Explanation of the Value Network Concept.
According to Palmié et al. (2022), the Value network concept refers to the interconnected ecosystem, sellers, dealers, and users that work together to give value to the end investor. For example, in the Office vs. Google Docs market, the value network includes the software developers and the users, IT departments, training services, third-party integrators, and other parties who have a stake in the software’s adoption, implementation, and use.
Factors That May Cause Companies Fail to Recognize and React to Potentially Disruptive Innovations
According to Arnnet (2015), most companies need help to visualize a series of factors to react to disruptive innovation. Firstly, too much focus on sustaining innovations that address the already existing customer needs can result in neglecting emerging customer segments and disruptive technologies that may cater to them. Furthermore, disregarding or misunderstanding the market and customer requirements means overlooking a disruptive innovation bound to invoke a change in an industry. Such an investment is often avoided out of fear of cannibalizing existing products or services, as the companies seek protection for their prevailing revenue stream. Additionally, Agarwala (2022) says that the high entry barriers of disruptive technologies create reluctance about venturing into new areas, hence limiting innovation and adaptation. Finally, organizational inertia and resistance to change within established companies hamper them from embracing disruptive innovations and adjusting strategies, thus making it even more difficult for them to identify and respond appropriately to these shifts in the market.
Analysis of Microsoft’s Reaction to Google Apps in The Office Productivity Market That Employs the Concepts of The Disruptive Technology/Value Network Concept
Initially, Microsoft saw Google Docs as a cheap, cloud-based option to its own Office package. Even though Google Docs had some problems initially, Microsoft didn’t see how it could change the standard office efficiency software market. In response, Microsoft mostly acted defensively, trying to keep its market control instead of adjusting to the new situation. The company kept putting a lot of money into its most popular Office suite, adding new features and functions to keep it ahead of the competition. However, Microsoft’s reaction was limited because most revenue came from selling software licenses and installing software on-site. This made it hard for Microsoft to switch to a plan built on subscriptions and the cloud, like Google Apps (Mookerjee & Rao, 2021).
Comparison of The Differences Between Microsoft’s and Yahoo’s Reactions to Google Introducing Disruptive Innovations into Their Markets
Yahoo had disruptive innovations under mobile and search, but they couldn’t ably respond. The company should have recognized the significance of mobile as a disruptive technology and invested in mobile-centric offerings, leading to a loss of market share to competitors like Google and Apple. This allowed open competition, which later would come from Google and Apple, right into its market share. Yahoo reacted to disruptive innovations with organizational paralysis, strategic missteps, and a need for a cohesive vision (Catapano et al., n.d.). Unlike Microsoft, Yahoo could never actually have a clear strategy in its value network so that it could adapt to the fast-changing technological landscape. Asymmetry of motivation plays a role in understanding the differences between Microsoft and Yahoo’s reactions. As a leader in the enterprise software market, Microsoft had more to lose from disruptive innovations and hence had higher motivation to defend the place. On the contrary, this disappointed Yahoo, as they didn’t pursue disruptive technologies and innovations that would help them change with the changing market dynamics.
In conclusion, Microsoft’s response to a disruptive innovation in the office efficiency market differed in several important ways from Yahoo’s. Microsoft worked hard to protect its market power and value network, but Yahoo needed help adapting to new technologies and saw new market trends coming up. Different motivations, organizational factors, and strategy choices played a big part in how these two companies went in different directions when faced with disruptive innovations.
References
Agarwala, N. (2022). Role of a policy framework for disruptive technologies in the maritime domain. Australian Journal of Maritime & Ocean Affairs, 14(1), 1-20.
Arnett, T. (2015, August 28). Tablets and disruptive innovation. Christensen Institute. https://www.christenseninstitute.org/blog/tablets-and-disruptive-innovation/
Catapano, C., CFA, & CPA. (n.d.). Google vs. Yahoo: Continuous Disruptive Innovation | Bridgesphere. http://bridgesphere.com/google-vs-yahoo-a-case-study-in-continuous-disruptive-innovation/
Mookerjee, J., & Rao, O. R. S. (2021). A review of disruptive innovations’ impact on markets and players’ business performance. International Journal of Grid and Distributed Computing, 14(1), 605-630.
Palmié, M., Miehé, L., Oghazi, P., Parida, V., & Wincent, J. (2022). The evolution of the digital service ecosystem and digital business model innovation in retail: The emergence of meta-ecosystems and the value of physical interactions. Technological Forecasting and Social Change, 177, 121496.
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