How Do Incumbents Leverage Digital Technology to Re-spond to Disruptive Innovation:A Resource Scalability Perspective
The rapid adoption of digital technologies has spurred the continuous emergence of disruptive innovations,presenting sig-nificant challenges for incumbent firms.Disruptive innovation de-scribes a process where disruptors initially penetrate niche markets within an industry,offering products or services tailored to specific customer segments,and gradually expand into the mainstream mar-ket,ultimately displacing incumbent firms.Incumbents often prior-itize their established businesses,focusing on meeting the demands of mainstream markets and customers.This focus,however,renders them vulnerable to overlooking transformative shifts in niche mar-kets.For instance,e-commerce companies initially entered the online market with limited scale and negligible profits.Over time,they steadily"encroached"on the offline market.Many retail supermar-kets,as incumbent firms,remained rooted in offline operations and were slow to adapt to the digital transition.Consequently,they pro-gressed from"disregarding"and"misunderstanding"online com-merce to eventually"falling behind."Similarly,the rapid growth of live-streaming e-commerce and influencer-driven economies has catalyzed the emergence of the"small-batch customization market"in apparel manufacturing.This market typically begins with small orders of fewer than 200 items,which,once proven successful as"blockbuster"products,are followed by large-scale orders.For incumbent apparel manufacturers,small-batch customization entails higher costs and lower margins.However,adhering rigidly to large-scale production,with minimum order quantities in the thousands,risks leaving them without orders and exposed to disrup-tion.Nonetheless,effectively addressing the impact of disruptors remains a formidable challenge for incumbent firms.Existing research on how incumbent firms respond to disruptive in-novation has primarily centered on the"ambidextrous organization"strategy.However,this approach introduces significant challenges,particularly due to a lack of resource synergy between new and ex-isting businesses.Through extensive studies on the innovations of disruptors and the responses of incumbents,Professor Christensen proposed that incumbent firms could address disruptor impacts by establishing independently operating new organizations to incu-bate emerging businesses.This strategy embodies the concept of ambidexterity,enabling incumbent firms to engage in exploratory business activities within newly created organizational units,thus insulating these activities from the influence of exploitative opera-tions in existing units.Despite its potential,coordinating"ambidextrous organizations"remains a critical challenge,as it imposes substantial demands on the resource integration capabilities and attention allocation of top management teams.Moreover,creating new organizations often requires substantial investment,limiting its feasibility for re-source-constrained incumbent firms.If the allocation of resources to new business ventures compromises the development of tradi-tional operations,firms risk becoming"stuck in the middle."This raises a fundamental theoretical question:Is it essential for incum-bent firms to establish new organizations,or can existing resources be effectively leveraged to support both new and existing business-es?The core of the"ambidextrous organization"strategy employed by incumbent firms lies in resource redeployment,predicated on the assumption that resources between new and existing businesses are inherently competitive.However,a defining characteristic of enterprises in the digital era is resource scalability,which allows resources to be shared across multiple business domains.Recent re-search by Giustiziero et al.(2023)underscores resource scalability as a hallmark of digital-era enterprises,wherein the value derived from resources increases as business activities expand,due to their ability to meet the demands of diverse business needs.A prominent example is data resources,which can be accessed and utilized at low cost across various business functions.Resource scalability suggests that incumbent firms can shift the dynamic between"resource competition"and"resource sharing"across new and existing business units.This prompts a critical ques-tion:How can incumbent firms enhance resource scalability?Ex-isting research suggests that digital technologies play a pivotal role in enabling firms to adapt to innovation-driven transformations.Further inquiry focuses on identifying the specific characteristics of digital technologies that can facilitate improvements in resource scalability.While the attributes of digital technologies have been widely debat-ed,an academic consensus is emerging.Yoo et al.(2010)identify two foundational characteristics of digital technologies:data ho-mogenization and reprogrammable functionality.Data homogeni-zation emphasizes the simplicity,accessibility,and visual clarity provided by digital technologies,which enable the conversion of physical resources into digital forms.Reprogrammable functional-ity highlights the adaptability and extensibility of digital technolo-gies,allowing firms to implement rapid and efficient adjustments by embedding digital technologies into physical resources.Building on this foundation,Liu et al.(2020)argue that these two characteristics underpin the generativity of digital technologies—their capacity for dynamic self-referencing and intelligent iterative optimization.In conclusion,this study addresses the research question:How can incumbent firms leverage digital technologies to enhance resource scalability in response to disruptive innovation?Given the explor-atory and process-focused nature of this inquiry,a case study meth-odology is adopted.Through theoretical sampling,"Hempel Inter-national Group",an incumbent firm in the apparel manufacturing sector,is selected as the research subject to examine its response to disruptive innovation.Confronted with the rise of small-batch cus-tomization markets and disruptors in the apparel industry,Hempel opted against independently establishing customized factories.In-stead,the firm digitally transformed its existing production lines to integrate both new and existing businesses.The findings reveal that,beyond the"ambidextrous organization"strategy,incumbent firms can pursue an alternative approach:le-veraging digital technologies to enhance resource scalability.At its core,this strategy involves an evolutionary process characterized by"cross-scenario resource sharing,modularized resource deploy-ment,and intelligent resource reconfiguration."This study makes several key contributions.First,it introduces a novel strategy for leveraging digital technologies to enhance re-source scalability as a means to address disruptive innovation.This approach alleviates the challenges faced by top management in inte-grating resources across new and existing businesses while reducing the transformation risks for incumbent firms.Second,it pioneers a process-oriented investigation into the enhancement of resource scalability.Resource scalability represents a significant evolution of the resource-based view in the context of digital transformation.While prior studies have retrospectively examined the importance of resource scalability,this research takes a forward-looking per-spective,exploring and analyzing the process of its enhancement.
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