Disruptive Internet-service innovation diffusion

Abstract

A disruptive innovation strategy (DIS) entails innovation that makes customers embrace new value propositions shifting the basis of competition. Prevalent in fast-changing Internet and IT markets, DIS challenges incumbent firms and has the potential to transform industry structure. This article contributes toward rigorous DIS theory building with a system dynamics (SD) simulation model of disruptive innovation diffusion. The model shows disruptive innovation diffusion as a replicable process that can enable business growth for disruptive innovators. It builds on diffusion processes in marketing and epidemiology to show customer switching in the market segments that disruptive innovators exploit. Multiple computed scenarios examine the dynamic performance effects of disrupters' attack on high-end market segments and incumbent retaliation. Data from firm d, an entrant Internet-services provider, enable model calibration and examination of the strategic concerns of a real start-up firm, providing multiple insights into disruptive Internet-service innovation management.