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Master's thesis for Hyper Island Digital Management MA.
Master's thesis for Hyper Island Digital Management MA.
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Global Consultancy firm McKinsey report that 84% of global executives cite innovation
as extremely important to their growth strategies (McKinsey, 2010). Analysis of the
figures demonstrate that their priorities are well founded; innovation, and the creative
destruction it gives rise to, has resulted in only 12% of Fortune 500 firms from the 1960s
being in existence today (Perry, 2016).
Further, with reference to Fig. 2, it can be seen that the average lifespan of a Public
company is decreasing year on year, largely because of an inability to adapt to the
complexity of the modern business landscape (McGrath, 2013). According to Innosight,
at the current turnover rate, 75% of the S&P 500 will be replaced by 2027 (Innosight,
2017). With a significant number of leading tourism brands, including Expedia and
Hilton, on the S&P 500, it is highly likely that tourism providers will need to engage in
continuous evolution in order to adapt to the volatility of international travel demands
for both survival and growth (Hsu et al, 2016).
It may be said that many corporations are still not well placed to innovate, with a
tendency towards developing established concepts more efficiently, rather than
adopting new thinking. Consequently, Steve Hilton observes two distinct types of
response when confronted with a threat from a competitor (Hilton, 2016, p.222):
1. Erecting barriers to entry to prevent new, more innovative competitors from launching,
or succeeding once they launch;
2. Adopting a collaborative, human-centred approach, often with multiple parties,
based on mutually beneficial relationships to produce greater value for
society than could otherwise be produced on their own.
Insofar as the second approach is favourable, it is helpful to identify commonalities
and causalities that may encourage and enhance the thinking necessary to succeed
at innovation.
2.2.2 WHAT CAUSES COMPANIES TO FAIL?
Disruption Theory describes a phenomenon in which products that lack in traditionally
favoured attributes can transform a market and capture mainstream consumers from
formerly dominant companies (Guttentag, 2013). Initially developed to understand why
companies fail, Professor Christensen has also identified characteristics common to
successful disruptive products (Christensen, 2015):
• Typically underperform against a prevailing product’s key performance metrics.
• Offer a distinct set of new benefits, such as being cheaper.
• Appeal to the low-end of the market or create a completely new market.
Fig. 3 illustrates how companies should be vigilant to falling behind as products or
services with disruptive attributes gain in popularity. A noteworthy example in tourism
is AirBnB, who addressed consumer needs by connecting tourists directly with hosts in
destination, thereby disrupting traditional hotels because of its relative value for money
and the new ‘local’ experience the sector created (Hsu et al, 2016).
However, not every new idea that aspiring entrepreneurs may wish to launch is
disruptive and its overuse may distract from the real issues with emergent products
and companies (Gobble, 2015). Further, whilst Disruption Theory is useful for identifying
potential threats, it does not attempt to make the argument that ‘new is good’ and nor
is it the only way to gain a competitive advantage (Gobble, 2015).
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