Osiyevskyy & Dewald (2015)

Disruptive business model innovation

A change in how value is created and captured that initially targets overlooked or low-end customers and can eventually displace incumbents

Business model

A firm’s meta-routine for creating and appropriating economic value

Core research question

What cognitive factors drive incumbents to choose explorative versus exploitative business model change in response to disruption

Exploration

Experimentation with new business models or radically new ways of creating and capturing value

Exploitation

Strengthening and refining an existing business model through incremental improvements

Central argument

Incumbent responses to disruptive business models are driven by managerial cognitive framing of opportunity and threat

Explorative business model change

Adoption or experimentation with a disruptive business model or its components

Exploitative business model change

Incremental strengthening of the existing business model to defend competitive advantage

Orthogonality of exploration and exploitation

Exploration and exploitation are independent dimensions rather than opposites

Typology of incumbent responses

A 2x2 framework based on explorative adoption and exploitative strengthening

Defiant resistance

Ignoring or actively resisting disruption by maintaining the existing business model

Pure exploration

Abandoning or neglecting the existing business model to fully adopt the disruptive one

Pure exploitation

Defending the existing business model through incremental improvements without adopting the disruptive model

Integration strategy

Simultaneously exploring the disruptive model and exploiting the existing one through integration or spin-offs

Managerial cognition

How managers perceive and interpret disruption as opportunity or threat

Strategic agency perspective

The view that strategic leaders’ decisions shape organizational actions

Intentions to innovate

Managers’ planned actions that predict future strategic behavior

Perceived opportunity

The belief that a disruptive business model offers growth or profit potential

Opportunity framing effect

Perceived opportunity increases explorative business model change intentions

Threat perception

Managers’ beliefs about negative consequences of disruptive business models

Performance-reducing threat

The perception that disruption will reduce profits or margins without threatening survival

Critical threat

The perception that disruption threatens the survival or existence of the business

Prospect theory

A theory stating that decision makers become risk-seeking when facing potential losses

Behavioral theory of the firm

A theory arguing that performance shortfalls trigger problemistic search

Threat-rigidity

Severe threat causes cognitive narrowing and rigid reliance on habitual responses

Performance-reducing threat effect

Performance-reducing threat increases explorative business model change

Critical threat effect

Critical threat reduces strategic change by inducing rigidity or inaction

Unexpected finding on critical threat

Critical threat negatively affects exploitative business model change

Threat paralysis interpretation

Severe threat may cause freezing rather than adaptation

Prior successful risk experience

Past positive outcomes from risky decisions that increase confidence

Risk experience effect

Prior risk success increases both explorative and exploitative intentions

result 1 Opportunity perception

Opportunity perception strongly predicts explorative business model change

result 2 Performance-reducing

Performance-reducing threat increases exploration but not exploitation

result 3 Critical threat

Critical threat reduces exploitative change and does not increase exploration

result 4 risk experience

Prior risk experience is the strongest dispositional driver of change

Main theoretical contribution

Linking managerial cognition to explorative versus exploitative business model change

Contribution to disruption literature

Showing that disruption responses are cognitively driven rather than purely rational

Contribution to business model theory

Identifying exploration and exploitation as distinct dimensions of business model evolution

Core takeaway

Incumbent adaptation to disruptive business models depends on how managers cognitively frame opportunity and threat