyond the firm’s boundaries. In this sense, the guidelines provide a more detailed understanding of how a business model can be impacted by a disruptive innovation and the ways in which it needs to be changed. These guidelines address the factors that ought to influence the design of a new business model. As stated previously, the underlying perspective is similar to the ‘hypercube of innovation’ (Afuah and Bahram, 1995) which points out that an innovation needs to be mapped in terms of its impact on different firms throughout the supply chain. However, the guidelines presented here differ in offering a more fine grained description of these actors in terms of resources, activities, power, and incentives. They differ also in assuming that an established network constellation is built on interdependence, which in turn suggests that finding the right business model is ultimately an issue of understanding the incentives that govern different actors and how these incentives can be aligned.

Although the proposed guidelines may be different from what has been suggested previously with regard to disruptive innovation, they share some features with previous work in other areas such as supply chain management and strategic management. Supply chain management has for a long time dealt with how actors, resources and activities can be linked together (Johnsen et al, 2000). It has been argued that the challenges related to interdependencies can be managed by understanding the incentives, exchanging information, and trying to find solutions that are mutually beneficial (e.g. Lee, 2004). When introducing

32 _{The firm in the IP video industry also sought to communicate its value creation differently. It focused on the} total cost of owning a surveillance system rather than the price of single products.

disruptive innovations, firms can learn by adopting a similar way of thinking. It is important to be aware of an innovation’s impact on the surrounding network and to find ways to motivate actors to work in the same direction. Under conditions of interdependence, firms that seek to maximize only their own value at the expense of their networks may be worse off as this behavior may dissolve the networks. However, it should be noted that the introduction of innovations differs from management of a supply network in an important way. Innovation activities are different from more operational issues in the sense that the degree of uncertainty is often higher and that it is initially more difficult to quantify the precise value of adoption. To compromise and find ways to share both risk and profit may be even more important when aligning a network in favor of an innovation33.

Scholars in strategic management have frequently pointed out that strategy is ultimately about finding a fit between the resources and capabilities of a firm and its surrounding environment (e.g. Grant, 2008). Earlier recommendations regarding disruptive innovation differ in regarding the environment as something that cannot be influenced. The guidelines proposed in this dissertation have a lot in common with for instance the work by Normann and Ramirez (1993; 1994) who regard strategy as the management of a value-creating system where the firm and its network work jointly towards value creation. In this perspective, the main strategic task is reconfiguration of the roles and relationships in the value chain. In some respects the guidelines also resemble Network Value Analysis, as developed by Peppard and Rylander (2006). This approach aims to describe how value is created and distributed in a network, how a firm’s activities impact on it, and how other actors will behave. These views differ for instance from the positioning school (e.g. Porter, 1985) which maintains a more adversarial perspective on the environment.

Having offered some guidelines and described some cases of firms that encountered problems, it is interesting to revisit some of these cases and discuss whether things could have turned out differently with this perspective. The guidelines provide a better understanding of the main challenges and point to some ways to handle these issues. In this sense, they help firms to identify appropriate measures. However, this is not to imply that some of the firms would have survived or prospered by doing so. The challenges faced by individual firms are often more complex and difficult to address.

To return to the Hasselblad case, it can be seen that several firm- and technology-specific issues made it problematic for Hasselblad to handle the transition to digital imaging. For instance, digital technology is often associated with a very fast pace of development, which exacerbates the difficulties. When the technological shift was underway in the late 1990s, better and cheaper cameras rapidly penetrated the market, which increased the problems for Hasselblad. A similar pattern applies to the transition from mechanical to electronic

33 _{See e.g. Holmström and Stalder (2001) for an illustration of how important it is to share risks and benefits} when adoption depends upon many different actors.

calculators. Once the calculators were based upon integrated circuits, prices declined quickly while computing performance continuously increased. Hence, there are several issues related to technological improvement which are important, yet difficult to deal with theoretically. In these cases, there were also several firm-specific factors which augmented the problems. Hasselblad suffered from several changes in ownership which created strategic inconsistency over time. Additionally, the short term scope of ownership which the Union Bank of Switzerland declared in 1996, along with its intention to make leveraged buyout seems to have increased these difficulties. Clearly, such factors are hard to incorporate into a managerial framework but nevertheless they have a considerable impact on the eventual performance of a firm. It should therefore be pointed out that the guidelines presented above assume that individuals are both able and willing to handle disruptive innovation in a rational way that maximizes the long term value of their company. Management needs to attend to these issues, but the dominant logic of established firms may sometimes prevent this from happening (Prahalad and Bettis, 1986). The empirical data in this dissertation would suggest that management attention is sometimes lacking but that it is still an important prerequisite for succeeding with disruptive innovation.

The Facit case also includes some specific factors that are hard to address managerially. For example, in the 1950s, the firm recruited some of Sweden’s top electronics researchers and set up the subsidiary Facit Electronics. There was little knowledge about electronics in Sweden at the time and Facit identified and recruited the key people in the country. Hence, both Facit and the labor market in which it was located lacked a sufficient competence base in electronics. These macro-economic conditions are difficult to integrate into the proposed guidelines but they do play an important role and should not be overlooked.

Having underlined the heterogeneity in the challenges faced by specific firms, the proposed guidelines still mark an improvement to what existing theory on disruptive innovation has offered. The aim is to propose a more detailed approach that makes it possible to understand where and how a disruptive innovation prospers, to understand the enablers and disablers of its growth and how firms can develop new business models when introducing these innovations.