TVE-MIL19017

Master’s Thesis 30 credits

June 2019

Disruptive innovation theory in the

paper- and packaging industry

Applying Clayton Christensen in a new context

Joakim Strömberg

Philip Thorman

Master’s Programme in Industrial Management and Innovation

Masterprogram i industriell ledning och innovation

Abstract

Disruptive innovation theory in the paper- and

packaging industry

Joakim Strömberg and Philip Thorman

The paper- and packaging industry has for a long time transitioned from

a production-focused industry towards a customer-orientation – today

the customers have become fundamental. Managers are searching for

ways to create superior innovations in the industry which can compete

against the oil-based solution, i.e. plastic. However, they face challenges

as they attempt to launch products in the market. One exciting scholar

who has researched much about the challenges of incumbent firms is

Clayton Christensen and his theory of disruptive innovation. The theory

has received much attention throughout the years and provides with a

holistic literature framework to analyze the industry. The thesis aims to

investigate Clayton Christensen’s disruptive innovation theory in order

to problematize it in a new context, the paper- and packaging industry.

This will be done by discussing how individuals argue, understand and

use the term ‘disruptive innovation’ and also discuss Christensen’s

Innovator’s Dilemma in relation to how incumbents tend to manage

their innovation projects in the industry.

The research used a qualitative research approach implementing one

case study. Interviews with incumbent actors in the industry, one

producer and two brand-owners, pertaining to an innovation project

constituted for the empirical findings. The data analyzed through a

theoretical lens of Christensen’s disruptive innovation theory. From an

iterative process between theory and empirical findings the thesis has

made the following contributions. First, we have problematized

Christensen in a new context and identified an industry which is

considered an anomaly in Christensen’s theory. The industry is unlikely

to be subjected to the Innovator’s Dilemma due to its fundamentals as an

industry, e.g. collaborations between actors and listening to customers.

Second, our practical contribution is the importance of differentiating

between sustaining and disruptive innovation, especially concerning

radical and disruptive innovation. If an individual does not have a

theoretical understanding of disruptive, it is common to be confused

concerning the differences between radical and disruptive innovation.

However, learning about the differences creates an opportunity to

identify new ways of gaining value.

Keywords: Disruptive innovation theory, Innovation, paper- and packaging

industry, Christensen

Subject reader: Peter Birch

Examiner: David Sköld

TVE-MILI19017

Printed by: Uppsala Universitet

Faculty of Science and Technology

Visiting address:

Ångströmlaboratoriet

Lägerhyddsvägen 1

House 4, Level 0

Postal address:

Box 536

751 21 Uppsala

Telephone:

+46 (0)18 – 471 30 03

Telefax:

+46 (0)18 – 471 30 00

Web page:

http://www.teknik.uu.se/student-en/

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Preface Having spent long hours in telephone, reading way too many articles, and contemplating

until we have become dizzy is a good description of our journey. It has been lots of sighs

and furious discussion progressing into great outcomes and ideas to move forward. As we

started, we saw an opportunity to conduct this thesis with high curiosity and enthusiasm

something which remained with us throughout the study.

Special thanks to our case company for this fantastic opportunity. You have provided with

insightful and fun discussions in our interviews, we are very grateful for taking the time

to talk to us. We also want to thank the two brand owners for participating in the study,

your answers were very valuable for the study. Furthermore, we like to offer a huge thank

you to our subject reader, Peter Birch, for being a supportive and meticulous criticizer

throughout our study.

All the best,

Joakim & Philip

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Popular Science Summary When being a scholar in innovation management, it is likely to come across Clayton

Christensen and his theory of disruptive innovation. A theory which has received much

attention in the past thirty years – by scholars and practitioners alike. It quickly became

widely applied, but also widely misunderstood. Being a popular theory amongst scholars

and practitioners, we found an opportunity to make our research on the theoretical

foundation of his theory, applying it in a new context which he has not explored before.

Christensen (1997a) created a theory which concerns how incumbents tend to fail due to

disruptive technologies. A theory which he later refined to describe how incumbents fail

due to disruptive innovations (Christensen & Raynor, 2003). The theory spread and many

researchers both praised and criticized it – being the most influential business idea and a

powerful tool, but in the same time accused of being vague, misunderstood and lacking

proper research method. However, the world is always changing and managers seek new

ways of dealing with all the challenges. The theory presented with an interesting

opportunity to suggest an alternative for practitioners concerning the value of different

innovations while validating the framework by Christensen.

We conducted a case study, investigating incumbents in the paper- and packaging

industry; one producer and two brand owners in retail. Studying how they reason about

innovation management and the nature of the industry enabled us to discuss Christensen.

Discovering how this industry seems not to be affected by his Innovator’s Dilemma or

emerging of disruptive innovations. Being a process-oriented industry, constituting of

large machinery and volumes, close collaborations, strong customer-orientation, and

drivers of a global shift to replace oil-based packaging, we found evidence suggesting that

being disrupted, or disrupting anyone else, was unlikely.

Studying the industry enabled us to problematize Christensen’s theory, identifying an

anomaly, and therefore suggest that his theory is ill-suited to explain the actions in the

industry. However, we did discover that there is confusion regarding how people

differentiate between radical and disruptive innovation. We suggest that making this

differentiation would be valuable in the paper- and packaging industry and by including

the alternatives; radical (and sustaining) against disruptive innovation project offers new

way to think about the possibilities. We and Christensen (2006) promote further research

in his theory – urging others to continue identifying anomalies and further develop the

popular theory.

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Table of Contents 1 Introduction ................................................................................................................................................... 1

1.1 Background ............................................................................................................................................ 1

1.2 Problematization ................................................................................................................................. 3

1.2.1 Problem statement ...................................................................................................................... 4

1.3 Research Aim ......................................................................................................................................... 5

1.4 Research Questions ............................................................................................................................. 5

1.5 Delimitations ......................................................................................................................................... 6

1.6 Disposition .............................................................................................................................................. 7

2 Literature Review ........................................................................................................................................ 8

2.1 The development of disruptive innovation theory ................................................................. 8

2.1.1 Disruptive and radical innovation ...................................................................................... 10

2.1.2 Overshooting and innovation technology ....................................................................... 11

2.1.3 The Innovator's Dilemma ...................................................................................................... 12

2.1.4 The Innovator's Solution ........................................................................................................ 14

2.2 The (mis-)understanding of the word ‘disruptive’ .............................................................. 14

2.2.1 Different perspectives on disruptive innovation ......................................................... 16

2.3 The behavior of the incumbent firm.......................................................................................... 17

2.3.1 An explanation based on the Resource Dependency Theory .................................. 18

2.3.2 A suggested solution for incumbents ................................................................................ 19

2.3.3 Why incumbents still succeed .............................................................................................. 20

2.4 The role of the customer ................................................................................................................ 21

2.4.1 The mainstream customer and the emerging customer ........................................... 22

2.4.2 Other customer perspectives ............................................................................................... 24

2.5 Criticism against Christensen ...................................................................................................... 25

2.6 Summary of literature review ...................................................................................................... 26

3. Methodology .............................................................................................................................................. 28

3.1 Research Approach .......................................................................................................................... 28

3.2 Research Design ................................................................................................................................ 28

3.3 Research Method .............................................................................................................................. 29

3.4 Quality of Qualitative Data ............................................................................................................ 31

3.5 Data Collection ................................................................................................................................... 32

3.6 Ethical considerations ..................................................................................................................... 32

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4 Empirical Findings ................................................................................................................................... 33

4.1 Industry Background ....................................................................................................................... 33

4.2 The shift in the packaging industry ........................................................................................... 34

4.2.1 Sustainability – a trend which drives the development ............................................ 35

4.2.2 Single-use-plastics-directive – good or bad for paper solutions? .......................... 37

4.3 Understanding of disruptive innovation ................................................................................. 38

4.3.1 The importance of innovation in the industry .............................................................. 38

4.3.2 The understandings of disruptive innovation in its definition ............................... 39

4.3.3 Can the project be considered a disruptive innovation project?............................ 40

4.4 Being an actor in the industry ...................................................................................................... 43

4.4.1 Incumbents and entrants ....................................................................................................... 43

4.4.2 The case company and the brand owners ....................................................................... 45

4.5 The role of the customer ................................................................................................................ 46

4.5.1 Customers and projects at the case company ................................................................ 47

4.5.2 Developing with or without customers ............................................................................ 48

5 Discussion .................................................................................................................................................... 50

5.1 RQ1: The concept of Disruptive Innovation ........................................................................... 50

5.1.1 Make a strategic decision for the project, go sustaining or disruptive ................ 51

5.1.2 The value with a common understanding of disruptive innovation ..................... 54

5.2 RQ2: Innovator's dilemma in the paper- and packaging industry? ............................... 56

5.2.1 Innovating due to a strategic shift ...................................................................................... 56

5.2.2 Collaborations between incumbents and entrants prevent them from being

disruptive ................................................................................................................................................ 58

5.2.3 The necessity of customer involvement in the innovation process ...................... 61

6 Conclusions ................................................................................................................................................. 65

6.1 Concluding remarks about research aim and questions ................................................... 65

6.2 Theoretical contribution ................................................................................................................ 66

6.3 Practical and managerial contributions ................................................................................... 67

6.4 Research Implications ..................................................................................................................... 69

6.5 Limitations and future research ................................................................................................. 70

7 Bibliography ............................................................................................................................................... 71

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1 Introduction

1.1 Background

Managing innovation in an industry like the paper- and packaging industry today implies

that one needs to work with both improving the current processes as well finding new

innovative solutions, which is a daunting managerial challenge (Christensen, 1997a;

O’Reilly & Tushman, 2004). However, it has not always been this way. Olander Roese

(2014) explains how the Swedish forest industry has been subjected to a strategic shift

for nearly three decades, turning their focus from cost-leadership and production-

efficiency towards customer-orientation and innovation. From several factors, e.g. global-

competition and standards (Olander Roese & Olsson, 2012), financial instability and

increasing costs for production (Ottosson, 2008) the industry was driven towards a new

strategic intent. Making the transition has been challenging for the actors. Berg (2005)

and Hayhurst (2002) accused the industry of poor listening to both market and others in

the value chain (as cited in Olander Roese, 2014). Many of the incumbents in Sweden also

experienced structural challenges to transform since they had spent decades optimizing

their old processes and burdening themselves with old traditions and expensive

machinery (Ottosson, 2008). However, Olander Roese (2014) believes that increased

market- and customer orientation will be fundamental for the continuous development of

the industry. The concept of customer-orientation and innovation are nothing new in

literature; however, there are few examples when it is applied to the paper- and packaging

industry (Olander Roese, 2014). As a consequence, from the customer-oriented mindset

the industry has become part of another shift in the packaging industry - the battle against

fossil-based material, i.e. plastic. This shift has been amplified by regulations against

plastic, e.g. ‘single-use-plastics-directive’ by the EU (EU, 2019). The demand for finding

alternatives for plastic solutions are growing and the paper industry has taken a

leadership role in offering its solutions. Although, it has been a significant challenge to

compete against plastic producers as they are forced to create alternative materials which

do not only meet customer demands but are adaptable to the existing actors in the market.

Kumaraswamy, et al. (2018) explain how this century could best be described as an era of

continual disruptions where technological innovation and new business models affect

entire industries and subsystems. From innovation management literature we have found

that one of today’s most exciting scholars in innovation management is Clayton

Christensen, and his theory of disruptive innovation. Offer a theory which concerns both

incumbents and entrants, it makes for an interesting theory about the challenges

described in the paper- and packaging industry. Disruptive innovation theory has

received much attention and debates in academia in the recent two decades (Danneels,

2004; Yu & Hang, 2010). Kilkki, et al. (2018) found that before 1997, there were 51

mentions of ‘disruptive innovations’ in 10,000 innovation articles and in 2015 it had risen

to nearly 3000 articles discussing and debating the concept. Since the concept was

introduced it has been considered a great success and even an industry was built around

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its theory where consultants, conferences and firms have been established in order to

offer the service of helping other firms with disruptive innovations (Christensen et al.,

2018; Gobble, 2016). Philip Kotler, a renowned marketing “guru” chose to use

Christensen’s disruptive innovation theory in his research - validating its continued

relevance for academia and practitioners (Kotler & Keller, 2012). Danneels (2004)

elevated Christensen to the status of “guru” in his field, while Corbyn (2017) wrote how

The Innovator’s Dilemma was “the most influential business idea of recent years”. Many

authors agree that the occurrence which gave attention to the concept was in 1997 as

Clayton Christensen released the book The Innovator’s Dilemma (Chesbrough, 2002;

Danneels, 2006; King & Baatartogtokh, 2015; Kumaraswamy et al., 2018; Yu & Hang,

2010). Since its release it has been studied in various industries (Christensen et al., 2015;

Christensen & Rosenbloom, 1995). Examples can be found in Christensen (1997a) and a

summary of case studies are available in Christensen, et al. (2018).

Christensen (1997a) offers a theory which highlights a process where small, or new,

actors with fewer resources challenge incumbent actors with disruptive technologies. It

builds on the premise of offering an inferior product in terms of features, performance

and price compared to what the incumbents tend to offer the mainstream market

(Govindarajan & Kopalle, 2006; Adner, 2002). Kumaraswamy, et al. (2018) explain that

due to its inferiority the product appeals to the low-end, or new, market which the

incumbents have previously overserved or ignored. The incumbents in this scenario are

focusing on improving their offerings for their most demanding and profitable customers,

thus making the circumstances for launching the product easier in the low-end market.

The challenger, also referred to as entrant, keeps on developing their product

incrementally; however, and at a faster pace than what the mainstream market demand.

The reason is that the market demand tends to change slowly in comparison to the

disruptive innovation, thus making it possible for the disruptive innovation to catch up

(Christensen, 1997b). Christensen (1997a) further argues that as the product has been

developed enough to reach the mainstream customer, i.e. the incumbent’s market, and

“when mainstream customers start adopting the entrants’ offerings in volume, disruption

has occurred” (Christensen et al., 2015: 4).

Being a popular theory, it has been subjected to both praises and criticism. Much criticism

has arisen due to vagueness and research methods (Danneels, 2004; King &

Baatartogtokh, 2015; Lepore, 2014, Markides, 2006; Sood & Tellis, 2011; Tellis, 2006).

Christensen, et al. (2018) writes how the original concept gained widespread traction for

practitioners and academics alike, however the concept remained widely misunderstood

(Christensen, 2006; Christensen et al., 2015; Gilbert, 2014). Yu and Hang (2010) explain

that the concept has been developed and revised pertaining to three major themes; the

evolution, the description and its clarification, which have served as foundations for its

future research. Christensen (2006) and Christensen, et al. (2015) were the first attempts

of dealing with the criticism and define more clearly what disruptive innovation meant.

Then again, in the 2018 article, Christensen, et al. (2018) stated that the primary

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contribution was to update and integrate the conceptualization of disruptive innovation

theory, but also clarify the underlying constructs for future research.

1.2 Problematization

The problematization first addresses the theoretical framework for our problematization

and Christensen’s perspectives for developing theory. It then transitions to the problem

statement of the thesis.

"The contribution of social science does not lie in validated knowledge, but rather in the

suggestion of relationships and connections that had previously not been suspected" (Weick,

1989: 524)

Davis (1971) with Sandberg and Alvesson (2011) believes that what makes theory

interesting, or even famous (Davis, 1986) is its ability to challenge assumptions in a

significant way. As quoted above, Weick (1989) also expresses his interest in the

unknown and believes that knowledge generated in, at least social sciences, should be

more than just validation. In our case, we seek to develop a theory by understanding an

unexplored context, therefore implementing the research in the view of Weick (1989) will

be useful for us. Locke and Golden-Biddle (1997) build on these aspects as they write how

the strongest contribution to research comes from the legitimacy it was produced, and by

focusing on novelty and uniqueness as significant components. By applying Clayton

Christensen in a context where it has not been applied before, we seek to achieve both

novelty and uniqueness. Although, we will need to balance novelty and continuity

(McKinley et al., 1999) as the research will be built upon existing theory. Locke and

Golden-Biddle (1997) offer three ways in which we could problematize Christensen’s

theory, i.e. incompleteness, inadequacy, incommensurability, and for the upcoming

problematization we adopt an incompleteness approach. Locke and Golden-Biddle (1997)

explain that when researchers decided to problematize literature as incomplete it means

that the existing literature is not completed and the current study will attempt to specify

it further, aligning with our research and how we will further specify its usability in this

type of industry.

The problem for the thesis relates to both the development and the criticism of

Christensen’s theory. In the 2006 article, Christensen (2006) discusses how his model for

theory-building is built upon two major stages; the descriptive and normative stage. The

descriptive stage needs to be completed before developing a normative theory; in the

process of building theory there are three steps; observation, categorization and

association (see Christensen, 2006:40). In relation to this, Christensen (2006) discusses

the importance of anomalies – outcomes which the theory cannot account for. Christensen

(2006) believes that these are triggers for improving theory by testing it to various

contexts and reducing ambiguity. When Christensen created his theory, it originated in

the disk-drive industry as descriptive research. He believes that his transition to

normative theory started in 1996 (Christensen, 2006). Acknowledging the superiority of

the predictive power of normative theory this was his reason for transitioning

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(Christensen, 2006: 42). Furthermore, he also argues that normative research can be used

to resolves anomalies and further develop the theory, one way to do this is to ask “What

was it about the situation in which those managers found themselves that caused the causal

mechanism to yield an unexpected result?” (Christensen, 2006: 43).

It was in this transition where we believed that most of the criticism rose for Christensen

theory. Following Hume’s Law; there is a significant difference between what is and what

it ought to be, which we believed Christensen had been subjected to. The theory was

satisfactory in its descriptive state and successfully worked to understand why certain

events occurred in industries like the disk-drive industry. However, as he started to

suggest that the theory also could answer how one ought to do in other industries, the

criticism rose and he was forced to defend his theory against scholars (e.g. Lepore, 2014).

One of the more substantial criticisms which Christensen has been subjected to is that he

uses “hand-picked” cases in his research which only complies with his theory (Danneels,

2004; Gobble, 2015; King & Baatartogtokh, 2015; Lepore, 2014; Markides, 2006; Tellis,

2006; Sood & Tellis, 2011). Christensen (2006) is aware of this criticism that he

supposedly avoids anomalies, however argues that it is not valid. Christensen (2006)

argues that the purpose of deductive theory building is finding anomalies, not avoiding

them – as this is how his theory improves, e.g. the change from disruptive technology to

disruptive innovations was based on an anomaly. He argues that we cannot judge the

value of a theory based on its ability to ‘tell the truth’, but instead based on the

understanding it provides us with. Furthermore, discussing the aspect of how revisions

can discredit his theory, to this he argues that this would not be the case (Christensen,

2006: 51). He explains that to the people who see this as a weakness does not understand

the theory-building process. Lastly, he urges subsequent researchers to uncover the

anomalies of a prior scholar’s work, as they would be considered a triumph for both, since

it opens an opportunity to improve on the theory. As for his work, he would be honored if

other scholars could identify anomalies to the theory of disruption which has not been

accounted for before (Christensen, 2006: 54).

1.2.1 Problem statement

In our thesis we are investigating Christensen’s theory in aspects such as the

understanding and conceiving of disruptive innovation, the role of customers and actions

of incumbents. Based on these aspects we problematize Christensen in a new context in

search for an anomaly which he has not previously accounted for by investigating an

incumbent in the paper- and packaging industry. Nowhere have we found a case of

Christensen which clearly resembles the paper- and packaging industry (see examples in

Christensen & Rosenbloom 1995; Christensen, 1997a; Christensen et al., 2018). It is

possible to claim that the case in the steel industry was similar, however we argue that it

is not due to the following reasons. As Christensen decided to explore the industry with

an innovation that relabeled part of the industry to the ‘mini-steel-industry’ it did change

the characteristics of the large process industry, e.g. large production plants, expensive

machines and massive volumes. In Weeks (2015) research he explains how many of

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Christensen’s observations in the industry were accurate, e.g. large mills failed, unable to

open mini-mills. Lepore (2014) found that the unit of analysis was an issue in the case, it

is unclear if it was due to the industry, a specific firm, or other factors that it disrupted.

Weeks (2015) further explains how scholars still ponder on why the U.S steel industry

still survived, while so many others failed. Especially since they never adopted disruptive

innovation. With this remaining ambiguity for the steel industry, we argue that our

investigation in another process industry is still justified as a new industry.

Based on the framework for our problematization (Locke & Golden-Biddle, 1997), the

objective is to treat Christensen’s work as incomplete in search for anomalies in our

context which further specifies the theory. The idea is not to classify the theory as

irrelevant or useless, but in accordance with Gobble (2015) define limitations of the

concept. Christensen, et al. (2015:4) explains how “…managers may end up using the

wrong tools for their context, reducing their chances of success “, however that brings the

questions; what it is the wrong context? One way to test this theory is to apply

Christensen’s theory to a new context, the paper- and packaging industry. By reviewing

components of the disruptive innovation theory, the thesis contributes to the innovation

management field by discussing and offer suggestions for its further development.

1.3 Research Aim

This research tests the validity of Christensen’s theory in the context of a specific process

industry – paper- and packaging. The paper- and packaging industry is changing, both in

terms of competition but also demands from customers. The theory can offer guidance for

how to deal with discussions about innovation projects as well as relationships between

incumbents and entrants. By applying his theory, we will be able to investigate its

usability to discuss how well it complies with the setting, this is especially relevant since

it has been criticized for only being tested in specific contexts. We will contribute to the

research of this claim by investigating the theory in a process-industry, namely the paper-

and packaging industry.

The aim of the thesis is to investigate Clayton Christensen’s disruptive innovation theory in

order to problematize it in a new context, the paper- and packaging industry. This will be

done by discussing how individuals understand and conceive the term disruptive innovation

and also discuss Christensen’s Innovator’s Dilemma in relation to how incumbents tend to

manage their innovation projects in the industry.

1.4 Research Questions

Based on the research aim of the thesis, we will elaborate on two research questions

which will enable the research into Christensen’s theory. The first question concern how

‘disruptive innovation’ has been understood and discussed in the industry, but also how

a common understanding of the concept could become more valuable. Bryman and Bell

(2015) explain that the definition, as any definition, will only be as good as in the context

by which it is used. Therefore, when discussing how individuals in the paper- and

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packaging apply the word will be valuable not only for the theoretical research aim, but

also for the involved respondents. We disclose how the individuals apply and also reflects

upon the word. Being right or wrong does not always matter, however if the word creates

confusion and misunderstanding is relevant for the research.

RQ1: How are individuals in the paper- and packaging industry understanding and

conceiving disruptive innovation and why a common understanding is valuable?

Connecting this question to the purpose, it will not offer foundation for the thesis which concerns specifically validating Christensen’s theory. However, it does offer an example if individuals share a common understanding of the implications with this type of innovation. They might not argue or discuss this disruptive innovation per Christensen’s definition; although, they might conduct this type of innovation nonetheless. By implementing this research questions, we are able to problematize upon the conception of disruptive innovation and investigate whether Christensen’s definition has been established within the industry. However, Christensen, et al. (2004) believe that theory should be used to predict a certain outcome. Therefore, in order to get the desired outcome, you have to understand the theory you intend to use (Tidd, et al. 2005). From Christensen’s definition of disruptive innovation, he also builds his theory, therefore, collecting insights from an incumbent actor, and two brand-owners, in the industry about how they manage their innovations projects constitute our second research question. Understanding the relationships in the market and how external forces influence their decisions enables us to discuss how we believe that Christensen’s idea, e.g. the innovator's dilemma, can apply in the industry. RQ2. How is Christensen’s concept The Innovator’s Dilemma applicable in the paper- and packaging industry and does it influence how actors manage projects?

1.5 Delimitations

In this research we have set some delimitations:

• We will base our empirical data on the collection from one producer in the paper- and

packaging industry. From this actor we have interviewed eight individuals, some with

similar job descriptions, but together a wide range of expertise.

• We have interviewed two separate brand owners from the value chain which act in

retail. Limited to our time-frame and investigating as independent researchers some

of the excluded respondents were not available in the set time-frame of the thesis.

• For the selection of candidates for the brand owners interview we opted to only select

actors who had been previously discussed with the respondents at the case company.

Having interviewed more could have been fruitful, however limiting our search of

external respondents after the answers in the interview enabled us to focus our

attention towards the brand owners which was believed to be most important for the

project.

• In order to give Christensen’s theory our full attention, some other authors were

excluded in the literature review. The selection of other authors theories was due to

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their relation to Christensen in form of critique or other perspectives about his

theory.

1.6 Disposition

The thesis will be conducted in accordance to figure 1.

Figure 1. The disposition for the upcoming part of the thesis.

For the upcoming part of the thesis, the first section is the Literature Review. The section

consists of a more comprehensive description of the development of disruptive

innovation and the notion of Innovator’s Dilemma and Solution. Followed by the (mis-)

understanding of the word disrupt and different perspectives on where it can be used.

After that, we review main components in Christensen theory regarding, incumbents and

entrants as well as customers. Lastly, criticism of Christensen’s research is presented.

The methodology describes the strategy, approach and implementation of the thesis. We

also elaborate on the quality of the research and the data collected. Lastly, we discuss the

ethical considerations and implications of the research.

Empirical Findings consist of the presentation of the industry and the answers of the

respondent, the case-company, and two anonymous brand owners. It is structured to first

present the reader to the background based on literature and articles. It then transcends

to the primary data collected by the respondents as we describe the current shift in the

packaging industry, the understanding of disruptive innovation, what it means to be an

actor in the industry and the role of the customer.

Discussion is structured to answer the research questions. Based on the empirical

findings and the literature review we will engage in an in-depth discussion answering the

research questions. The discussion is constructed with an inductive approach where the

focus is to present and discuss how the respondent’s answers compare and distinguish

from the existing literature with the main focus on Christensen.

Conclusions contain the discussion of the research purpose. It also provides the final

remarks for the theoretical and practical and managerial contributions. Lastly, limitations

and future research potential are elaborated upon.

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2 Literature Review

2.1 The development of disruptive innovation theory

The concept of disruptive innovation theory was first introduced by Bower and

Christensen (1995) in 1995 when they researched the disk-drive industry (Christensen

et al., 2015; Gobble, 2016; King & Baatartogtokh, 2015; Nagy et al., 2016; Schmidt &

Druehl, 2008). Christensen’s theories are built upon the trajectory chart from that

industry (see Christensen, 1997a: xvi, 16; Christensen & Raynor, 2003: 33,44;

Christensen, et al. 2004: xvi). Christensen, et al. (2018) describes that as the first

interviews with the disk-drive managers were conducted, the managers discussed the

concept resource-allocation process which is known for favoring sustaining innovation

(Bower, 1970). This meant focusing on new product development which offers high

margins by targeting large markets with identifiable customers and deprioritizing smaller

markets with less defined customers. Another theory which also emerged was common

resources-dependency theory which meant that businesses were dependent on their

most critical resources (Pfeffer & Salancik, 1978), in this case customers. Moreover, by

anchoring his theory in existing theory he developed his concept - Disruptive

Technologies. In this research they claim that there was a consistent pattern in why

leading companies failed as technology and market changed. This pattern was

exceptionally consistent in the disk-industry as incumbents lost their positions to changes

in technology (Bower & Christensen, 1995).

When Christensen (1997a) released The Innovator’s Dilemma in 1997, the focus was on

technological problems for the incumbent. He explored how new technologies came to

surpass the previously greater technology (Markides, 2006). The disruptive innovation

process is known to follow a particular road from ‘low-end, or new, market to the

mainstream market’ and will be considered disruptive regardless if the incumbent fails or

not (Kumaraswamy et al., 2018; Yu and Hang, 2010). Danneels (2004:247) argues that

disruption is usually associated with the replacement of incumbent against entrant,

however Yu and Hang (2010) believes that this is not always the case as incumbent firms

can usually move upwards to the high-end market where there are more profitable

customers. Christensen, et al. (2015) further explains that the disruption process is very

different depending on the industry, and will affect firms differently contrary to what

many believe. One issue of the concept is connected to the term itself (Danneels, 2004;

Schmidt & Druehl, 2008; Sood & Tellis, 2011). Researchers suggest that businesses and

markets can be “shaken” or “drastically change”, without being a ‘disruptive innovation’

in Christensen sense (Danneels, 2004; Schmidt & Druehl, 2008).

Disruptive innovation theory consists of two different kinds of innovation; sustaining and

disruptive innovations. Schmidt and Drugehl (2015) claim that it is crucial to understand

the difference between these in order to understand Christensen’s perspective. Sustaining

is believed to make a good product better for the incumbents existing customers, these

improvements can be both incremental and radical however always are believed to sell

9

more to their most profitable, mainstream customer (Christensen et al., 2015; Christensen

& Rosenbloom, 1995). Furthermore, these improvements usually correspond with a

feature which the mainstream customers care most for, enabling sales with higher

margins and profitability.

Disruptive innovation is however rarer. When introduced, disruptive innovation is

inferior in the attribute which the incumbent is currently offering, however it offers a

mixture of attributes which appeal to smaller customers groups, often those closest to the

bottom of the market (Markman & Waldron, 2014; Tellis, 2006). Christensen, et al. (2018)

argue that they may be; smaller, cheaper, more accessible, or perhaps more convenient

than the incumbents offer (Tellis, 2006). Tellis (2006) then argues that it would be

irrational for incumbents to invest their resources in this market. Christensen, et al.

(2018) explains that incumbents are unmotivated to develop innovations which promise

lower margins, smaller markets and inferior products which would be unattractive for

existing customers. It is believed that incumbents would outperform an entrant with an

innovation in the mainstream market but underperform in a disruptive context

(Christensen, 1997a; Christensen et al., 2018). Disruptive technologies would rarely be

introduced to an established market, instead they are valued in remote or emerging

markets. However, as the disruptive technology gets a foothold in the low-end market it

will develop until it meets the standard of the mainstream market. This in return leads to

a shift of mainstream customer to the new innovation and disruption has occurred

(Christensen et al., 2018; Markides, 2006). Christensen (1997b) explains how the

disruptive innovation tends to be developed in a higher pace than the sustaining

innovation in order to serve the mainstream customer, and that is because the market

demand usually changes slower than the development speed of a disruptive innovation.

King & Baatartogtokh (2015) however criticizes this remark on the foundation of experts

which state that a sustaining innovation can also be too slow to keep up with what the

mainstream customer demands, e.g. how improvement in wood materials fails to keep up

with construction requirements.

However, there is an issue with the definitions, Christensen (1997a) explains that while

innovation may be disruptive for one group it could also be sustaining for another (Adner,

2002; Christensen & Raynor, Danneels, 2004; Schmidt & Druehl, 2008). King and

Baatartogtokh (2015) found many cases which did not include sustaining innovation as

Christensen had suggested. One example was about local butchers. They did not work on

a trajectory of innovation, instead they kept the tools and practices which had not been

changed for ages. Still, local butchers were replaced due to other aspects.

10

2.1.1 Disruptive and radical innovation

Yu and Hang (2011) believe that it is crucial for managers not to confuse disruptive

innovation with radical innovation. There is no standard accepted definition of what

radical innovations is, researchers have defined it in numerous ways, and it is hard to say

precisely what characteristics a radical innovation has. Garcia and Calantone (2002) have

examined the extant literature on radical innovations and their result is a comprehensive

review of different definitions. They found that there are common features, e.g. new

technology is pursed and markets, new innovation fulfills key customer needs

substantially better than the existing solution (Chandy & Tellis, 1998). Bessant et al

(2014) argue that radical innovation involves a high degree of uncertainty, activities

include exploration where the established competence and knowledge cannot be used -

external inputs are often necessary. Tidd and Bessant (2014: 25) argues that radical

innovation concerns doing something differently. Pham-Gia (2010) claim that radical

innovation changes the market fundamentally by launching breakthrough novelties. It

requires new competencies which might destroy the existing competencies of the

company. It is commonly believed that radical innovation involves high risk and

uncertainties which generally make incumbents to choose to invest in low-risk

incremental innovations. However, to survive over the long-term firms they would need

to pursue radical innovations project to build new growth (Pham-Gia, 2010). Radical

innovations are by nature a discontinuity to the experience of the organization, this type

of development is outside the regular innovation management competencies which imply

that organizations have to absorb new dynamic capabilities (Bessant et al., 2014). While

radical innovation is often perceived as high risk, at the same time it should be elaborated

as an opportunity that can create long-lasting positive effects. It became clear that firms

have to respond to risks and opportunities in order to reap the benefits of radical

innovations (Story et al, 2014). Pham-Gia (2010) explains radical innovation by several

key points which contribute to a clear understanding of the concepts. (1, Emphasis),

radical innovation should emphasize the development of new business, products or

processes that change the market radically. (2, Degree of novelty), is high due to the

explorations of new technologies. (3, Impact on business), creates rapid growth in the new

market over the long term. (4, Uncertainties), uncertainty is perceived high. (5,

Trajectory), the development follows a sporadic and discontinuous path. (6, Business

case), the business model is evolving through discovery-based learning. (7, Process), in

early stages when uncertainties are high, informal and flexible processes should be used.

In later stages when the degree of uncertainties is low, the process should become formal.

(8, Resources and competencies), internal and external competencies and resources should

be acquired (Pham-Gia, 2010).

Disruptive innovations share some of the features that radical innovation has, but it

depends on how we chose to define radical innovations. Yu and Hang (2008) found that

there is high uncertainty and challenging to create disruptive innovations, especially if it

was based on a new scientific discovery. This finding is in coherence with that radical

innovations is believed to have high technology uncertainties. The main difference

11

between disruptive and radical innovation is how companies decide to launch it and to

whom. Disruptive innovations by definition should target the low-end market or new

market where other types of customers’ needs and demand have to be addressed

(Christensen et al., 2015). Radical innovation is pursuing to deliver superior value to

existing customer-base (Chandy & Tellis, 2000). Disruptive innovations encourage that

new business model and value propositions should be developed (Christensen et al.,

2015), but radical innovations can make use of the existing business model or some

researchers believe that it can be developed in some aspects (Pham-Gia, 2010). However,

researchers depict a disruptive innovations R&D strategy that can be developed with

existing competencies and knowledge while radical innovation requires a new type of

competencies (Bessant et al., 2014; Yu & Hang, 2010). Govindarajan, et al. (2002) found

that firms that have mainstream customer orientation are more likely to introduce radical

innovations but less likely to do so with disruptive once. Simply because those type of

firms serves existing customers. On the other hand, firms that had emerging customer

orientation was more prone to develop disruptive innovation, because they seek a new

type of customer groups. The results imply that the type of orientation the firm's select

lead to loss of a certain type of innovations.

Tidd, et al. (2005) argue that if innovation is defined differently between individuals the

results will also be perceived differently. For example, if innovation is seen as “strong

R&D-based”, the result might be unsatisfactory for stakeholders who prefer to focus on

customer needs. However, if innovation is seen as “understanding and meeting customer

needs” the output of such a process might lack technical progression. Frame analysis

theory suggests that our frame and perceptions of a situation guide how we interpret and

understands it, our beliefs, experience builds up our mental picture of the world which

implies how we tend to act (Fay, 1996; Goffman, 1974). The effect of different views has

a significant impact on the “value” you can exploit from it. That is why a clear and common

understand is necessary so companies can guide the processes in the direction that is in

line with their perspective (Goffman, 1974).

2.1.2 Overshooting and innovation technology

Furthermore, Christensen (1997a) discusses a phenomenon which he calls ‘overshooting

the market’, this implies that innovators’ performance improvements tent to exceed the

rate of improvement which the customer can absorb. This commonly occurs as an

incumbent produce something too advanced, an over-featured product which the

customers do not necessarily need. This in return leaves a gap at the low-end of the

market which would be interesting for entrants (Christensen et al., 2018). Being able to

detect overshot customers, saturated customers, is an important objective for an entrant

(Schmidt, 2004). The entrant can offer “good enough” quality in an attribute which is

important for the mainstream customer while focusing more on the development of

another (Christensen et al., 2004; Gobble, 2016). The fact that there are products which

are “too complex, expensive, complicated” also implies that there will be a customer group

which is not attracted to the solution, typically in the low-end market, which is where the

12

disruptive innovation would be implemented (Gobble, 2016; Schmidt & Druehl, 2008).

What is vital for the customer will always be changing which makes it hard for incumbents

to avoid this phenomenon (Christensen et al., 2004). One example of overshooting is if the

functionality is overshot it would not be reasonable to keep competing on functionality

and they should instead focus on sustainability for their next development (Christensen,

1997b). King and Baatartogtokh (2015) however argue that the assumption which

Christensen does is to suggest that there is an apparent rank of product attributes for

customers making them switch to another product when they are overly met, which they

argue is not true. They have found that many cases where incumbents firms fail due to

disruptive innovations; however, were never are even close to overshooting customers in

the way which Christensen states (King & Baatartogtokh, 2015).

Furthermore, Yu and Hang (2008; 2011) have researched the occurrences of disruptive

technologies, not to be confused with disruptive innovation, and explains that it can be

extremely challenging. They found that literature often assumes that this type of

technology just happens, however this is not always the case. They argue that

Christensen's have taken this aspect of the theory too lightly and not adequately

researched it. Another thing which Christensen discusses is the natural response that if

an entrant would try to establish a product in a high-end or mainstream market the

incumbent will pick up the fight and compete hard in order to not lose their best paying

customers (King & Baatartogtokh, 2015; Schmidt & Drugehl, 2008). King and

Baatartogtokh (2015) have found that other factors can affect why incumbents compete

in a high-end market. They found in 77 cases that many displayed factors such as the

appearance of substitutes, low barriers to entry, and increases of competitors can turn

profitable industries into profitless deserts. Markides (2013) further explains that for

disruptors to have a chance of winning against incumbents, they must invest in improving

the performance while maintaining their significant cost advantage over the sustaining

innovations. How successful they will depend greatly on the source of their cost advantage

and how sustainable it will be. Working against incumbents is not easy, if they noticed an

entrant which lower their costs, they would reduce as well. If the cost advantage is a factor

like low labor costs or a re-engineered product which requires cheaper or fewer

components, the incumbents can often find ways to tackle these threats. Nagy, et al.

(2016) also explains that one issue with the theory is that data, which only is generated

when a disruption has already taken place. Making the data less important as there was

nothing, they could to do prevent disruption from happening.

2.1.3 The Innovator's Dilemma

The concept of The Innovator’s Dilemma first was introduced in Christensen’s book The

Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail in 1997. The book

was about how large well-functioning and profitable companies tended to lose the battle

against technological changes (Christensen, 1997a). Following generic conclusions from

researchers about the how the world has become more complex, uncertain and dynamic

(Kim & Lee, 2017; Oliver & Parrett, 2018; Pérez-Luño et al., 2011; Martin, 1996; Zhan et

13

al., 2018), there was a keen interest back in the late 20th century for a way to cope with

all these changes, one which Christensen offered (Christensen, 1997a).

Thus, bringing us towards the Innovator's Dilemma. It builds upon the idea that incumbent

firms listen too carefully to their main customers and are unable to detect as disruptive

innovations are coming from low-end or new markets. One interesting remark is how

Christensen (1997a) does not criticize the firms in the way they act and instead argues

that their decisions and actions were entirely rational for an incumbent. Listening to their

largest customers, investing heavily in technology to serve them with the best products -

even when it requires completely different technical competencies and manufacturing

abilities from what the company had (Bower and Christensen, 1995). Ironically, it is

precisely these things which make incumbents lose as they are taught to act by traditional

business techniques (Bower & Christensen, 1995:47).

“Good management was the most powerful reason they failed to stay atop their industries.

Precisely because these firms listened to their customers, invested aggressively in new

technologies that would provide their customers more and better products of the sort they

wanted, and because they carefully studied market trends and systematically allocated

investment capital to innovations that promised the best returns, they lost their positions of

leadership” (Christensen, 1997a: xii)

Furthermore, what Christensen and Bower (1996) made clear is that incumbents do not

lose due to the nature of the new technology, but their strong impetus to satisfy their most

valuable customers. This results in the continuous investment of resources towards

projects which the existing customers prefer. Christensen (1997a) argues that

organizations will quickly terminate processes which customers do not value, making it

increasingly difficult for an incumbent to focus on technologies where the customers and

their market are uncertain. Additionally, Christensen and Raynor (2003) point out that as

an entrant firm introduces a new product in a low-end or new market an incumbent firm

rarely notices this, especially if the entrant manages to enter into a new market without

taking any shares of sales away from the incumbent. They further explain that even if the

incumbent would notice that the entrant takes market share in a low-end market they

would still not compete. The reason is that the low-end market does not pay premium

prices and is therefore not as attractive for the incumbent as their mainstream customer.

However, King and Baatartogtokh (2015) have found that even if an incumbent notice

what is happening, they are not always able to ‘challenge the disruptors’, simply due to

their inability. Kumaraswamy, et al. (2018) on the other hand argues that it would be

possible for incumbents to compete with the entrant by offering an equivalent innovation,

however in doing so they endanger cannibalization of their more profitable offering in the

mainstream market. Confronted with this dilemma, Christensen (1997a) argues that the

incumbent instead chose to ignore the challenger and to continue to develop their current

products. Over time the performance of the entrant will improve, while still being cheaper

and more accessible than the incumbent’s offerings and lastly disrupt the incumbent.

Govindarajan and Kopalle (2006:14) claim that there are four reasons why a disruptive

innovation would create a dilemma for incumbents. (1), the mainstream market would

14

not value the new features in the innovation when introduced. (2), the innovation would

perform poorly on the attributes which the mainstream market values. (3), the innovation

would attract an emerging or insignificant niche market. (4), the innovation would

generally offer a lower margin making the markets unattractive for incumbents.

2.1.4 The Innovator's Solution

Based on this dilemma, Christensen suggests ways of resolving the dilemma and therefore

publishing The Innovator’s Solution in 2003 with Raynor (Christensen & Raynor, 2003). A

suggestion was to create separate divisions which would handle disruptive innovations,

more commonly named ambidextrous organizations (O'Reilly III & Tushman, 2013). This

suggestion was also mentioned in Bower and Christensen (1995), but not as explicitly.

However, Christensen did make some significant revisions to his theories in his new book.

First, he chose to relabel his term disruptive technologies and instead call it disruptive

innovation (Christensen, 2006; Christensen & Raynor, 2003). Markides (2006) and Yu and

Hang (2010) explains that this revision widened the application of the theory, not only to

include technological products but also business models- and service innovations.

“In other words, [disruption] was not a technology problem, it was a business model problem”

(Christensen, 2006: 43)

Christensen (2006) then explains that technology in itself is not disruptive, it is instead

about how and to whom value is delivered. Schmidt and Druehl (2008) however had

another opinion as they claimed that the classification had to do with the characteristics

of the innovation and nothing with how the firms introduce it. This statement does not

agree with Christensen’s perspective and neither to Chesbrough (2010) who states that

creating technological innovation for success is not enough since technology in itself has

no objective value. The value comes from how it is commercialized in a business model.

Christensen, et al. (2015) explains how it is quite rare that technology would be either

sustaining or disruptive, and that it can only guide which steps to take strategically.

Finally, Christensen, et al. (2018) stated the technologies and business models intertwine.

A disruptive innovation has to be evaluated in relation to the business model of the firm,

this realization offered the conclusions that “No innovation is inherently disruptive”

(Christensen et al., 2018: 1050).

2.2 The (mis-)understanding of the word ‘disruptive’

All words which we create while researching are inherently ‘made up’ and therefore do

not have intrinsic value. However, how we choose to think and reason about words in

events and phenomenon are valuable. One word can mean many different things, however

one word in the field of innovation management which has been widely used in the last

centuries are ‘disruptive’ innovation (Gobble, 2016). Researchers argue that the word

disruption has almost come to a point where it has lost its meaning. It has been overused,

overexploited and misused and has therefore become a cliché for practitioners and

academics alike (Christensen et al., 2015; Gilbert, 2014; Gobble, 2016; Lepore, 2014).

Christensen, et al. (2015) agrees with the criticism (Lepore, 2014) that the word has

15

become a “buzzword” and has taken to many meanings. During an interview in

BusinessWeek Christensen responded to Jill Lepore’s acclaimed article, which has

ruthlessly criticized his research (see Lepore, 2014), he did agree that the word has been

used to justify whatever anyone feels like justifying. Christensen, et al. (2015) further

argues that too many use the word “disruption” without having read a serious book or

article in the subject. He states that “Many researchers, writers, and consultants use

“disruptive innovation” to describe any situation in which an industry is shaken up and

previously successful incumbents stumble. But that’s much too broad a usage” (Christensen

et al., 2015: 4). Weeks (2015) argues that the issues with Christensen work are the lack of

establishing clear boundaries of what disruption and sustaining is. Weeks (2015) then

argues that the current concept works in almost every context; almost all new

technologies will be inferior in performance in early development – does that make it

disruptive? Gobble (2015) found that Kevin Roose, in New York Magazine, has even

suggested that we should stop using the word – when everything is considered disruptive,

nothing is.

Researchers have recognized the fundamental flaw of lack of general classification as one

of the main criticisms of the theory (Danneels, 2004; King & Baatartogtokh, 2015; Lepore,

2014; Markides, 2006; Schmidt & Druehl, 2008). Michael Raynor, co-author to The

Innovator’s Solution however argues that the word disruption, as well as innovation, does

not have a technical meaning and when Christensen attached the word to his research, he

had a specific meaning in mind (Gobble, 2015). Even as Christensen himself has attempted

to clarify his meaning of the word ‘disruption’ (Christensen, 2006; Christensen et al.,

2015; Christensen et al., 2018), Nagy, et al. (2016) believes that there are still problems

with the attempts. One of the problems is the vagueness of the disruptive innovation

definition as it majorly concentrates on the market impacts. When Danneels (2004)

investigated the theory, he also finds that the same issue arises, even with its widespread

use of the term there is still a lack of clear understanding as for what constitutes the term.

Furthermore, Nagy, et al. (2016) argues that in order to claim ownership of the term

‘disruptive innovation’ they would first need to offer a clear definition of what disruptive

innovation is. Gobble (2016) builds upon this argument as she writes that without a

consistent definition, academics and practitioners will be influenced by either an

ontological conflict, i.e. the nature of disruptive innovation, or an epistemological, i.e. the

knowledge surrounding disruptive innovations and the difficulty of agreeing about what

is being studied. Gobble (2016) argues that many researchers, writers and consultants

use ‘disruptive innovation’ to describe any situation where the market is shaken up or

when an incumbent stumble. She then suggests that much of the problem with disruptive

innovation comes for the broader meaning of ‘disrupt’ and ‘disruptive’ in the English

language. She believes that disrupting or causing turmoil can also be an understanding of

the term. Christensen (2006) also believes that disruptive has many connotations such as

“failure” or “radical” in addition to his phenomenon. Both Gobble (2016) and Schmidt and

Druehl (2008) argues that it is possible to argue that an innovation can disrupt a market,

without it being a disruptive innovation in accordance to Christensen (1997).

16

2.2.1 Different perspectives on disruptive innovation

From literature various definition of disruption has been provided, one definition by

Christensen, et al. (2004: 293) is ‘‘an innovation that cannot be used by customers in

mainstream markets. It defines a new performance trajectory by defining new dimensions

of performance compared to existing innovations. Disruptive innovations either create new

markets by bringing new features to non-consumers or offer more convenience or lower

prices to customers at the low end of an existing market”. However, there are many

attempts at defining the term, many which show similarities to each other. In table 1, we

present some of these definitions.

Table 1. Different definitions and scholars with similar perspectives.

There are also scholars who research disruptive innovation but does not offer their

definitions of it (e.g. Kassicieh et al., 2002; Laplante et al., 2013; Markides, 2006 and Yu

and Hang, 2010). Moreover, some which do not comply with Christensen’s views at all

when discussing disruption. Kilkki, et al. (2018) explain that in the literature about digital

disruption there are almost no connections to Christensen. Damanpour (1996) discusses

it as a process which significantly eradicates practices in existing organizations by making

fundamental changes to its activities, Leifer, et al. (2001) defines it as a new service or

process which have non-existing or existing characteristics which improve key

performance or decrease costs. Assink (2006) believes that disruptive innovations mostly

arise by combining various emerging smaller ideas, trying to challenge suppositions that

have been there before, widening boundaries, spotting customer needs that have not been

discovered, trying new challenges, doing the unthinkable and challenging our state of

minds. It is a critical and interacting way of getting feedback and learning. Differently to

the increasing process of innovation, e.g. concepts of stage-gate and linear, disruptive

innovation look like a continuous development process that is circular and spiral. This

disruptive innovation is dependent on a system that is built on dynamic and systematic

17

thinking with learning as its core aspect. They affect already businesses in place and bring

in tremendous opportunities that eventually make the profits to grow (Assink, 2006).

In Kilkki, et al. (2018) research they take a conceptual style based on the idea of disruption

to give a definition that can be used in all fields without limitation to the business sector.

As defined in the Cambridge dictionary, disruption means preventing something mostly a

process, system or an event from its normal procedure. Therefore, an agent who

interrupts the activities of their counterparts is termed as a disruptor. Agents who are

disrupted such as by Yu and Hang (2008) and Christensen (2013) are referred to as

disruptees. This means that one can be a disruptees, a disruptor or a neutral party based

in the concept of disruption (Kilkki et al 2018). Brown (2003) however takes disruptive

innovation to social perspective and states that it changes the way of life in terms of social

activities, learning and work. It needs splitting conceptual frameworks, problem

restructuring and digging deeper into its causes. In his paper, disruptive innovation is

defined as through new process or concept that has been used successfully to make

significant changes to the demands and requirements of a market or industry that already

exists and creates new business markets or practices in whole by disrupting its past key

players with significant impact to the society.

2.3 The behavior of the incumbent firm

Christensen (1997a) explains that incumbent firms tend to invest where the return is at

its highest. However, what this leads to is that incumbents become rigid and stuck in their

current processes which in return makes them more interested in developing their

current processes than taking on disruptive innovations (Obal, 2013). Initially,

Christensen and Bower (1996) observed how established firms chose not to allocate

resources to disruptive innovation as they were unappealing for their existing source of

income, existing customers. Even so, empirical research has suggested that incumbents

have tried to cram disruptive technologies in their current processes, although this has

only resulted in changing the nature of the disruptive innovation into a sustaining one and

therefore neutralizing the disruption (Christensen, 2006; Christensen & Raynor, 2003;

Christensen, et al. 2018). In comparison, the entrant is considered more flexible and eager

to seize opportunities and being motivated to make current technology extinct, which

gives them an advantage while developing disruptive innovations (Obal, 2013;

Christensen, 1997; Tushman & Anderson, 1986). It is suggested that most of discontinues

change and innovations are developed by entrants (Christensen & Bower, 1996; Tushman

& Anderson, 1986). Macher and Richman (2004) argue that entrants outperform

incumbents due to its smaller sized, shorter history and less limited commitments to their

current networks and technologies. However, the path of the entrant is not always easy.

Kumaraswamy, et al. (2018) explains that there is often a significant challenge in gaining

access to the resources which are held by the incumbents, especially if they would

challenge them in their most profitable market.

The main issue which is often discussed in the relationship between incumbents and

disruptive innovations is how they are believed to be ill-suited for each other (Christensen

18

& Rosenbloom 1995, Christensen 1997a, Tushman and Anderson 1986). The reason is

believed to connect with behavior and that incumbents are usually trapped in their core

rigidities and organizational myopia (Leonard-Barton, 1992; Levinthal & March, 1993;

Kumaraswamy et al., 2018). The organizational inertia is believed to come from

structured routines as well as traps in their existing competencies (Leonard-Barton,

1992). Christensen, et al. (2018) explains that the core rigidities of incumbents are

dependent on how the managers would frame the innovation; as a threat or opportunity.

Gilbert (2005) explains that framing the disruptive innovation as a threat often leads to

more allocation than for an incumbent to when considering it an opportunity.

Christensen and Bower (1996) found that incumbents tend to focus on the processes

which improve the offering to existing customer and therefore making it difficult for

managers to shift their investments towards disruptive innovations. However, on the

contrary Henderson (2006) have found that arguing the incumbent firms are ill-equipped

to handle disruptive innovations is not always the case. It is possible to sometimes the

incumbent did identify the needs of the low-end or new market, however they lacked the

market-related competence in order to serve these customers.

2.3.1 An explanation based on the Resource Dependency Theory

One way to explain the rigidness of the incumbents and their inability to act upon

disruptive innovations comes from resources dependency theory. Christensen and Bower

(1996) found that a firm’s strategic intent often is bounded by their interest of external

entities, e.g. customers, which provides the firm with resources they need to survive. They

explained that customers wield power to direct the investments of firms which results in

sustaining technologies that address their needs. Based on this theory, incumbent firms

will, and should not, direct their resources towards markets where estimated early

potentials are low (Bower & Christensen, 1995; Christensen et al., 2018).

Cost structure

One of the rigidities can be connected to the concept Cost Structure (Christensen, 1997a).

Bower and Christensen (1995) explain how a firm's income and cost structure plays a

vital part in the decisions whether or not to develop technological innovations. The

incomes which incumbents can expect from a low-end market are usually low and

therefore it is hard for them to estimate how much they could earn. This in turn implies

that an incumbent firm which has spent many resources in establishing and developing

their current processes will have significant challenges when they attempt to handle a

disruptive innovation. It is considered as ‘not meaningful’ and thus rarely happens.

Christensen, et al. (2018) argues that changing the cost structure to something which does

not provide the mainstream customer with better products are not typically not valued in

incumbent firms. Furthermore, it is known that incumbent firms tend to have more

resources allocated to sustaining innovations rather than disruptive, and when a manager

gets the choice of investing in a technology with lower earning potential versus higher

earning potential, it is usually not a hard decision.

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Allocation of resources

A premise of Christensen and Bower (1996) was that resource allocation heavily influence

how innovations can make firms fail or succeed. They describe how every day, new ideas

emerge for products, applications, processes, customer insights, and more. Many of these

proposals in turn requires human and financial resources and the innovations which

firms tend to exploit are mirrored in the patterns of resource allocations and initiatives.

Christensen and Bower (1996) made observations where the market-driven initiatives

usually are believed to provide most innovations after the demand of their customers.

Incumbent firms often were leading in these types of innovations, and where innovations

did not address this demand it was rarely funded. One important conclusion which they

drew was that an incumbent’s inability to allocate resources to technologies which did

not address their mainstream market often were the root of their failure. The entrant in

this case would have been more willing to invest in a technology which addresses a low-

end, or new market, which later invaded the mainstream market of the incumbent.

Another issue is the processes and traditional ways of conducting business. Yu and Hang

(2010) explain that even if failure is due to structure routines it is also based on key

financial variables for return (Christensen, 2006), and traditional market research

reports. These structured routines are believed to inhibit the actions of incumbent firms

and make inadequate evaluations of emerging technology projects as they occur. These

routines are hard to change when set.

However, there is not just technological innovation which disrupts incumbents. Shared

economics is regarded as being disruptive in a broader sense, which influences more than

the industry, like structural changes outside of the industry. The shared economies are

influencing the labor market, creating conflicts regarding institutional arrangements,

furthermore we see how sharing economies extends over several sectors and are believed

to give rise to more structural changes (Geissinger, et al., 2018). The message is that new

innovation not only will obsolete current innovation but also have long-lasting effects

where new industries not only can be restructured, but also many interest groups. One

explanation of why the industry can be stagnant and unable to change is due to its

previous course of knowledge, know-how, structures, processes which are not able to

follow the changes which occur in the market. The steps to quickly change your

development trajectory are expensive and complicated (Tidd et al., 2005).

2.3.2 A suggested solution for incumbents

Innovation research has found that the size of a firm is a crucial determinant regarding

R&D activities (Cohen and Klepper 1996; Tsai and Wang 2005) and it is well-known that

small firms have been considered more productive than large firms when trying to

introduce new products (Lee and Chen 2009; Lejarraga and Martinez- Ros 2008). This

research has had some impact where large firms have realized that they can keep their

flexibility if they introduce smaller business units, this is believed to make quicken up

decision-making and take more opportunities.

20

Yu and Hang (2010) explained one of the main proposals which Christensen offers in

order to solve the Innovator’s Dilemma is the establishment of ‘autonomous organization’

which independently can develop and commercialize innovations (Christensen & Raynor,

2003). The key dimensions which would separate the new organization are related to the

processes, values and cost structure instead of only separating the company in terms of

ownership structure (Christensen & Raynor, 2003). Christensen argues that it is essential

to create these autonomous organization in order to succeed in terms of disruption

(Chesbrough, 2001; King & Tucci, 2002). Christensen (2006) explained how almost every

one of the incumbents managed to maintain their industry-leading positions due to the

establishment of these organization while giving them the freedom to create a very

different model than one of the original firms. Tushman and O’Reilly (2002) also have

offered a solution the what they refer to as discontinuous innovation which is the concept

of ambidextrous organizations.

2.3.3 Why incumbents still succeed

Even if most of the previous text talks in the negative aspects of incumbent firms, some

still succeed. Some researchers explains how incumbent firms actually manage to identify

and exploit a suggestively disruptive innovation before someone else disrupts them

(Christensen and Bower 1996; Hill & Rothaermel 2003; Paap & Katz 2004; Yu & Hang,

2010). Yu and Hang (2010) explain one scenario where this is possible. When it comes to

adopting an innovation, it implies some risk and uncertainty (Rogers, 1983). To pursue a

disruptive innovation, the risk and uncertainty are believed to increase even more

(Danneels, 2004). From the uncertainty, the potential buyers will sometimes be less

interested in buying this new product and doubt its usefulness. Acting as a nervous buyer,

the customer will communicate with others (Katz & Tushman, 1979) and from these

interactions the buyer can be convinced whether or not to adopt the new technology. This

is generally better for incumbents who have longer-lasting relationships with the buyer

built on trust (Pavlou, 2003) and thus disruptive innovation can be avoided.

Kumaraswamy, et al. (2018) explains further that having a past is not necessarily a bad

thing. Being established can be a resource which can be productively efficient and useful

when exploring and exploiting new ideas.

Bergek, et al. (2013) also offers a suggestion for why Christensen’s theory does not always

apply and why incumbents tend to succeed. They develop the notion of “creative

accumulation” which concerns how incumbents can develop technologies, acquire new

and integrate technology by building on existing knowledge rather than replacing it. They

believe that firms need to concurrently develop existing knowledge while they integrate

new. Furthermore, they mention how other researchers argue that incumbents may fail

since they are burdened with core rigidities and are unwilling to invest in new

technologies; however, they challenge this assumption. They argue that the theory tends

to overestimate the ability of entrants to disrupt incumbents and also underestimate the

incumbent’s possibility to integrate and apply new technologies. They also explain how

incumbents are able embrace technological discontinuity and drive changes in mature

21

markets. Furthermore, they argue how creative accumulations can create barriers to

entry, making it challenging for entrants to enter the market. What happens is that

entrants cannot match the knowledge and experience of the incumbent and face big

challenges when competing for the mainstream market. Also, the extensive knowledge of

the incumbent hinders the entrants for developing and upgrading their technologies in

the same speed. When they conducted their research one of their cases was regarding gas

turbines and the failure which was the result from following Christensen theory. This

particular scenario included very high unit costs for machinery and facilities, and the

extensive number of tests to develop the turbines. When investigating this they also

noticed that the primary attribute was efficiency, and when they tried to follow “the

strategy of disruptive innovation” according to Christensen and underperformed on this

attribute, they instead failed. Overshooting at the key performance attribute was not an

option in this industry.

2.4 The role of the customer

One of Christensen’s components when discussing disruptive innovation theory is the

role of the customer. The main idea originating from Bower and Christensen (1995: 50)

is how “customers are reliably accurate when it comes to assessing the potential of

sustaining technologies, but they are reliably inaccurate when it comes to assessing the

potential of disruptive technologies”. In the Innovator’s Dilemma, Christensen (1997a)

discusses the relevance of addressing different customers. He explains how incumbent

firms tend to listen to existing customers when creating new product and therefore guides

the allocation of resources for managers. Research has also indicated that incumbents

which decide to consider their existing customers in the same way as they would potential

customers increases their risk of failure due to innovations (Christensen & Bower, 1996).

However, disruption innovation theory has been helpful for practitioners due to several

factors regarding customers (Reinhardt & Gurtner, 2011). For one, it is believed that new

technology is implemented more successfully due to their stronger awareness for

emergent markets (Clark, 2003). Second, it helps firms to focus on future markets (Tellis,

2006), thus avoiding market myopia. Lastly, it has increased the ability to enlarge firms’

current market; either by attracting new customers or by boosting the consumptions of

existing customers.

Danneels (2004) discusses a weakness of incumbent firms which he refers to as ‘the

customer competence’, which concerns the challenge of identifying customer groups

which they have not served before. Christensen and Raynor (2003) also discuss this

phenomenon where they urge incumbent managers to try and broaden their marketing

scope, look more for emerging customer needs and markets. The suggested urge of

focusing more on the emergent, low-end, or new-market directly relates to the

recommendation not to release a disruptive innovation to their mainstream customer due

to several reasons. Bower and Christensen (1995) explain:

“[L]eading companies succumb to one of the most popular, and valuable, management dogmas. They

stay close to their customers.” (Bower & Christensen, 1995: 43)

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“The problem is that managers keep doing what has worked in the past: serving the rapidly growing

needs of their current customers.” (Bower and Christensen, 1995: 47)

“By staying close to lead customers, as they have been trained to do, managers focus resources on

fulfilling the requirements of those reliable customers that can be served profitably. Risk is reduced

- and careers are safeguarded - by giving know customer what they want.” (Bower and Christensen,

1995: 48)

Ideas which one should consider from the quotes above is that managers are schooled to

stay close to their customers, which is rational to do. However, by only considering the

needs of the existing customers, they will only provide products which appeal to this

market. This implies an ignorance and closing of opportunities in new, or emerging,

markets. Hamel and Prahalad (1994) explains this as “the tyranny of served market”, and

refers to the downsized effect of eagerness to current customers. They argue that it is

necessary to address their existing customers, however it is equally important to learn

about the customers which they have not served yet. Govindarajan, et al. (2011) has found

that firms which over-rely on their existing customers are usually less innovative and

detracts from ‘true innovation’ and thus limiting their possibility of discovering novelty

(Utterback, 1994). Christensen and Bower (1996) also believe that listening to keenly to

existing customers may result in losing a market position. This is because resources are

generally allocated to the current customers, which derives sustaining innovations and

disregards market positions in smaller markets which are not favorable for an incumbent

(Govindarajan et al., 2011; Pérez-Luño & Cambra, 2013; Reinhardt & Gurtner, 2011;

Utterback, 1994). Slater and Narver (1998) further argue how customer-orientation

generally leads to incremental development efforts, blurred R&D programs and

unfocused business processes. Christensen and Bower (1996) support this argument as

they discuss the over-reliance on the existing customers, however, they also agree that

this is fundamental for modern marketing. The problem comes as management

consequently relies on the customer input for deciding if they should develop a product

or not. It decides where to invest, which technology to launch, which value chains to

develop, and more. Bower and Christensen (1995:43) believes that questions such as ‘Do

the customer want it? How big will the market be?’ have to be answered before having

any chance of moving forward. This approach assumes that the customers know what

they want, here and now. They will have an immense difficulty to identify future

technologies. Firms will miss weak signals, events about promising technologies

innovation which could potentially change market and industries (Christensen, 2006;

Tidd et al., 2005).

2.4.1 The mainstream customer and the emerging customer

Govindarajan, et al. (2011) explains that a mainstream customer orientation can be

defined as how a company decides to serve their existing customers through obtaining

their information and coming up with products that satisfy their anticipated and current

needs (Slater and Narver, 1998). Since mainstream customer orientation focuses on

understanding customer needs both current and anticipated, it involves both reactive and

proactive components outlined by Narver, Slater and MacLachlan (2004). Hence, a

23

mainstream customer orientation can develop innovative products, if they are focused on

the current customer base. Those firms that only have mainstream customer orientation

are limited by their search scope as their environment only involves those customers

whom they have had prior experience or transaction with. A mainstream customer

orientation leads to the search for those innovation opportunities that are present in the

current firm’s environment (Atuahene-Gima & Ko, 2001). The ability of a firm to serve its

current pool of customers is created by various market-related resources, which have

been customized to address the customers through their experience with them (Danneels,

2002). However, there is a trap associated with this customer competence as there is

certainty of positive returns (Danneels, 2007; Levinthal and March, 1993; Levitt and

March, 1988). There is a considerable pull of the mainstream customer base of the firm.

Indications of its needs are clear and offer strong motivation for product development

(Christensen, 1997a). There is the creation of scanning and resource allocation traps by

the mainstream customer orientation as mainstream customers give much concern on the

firm and provide an incentive in resource allocation. This is in line with Christensen’s

findings (1997a; Christensen and Bower, 1996) where he argues that firms are more

reluctant to invest in radical innovations as long as they address the mainstream

customers demand.

When considering the opposite of the mainstream customer, Christensen (1997a) refers

to them as the emerging customer. Govindarajan, et al. (2011) explains that a disruptive

innovation would underperform the attributes valued by the mainstream market, they

would instead appeal better to the emerging customers. Emerging customers should not

be the main focus of a firm; however, their potential significance should always be

considered. Having an emerging customer orientation focus implies not having well-

identified knowledge about customer needs nor the market (Christensen, 1997a). It also

involves the setting aside financial and human resources to work research and collect

information about these new customers (Danneels, 2003). More, it requires the firm to be

receptive to weak signals without being in the markets (Govindarajan et al., 2011). Lastly,

it entails investigating in the firm’s current customers and evaluating who they are and

who they could be (Day & Shoemaker, 2005).

However, Danneels (2003) argues that there should be a balance between the inclusion

and exclusion of customers. He believes that tight paring with customers brings a greater

understanding of their needs, thus resulting in greater customer satisfaction, easier

forecasting of demands and closer relationships. However, loosely collaborating with

customers does enable flexibility for a firm; becoming more receptive to opportunities

and emerging threats. Govindarajan, et al. (2011) further argues that a firm’s innovative

capabilities can be achieved by a complementary strategy for emerging- and mainstream

customer orientation. When companies have the ability to apply both mainstream and

emerging customer orientation, they are in a better position to serve their current

customers as well as also remain vigilant on those emerging markets that they have not

been able to serve.

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2.4.2 Other customer perspectives

Thomke and von Hippel (2002: 5) writes “listen carefully to what your customers want

and then respond with the new products that meet or exceed their needs”, and explains

how this has been a mantra for many businesses. It has resulted in great products;

however, they also believe the slaving to this intonation could also be threatening for a

company. They argue that it is challenging to fully understand a customer, often resulting

in costly and inaccurate process. Even when a customer knows they want, it is still

challenging to transfer this to the producers in a precise manner. They do believe that

when applying customer innovation, it can generate tremendous value, but it is not a

clear-cut nor easy process. Slater and Narver (1998) also have found that other

researchers have believed that having a market-oriented innovation process, where

needs and wants of the market are identified, is fundamental for success (e.g. Dougherty,

1990; Quinn, 1985). Pérez-Luño and Cambra (2013) also believes that a business has to

be innovative in the way it approaches learning and tracking of customer needs.

Especially in the internal processes to improve their development and implementations

of processes to understand customers’ needs and product development (Pérez-Luño and

Cambra, 2013). Two different types of orientation are further specified below; customer-

led business and market-oriented business.

In instances where firms are highly focused on their customers, developing close

relationships for insight into their needs and demands are common. Many companies do

this in order to obtain a competitive advantage, and Slater and Narver (1998) refer to this

as a customer-led business. Slater and Narver (1998) explain how customer-led business

seeks to create an understanding of the expressed desires of their customers - creating

products and services which can satisfy their desires. The problem is however that

customer-led philosophy is often short term, high focus and fast reactivity, making drastic

changes due to switches in desires. Pérez-Luño and Cambra (2013) explains that it is

common that only incremental and trivial innovations arise from companies which are

adaptive and reactive in nature. Being in a predictable environment, the strategy is

considered a good choice for stable results. However, it also builds on the fact the asking

customers gives direct answers to what they need and demands which is rarely the case

(Slater & Mohr, 2006).

In contrast, market-oriented businesses instead refer to the scanning of the market. It has

a more long-term focus and drives by generative learning, experimenting and finding new

markets and products (Pérez-Luño & Cambra, 2013; Slater & Narver, 1998). Pérez-Luño

and Cambra (2013) more in-depth explains that market-oriented involves learning

quickly from and about various types of needs and responding in an entrepreneurial way

in efforts to deliver superior value. There is a need for firms to have entrepreneurial

orientation and experience in their culture for them to identify the latent needs of their

customers. Researchers agree that listening to a current customer is essential but

strategically insufficient (Bharadwaj et al., 2012; Christensen & Bower, 1996;

Govindarajan et al., 2011). It is necessary for firms to look for new customers and market

opportunities and their market research should focus on identifying both latent and

25

current needs in order for them to develop a competitive advantage as well as overcome

barriers to entry (Pérez-Luño and Cambra, 2013). From this understanding, a customer-

led business can be characterized as being adaptive, reactive and myopic while a market-

oriented business can be characterized as being proactive and focused on long term goals

(Pérez-Luño and Cambra, 2013).

2.5 Criticism against Christensen

Throughout the literature review, there has been critic against particular aspect in the

‘disruptive innovation theory’; however, even Clayton Christensen has been criticized

during his years as a scholar. Excluding the critic about the vagueness of the definition or

assumptions, there are other aspects which have been discussed e.g. handpicking case

studies, not being subjected to peer-reviews and quality of the research.

First, there are many academics which have discussed the suspicious choices of cases

included in Christensen’s theory (Danneels, 2004; King & Baatartogtokh, 2015; Lepore,

2014; Markides, 2006; Tellis, 2006; Sood & Tellis, 2011). Gobble (2015) explains how

Christensen has been accused of hand-picking cases which match his preconceptions

while ignoring those which contradicts his theory. Lepore (2014) takes special note to

Christensen’s remark “nowhere in the history of business has there been an industry like

disk drives” (Christensen, 1997a: 20), and arguing that it makes for a very odd choice as

the foundation for a model for understanding in other contexts. She believes that using

this case study makes a notoriously weak footing for his theory. King and Baatartogtokh

(2015) also noticed this and argued in the same as Lepore (2014), finding it strange that

he was so inspired by a highly unusual industry. Additionally, Lepore (2014) claim that

Christensen tends to ignore aspects which do not correspond to this theory. King and

Baatartogtokh (2015) also found that by interviewing experts in the field, only 9 percent

of Christensen’s and Raynor (2003) examples contained the prerequisites in their theory,

making the data questionable. Lastly, one of the more famous cases which Weeks (2015)

discusses is the iPhone and how Christensen predicted that they would fail. The

consequences of these assumptions raised severe questions with his framework. Weeks

(2015) describes it as follow:

“He originally classified the iPhone as a sustaining innovation, probably because the iPhone

wasn’t a disruptive innovation in the more tightly constructed definition of the concept (lower-

cost/lower-performing). The iPhone wasn’t cheaper, smaller, etc. It also wasn’t a product that was

“good enough” for only a subset of users. The problem with Christensen’s analysis is that the

product also wasn’t a sustaining innovation in the long line of cell phone products; hence, the

iPhone didn’t completely fit either classification (disruptive or sustaining) in the original

Christensen framework. The iPhone was a premium-priced, radical product that appealed to a

wide audience and created a new industry. The iPhone wasn’t a cell phone; it was a smartphone.

Before the iPhone, the nearest product was probably the Blackberry with its efficient e-mail

integration. However, the iPhone added e-mail, music, and other capabilities in addition to a new

user interface. This counterexample doesn’t necessarily falsify the theory of disruptive innovation,

but it does illustrate why the concept needs tighter boundaries and a recognition that some

innovations will inevitably not fit comfortably in a two-category framework.” (Weeks, 2015: 420)

26

The next critic also originates from Weeks (2015) as he argues that one real issue with

Christensen's theory is the selection of journals. Christensen’s research is rarely subjected

to peer reviews and his most influential works (Bower & Christensen, 1995; Christensen,

1997a; Christensen & Raynor, 2003) are published in books or Harvard Business Review

– which does not get peer reviewed. The disregard for peer review implies lack of proper

discussions in terms of research methodology for instance. Weeks (2015) lastly believes

that if Christensen had been more peer-reviewed it could have helped him to refine his

concepts in disruptive innovations and improve upon the theory.

In response, Christensen has spent much time to defend his theory (Christensen, 2006;

Christensen et al., 2015; Christensen et al., 2018), offering revisions and further

clarifications for the definitions as well as included elements. Christensen, et al. (2015)

explains that the insight which they have obtained about being a disruptor, or defender,

is that it does not apply to every firm in a shifting market. Furthermore, it can also be the

scenario where a manager tries to use the wrong tools for their context. Additionally, in

Christensen, et al. (2018) they explain how practitioners who have an incorrect or faulty

understanding of disruptive innovation theory may reduce their chance of success. By

creating a thorough understanding of the nature of disruptive innovation they will notice

how searching for a one-size-fits-all solution will not be possible. Also, it is crucial to

understand that disruptiveness is a relative and not absolute phenomenon. What they

mean is that an innovation can be considered disruptive for one actor and sustaining for

another. Gobble (2015) also discusses the usefulness of the framework and explains how

managers tend to want to use this framework in order to; understand the market, identify

threats and opportunities while plotting a strategy for the future, all at the same time.

However, Christensen’s theory is not the only way to succeed, it does not always apply.

Once it does work and is properly applied it is still nothing more than a powerful tool.

2.6 Summary of literature review

The literature review was structured to enable us to answer our research questions, the

sections were divided as follow:

• Research Question 1, we use 2.1, 2.2 and 2.5.

• Research Questions 2, we use 2.3 and 2.4

A summary of each section is presented below:

2.1 describes the development of disruptive innovation. How it originated from the disk-

drive industry in 1995 and how it has refined and developed. We also discuss the

importance of differentiating between radical and disruptive innovations, how these are

easily intertwined but a separation could be valuable for the user of the words.

Furthermore, the meaning of overshooting and the creation of disruptive technologies.

Lastly, the explanation of the Innovator’s Dilemma but also its solution, according to

Christensen.

2.2 describes how the word ‘disruptive’ has been confusing for many. The word is believed to have become over-used or misunderstood, becoming a buzzword.

27

Furthermore, offering different perspectives on how disruptive innovation has been defined by others.

2.3 explains how incumbent’s behavior can influence its ability to work with, or detect disruptive innovation. Incumbents are assumed to reason with a resource-allocation process perspective which makes them favor sustaining innovation which addresses the need of their existing customers, making them ill-suited to develop disruptive innovation. A solution is to create separate units that have new processes, structures and values which make them able to focus at new customers and markets. Aspects of Christensen theory of disruptive innovations are brought into an in-depth discussion.

2.4 describes how the customer and how their role can influence businesses. We explain different researcher perspectives on why customers can be important for actors. Christensen mantra “listen to closely to the customers” when creating innovations is discussed and how it makes incumbent firms allocate their resources to those customers. This implies that the incumbent tends to end up with sustaining innovations and neglect investing in disruptive innovations. However, customers are often necessary for the innovation process and there is others perspective of the role of the customers is explained.

2.5 goes through issues which other researchers have had with Christensen theory, e.g. lack of proper research method and peer-review publications.

28

3. Methodology

3.1 Research Approach

The thesis is based on a qualitative research strategy which is best known for being

pragmatic, interpretive and grounded in perspectives and experiences of individuals

(Bryman & Bell, 2015). It emphasizes on words rather than quantifiable data through

interviews. While studying change with a qualitative approach it was important to assume

that reality consists of socially constructed reality, focusing on subjective rather than

objective knowledge (Gummesson, 2000). Bryman and Bell (2015) explain how the focus

will be on the individual’s interpretations of the context which they are in and how they

create meanings of their social actions. Therefore, by focusing on the opportunity of

receiving answers from individuals who are working within, or closely related, to the

paper- and packaging industry has been important for this research.

Eisenhardt and Graebner (2007) claim that reasonable empirical research should start

with a firm ground in literature where research gaps are identified and research questions

which addresses this gap are created. Even as this thesis applies an abductive research

approach, one could argue that the outset was deductive. An inductive approach initiates

empirically with real-life observations and often no grounding literature (Alvesson &

Sköldberg, 2017; Gummesson, 2000), and deductive research is the opposite. Gummesson

(2000) however argues that it is only the start which truly separates these approaches

and further the research takes an iterative process between empirical findings and theory.

As the outset of this thesis originated from a theoretical view, anchoring in existing theory

and creating research questions, it has after been subjected to an iterative process where

findings from theory and real-life experiences have influenced and guided the thesis.

These descriptions prove the abductive nature of this research, which has been conducted

with an iterative process between elements of induction and deduction (Alvesson &

Sköldberg, 2017; Bryman & Bell, 2015; Gummesson, 2000). The purpose of abductive

research is believed to enable higher understanding of a specific phenomenon with a

strong dependence on iterations (Alvesson & Sköldberg, 2017; Dubois & Gadde, 2002;

Gummesson, 2000) which is what we as researcher have striven for. As the abductive

processes iterates, confronting theory with empirical observations, it is believed that it

can add or refine existing theories (Dubois & Gadde, 2002) and since we are attempting

to develop suggestively incomplete research further this approach is favorable.

3.2 Research Design

After explaining the research strategy and approach the research design will explain the

numerous methods by which the data was collected and analyzed in the thesis. In order

to fulfill the purpose of the research and answering the research it was decided to conduct

a case-study. Case studies are a common approach in qualitative research and are

especially suitable for studying organizations (Bryman & Bell, 2015; Gummesson, 2000).

Furthermore, case studies are believed to support the researcher in gaining in-depth

29

knowledge and discovery for relationships in different contexts (Gummesson, 2000), and

its approach is suitable when the research objective is hard to separate from its context

socials aspects, e.g. cultural, values and individual understandings (Bryman & Bell, 2015;

Yin, 2003).

In this research, a single case study is conducted. It was structured around one specific

scenario. We were presented with a real project which has been developed by the case-

company. The project consisted of a potential innovation with various possible

applications if it would be released to the market1. The case study has been implemented

by interviewing ten respondents (further explained in 3.3 Research Method). The case

study has been conducted with the ambition to generate suitable data for a single case by

which we can engage in an theoretical analysis with certain concepts in Christensen’s

theory.

The weaknesses of case studies are however that the reliability is often criticized (Bryman

& Bell, 2015). From a positivist view it is believed that by conducting the same research

there is a low chance of achieving similar results, which also affects the generalizability

and thus its ability to build theories and methods (Bryman & Bell, 2015). However, one

could ask how well the data generated is supporting the theoretical arguments? If the

purpose of the research is not to generalize and instead concerns the generating of theory

for a certain context then case studies can be highly useful. Lee and Baskerville (2003)

support this statement by writing that deep understanding is more important than

offering representative results when conducting case studies. From this deep

understanding theories can be built which is significantly anchored to the context (Lee &

Baskerville, 2003). Even more, the results from the case studies can become useful for

comparison when attempting to achieve a more comprehensive understanding of similar

scenarios in kindred contexts (Huberman & Miles, 2002).

3.3 Research Method

Empirical data was collected from 10 semi-structured interviews (see Bryman & Bell,

2015), where themes (see 3.5 Data Collection) was formed from the overarching purpose

and research questions. This was meant to facilitate that the questions and themes

generated would be relevant for the study and thus increasing internal validity (Bryman

& Bell, 2015). Large flexibility and dynamics were pursued in the interviews. The

respondents were continuously encouraged to explain their point of view, resulting in

various spontaneous questions asked in order to gain deeper understanding. The purpose

of the interviews was to acquire knowledge and meaningfulness for the study and

therefore was the individual not prevented from expressing themselves freely (Babbie,

2015; Kvale & Brinkmann, 2014; Bryman & Bell, 2015).

1 The technical and practical nature of this project will remain confidential in this thesis. However, the specific attributes of the project are not relevant in order to properly answer the research questions and will therefore will not influence the contribution of the thesis.

30

The purpose of the interviews was sent in an email, explaining our interest in learning

about the think about the project and aspects related to it. Asking the interviews general

follow-up questions enabled us to more in-depth discuss their understandings and point

of views. In the email, we emphasized on their importance for the study. Furthermore, it

was explained that the respondents would remain anonymous and their answers handled

confidentially, in accordance with Patel and Davidson (2011). All of the names and titles

in the case-company would further be anonymous as it is presented in the thesis. The

interviews lasted between 50-70 minutes and seven were conducted at the respondent’s

office, face-to-face, which is to prefer in the qualitative research because it is easier to

create an understanding for each other. Body language and social context, the relationship

which was formed between the respondents and researchers were absolutely essential

for the more profound understanding. Kvale and Brinkmann (2014) and Tracy (2012)

argues that knowledge is created between the interviewer and interviewee which enables

mutual understanding. This became apparent throughout the interviews as the longer the

interviews processed the more confident and susceptible the respondents became and

mutual understanding was achieved. Schostack (2006) explains that in every interaction

between individuals there are opportunities for creating meaning and knowledge, while

it is equally easy for misunderstandings and misjudgments. All conversations will be

colored by a number of aspects where it will be hard or almost impossible to bridge these,

even though you attempt to adapt the language and body language (Patel & Davidson,

2011). There are dynamics in every interview.

Solipsism points out that it is much easier to understand individuals that are similar to

yourself and thus much harder to understand people who are different (Fay, 1996). This

phenomenon is by long known and influences the interactions in an interview. How the

relationship is between the interviewer and interviewee can contribute to different ways

of thinking about a specific phenomenon, for example permitting new knowledge where

understanding grows (Gillham, 2005). New perspectives and aspects which the

respondent had never thought about before are important to achieve a nuanced picture

of a particular entity (Bryman & Bell, 2015), which appeared as the respondents

expressed things like: “I hadn’t thought about it that way before”, “this gave me some new

ideas”, “from what I learned from today I would make sure to talk more those colleagues”.

Patel and Davidson (2011) believe that it takes lots of practice and understanding in

qualitative research for the interviewer to be able to create the “right” relationships in

order to get as much as possible from interviews. The interview takes place in a social

context, and it only exists here and depends on the individuals in the room and some other

aspects. The interaction will be colored by who we are, and it is necessary for us in order

to understand and interpret an individual. To avoid misunderstanding some self-

understanding is required as well as the ability to place yourself in the person's context,

asking them to explain more detailed and nuanced about the phenomenon. In addition,

reflection and understanding of how one contributes to what may arise in the interviews

are important (Bryman & Bell, 2015; Fay, 1996). The awareness of these pitfalls was

crucial in order to conduct the interviews. Taking these aspects into consideration did

also contribute to an increase in internal validity.

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The three remaining interviews were conducted on distance as a face-to-face meeting

could not be arranged. Conducting has its advantages such as being comfortable and easy

to implement, and it does collect data for the research. The disadvantages however are

that it is not possible to engage in body language and the other contexts in the

conversation. This contributes to difficulties in perceiving if the person really

understands the questions and if there are difficulties in interpreting the data.

Furthermore, Bryman and Bell (2015) explain that distance interviews which last longer

than 20 to 25 minutes are not sustainable since it demands higher motivation and

commitment to complete than a face-to-face conversation. Even as the interviews was

estimated to last around 60 minutes, two of the interviews were ended after 50 minutes

as it was hard to come up with relevant follow-up questions to ask the respondents.

Nonetheless, the answers did contribute highly well to research in a complementary way.

All interviews were transcribed and sent back to the respondents allowing them to revise

and correct any misunderstandings. Decoding and analysis of the data have been

continuous and patterns and themes have been identified, which in turn has been

categorized in order to get a clear picture over the collected data (Patel & Davidson, 2011).

In order to ensure high quality for the collected data, a notepad containing thought and

reflections was created during the research. This gave an important insight into how the

knowledge was developed, partly for the upcoming interviews as well as for the study as

a whole (Patel & Davidson, 2011). Continuous analysis of data gave rise to new ideas that

were explored more in subsequent interviews. This approach enables an opportunity to

understand the context in-depth (Patel & Davidson, 2011). The final material of data is a

text of quotes from several respondents and comments and reflection which they

respondents offer under the interviews, these were interspersed with own

interpretations and comments (Patel & Davidson, 2011).

3.4 Quality of Qualitative Data

While qualitative data does not have one ‘best way to analyze data’ (Patton, 2002) and is

often subjected to criticism for being too subjective, hard to replicate and generalize

(Bryman & Bell, 2015), it can offer quality of data in other aspects. Commonly, the

characteristics of qualitative data is an interpretation between us, researchers, and other

subjects; people and documents. Patton (2002) argues that since qualitative findings lack

statistical significance it should be valued by its substantive significance instead. This

means that one should consider the usefulness and relevance of the findings in relation to

its intended purpose. Instead of putting too much focus on reliability and validity in

qualitative research, researchers suggest that it is more about trustworthiness,

transparency and in-depth descriptions and how well the researchers understand the

context (Bryman & Bell, 2015; Patel & Davidson, 2011). Patel and Davidson (2011) do

however argue that it is possible to achieve good internal validity in the research if the

researcher can display good understanding for the context.

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3.5 Data Collection

In order to study the views and perspectives in relation to Christensen’s theory, semi-

structured interviews were the best option when collecting primary data. Secondary data

was provided by the case company and also from research about the paper- and packaging

industry in order to achieve a deeper understanding of the context. In total, we conducted

ten interviews (see table 2). Eight was conducted with the case-company and consisted of

individuals with different insights. The two Brand Owners which is part of the case

company's value chain are acting in retail, i.e. the last level before consumers in the

packaging value chain. The questions concerned the themes in table 2 and were

formalized to obtain the respondent's intentions, descriptions and experiences.

Table 2. The primary data collected with respondents and themes.

3.6 Ethical considerations

While conducting this research, we have thought about various ethical issues. As the

respondents were informed about the questions which we wanted to make it clear that

our goal with the interviews was to obtain their understanding and views on innovation.

However, we had to think about how their integrity would be maintained when we wrote

their remarks and identified them as different types of actors. It was essential to keep the

respondents anonymous even as we wanted to provide with rich detail and a possibility

for the reader to track the views of different respondents by mentioning them as fictive

names in alphabetical order, e.g. Adam, Björn

There was an issue with the project where we have agreed to keep sensitive information

about the product confidential. It has been a balance between offering our readers

comprised and exciting information about the respondents’ insights without disclosing

too much information which could endanger the safety of the project.

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4 Empirical Findings

4.1 Industry Background

Despite its importance, the research in the packaging industry from a managerial view is

considered limited (Björkdahl & Börjesson, 2011; Rundh, 2005). Overall, researching the

forest-, paper- and packaging industry is not that common, at least in the focus of the

upstream actors in the value chain (Rundh, 2005). However, the industry has been active

for quite some time and has been essential for the Swedish economy (Olander Roese &

Olsson, 2012; Olander Roese, 2014). Olander Roese (2014) describes how the Swedish

forest industry dates back to the early 19th century when there was a change in focus from

and instead towards iron and forestry. In the 20th century Sweden invested heavily in

manufacturing for cellulose and paper, which increased soon after the second world war.

From that time, the ambition was to produce high-quality paper and hygiene products

thus focusing on cost-effective production and large volumes. It was common that large

businesses in the industry made substantial structural changes which involved reducing

manufacturing units, merging and investments to increase process efficiency.

Traditionally, success in the industry was the ability to build resources, achieve

capabilities for production, produce high volumes and have low costs. However, in the

1990s it was realized by the Royal Swedish Academy of Engineering Science that the

industry was soon to be subjected to a strategic shift, changing from production and

standardization and instead increase focus on customers. This industry had previously

been far from customer-oriented (Olander Roese & Olsson, 2007), and now it had to

prepare for development in new products, forcing a change towards global standards and

competitions as well as demanding consumer (Olander Roese & Olsson, 2012).

By taking the outset in Porter’s (1980) traditional classification of strategy, the actors in

the industry were forced to change their managerial approach from a cost-leadership

approach towards differentiation. Frambach, et al. (2003) argues that by applying the

cost-leadership approach it is common that one achieves great competitor focus, and less

focus on new product development. However, the differentiation strategy would have a

positive effect on customer-orientation, and therefore product development. Olander

Roese (2014) and Ottosson (2008) argues that actors in the Swedish forest- and paper

packaging industry did just that, changed their strategy from costs, production resources

and efficiency, and became interested in aspects such as markets, customer-orientation

and product-innovation. Ottosson (2008) also claims that periods of financial instability

and increasing costs for production also acted as drivers for spurring new ideas and

became necessary for the continuity of the industry and its sustainable development.

During this shift however there were, and still are, challenges which the great firms face.

Berg (2005) and Hayhurst (2002) wrote (as cited in Olander Roese, 2014) that the

Swedish forest industry is accused of poor listening to the market and also to other actors

in their value chain. Ottosson (2008) acknowledges a significant obstacle in how

structural changes in large companies like Stora Enso, UPM, Södra, Billerud, Holmen and

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SCA was challenging as they had spent decades optimizing their old processes - being

burden by investments and traditional ways of doing things. Markides (2001) explains

that there are plenty of suggestions for how to deal with strategy and change, but it is less

common in this context. As the firms are coming from a production view and moving

towards something customer-oriented O’Reilly and Tushman (2002) believes that one of

the toughest managerial challenges will be to deal with the balance between attending to

previous processes and products while preparing for the future.

Summing up, for nearly three decades, actors in the Swedish forest industry has been

subjected to a strategic change which implies moving towards customer-orientation and

innovation. Olander Roese (2014) believes that the growing market- and customer-

orientation, as well as focus on innovation are essential prerequisites for the continuous

development of the industry. Borg and Lingqvist (2017) also believe that external

collaboration is an essential part of organizational growth in the industry.

4.2 The shift in the packaging industry

As the paper- and packaging industry was subjected to a shift in the previous decades,

there has been another shift during later years. Not only affecting the paper-based

packaging solutions, but all of packaging. The phenomenon is concerning plastic

materials, and plastic packaging.

“Today there is no bigger criminal than plastic if you talk about material” – Brand Owner (1)

“I believe that plastic is a hot potato” – Brand Owner (2)

Brand owner 1 explains that during the last two years, but mostly during the last year, the plastic-

questions has appeared more and more, it is also prevalent in customer surveys. The shift away

from fossil-based plastic packaging towards bio-degradable fiber-based solutions is a known fact

in the packaging industry. All of the respondents discussed their opinion about plastic and how

the industry is shifting. Some examples are:

“There is a wish in the world to replace plastic” – Denise

“My feeling is that large actors are doing something” – Gabrielle

“We have a starting point with some form of a driving force, a movement in the society, something is

about to happen” – Brand Owner (1)

We found that while all of them showed their concerns about the fossil-based packaging

there were also challenges with this shift. Clas argues that it will not be able to compete

against plastic, at least in terms of price. Furthermore, Gabrielle explains that some of the

plastic producers might try to appear more environmentally friendly, some of them would

even change the appearance of plastic to mimic the properties of fiber-based surfaces, to

‘appear environmentally friendly’.

However, brand owners in retail have offered a further elaboration of the customer in the

plastic-paper dilemma. Brand Owner 1 explains that seeing the difference between plastic

and paper can be very product-specific. If you can change something that has been a

traditional plastic package, you might be able to create that “wow-feeling” from paper, but

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in other cases it might be harder. The respondent then further states; “if we talk about

food and how we eat in Sweden today, we cannot simply exclude plastic. Plastic is a fantastic

material when it is used as it should be, when it is circular – but when it is not, then we can

talk about its problems”. Both brand owners believe that in some cases the consumer

might feel more secure with plastic, even if they seldom say it. Knowing that nothing has

penetrated, nothing is wet, offers some sort of security. However, brand owner 1 states

that paper is higher rated than plastic in terms of quality. It is rarely a negative feeling

when you have packaging made out of paper, but sometimes, in certain products, you

might want that plastic feeling.

4.2.1 Sustainability – a trend which drives the development

“Sustainability is the human kinds most essential question right now” – Adam

Most of the respondents argued similarly, some explicitly stated that people are paying

more attention to sustainability (Denise-Hans), ‘Everyone wants the sustainable option’.

Brand owner 1 acknowledges that the paper- and packaging industry has been

exceptional with riding the wave of creating sustainable products and earning

extraordinary value from it.

Gabrielle describes that it started as a desire from the customers, however it has started

to become a problem; “No one wants to be the environmental bad guy, you want to be in the

front, showing that you are making an effort”. Denise also sees this type of trend, explaining

confidently that “if there is a will, demand and trend it will work in our favor”. The Brand

Owners also explains their interest in sustainability and the trends which affect their

business decisions. Brand Owner 2 states that they have demands on their suppliers

which are general and worked with progressively, but they too try to work more with

environmental scanning to learn and make wise choices for their brand; “Sustainability is

central to us, we always try to improve on that area”. Brand Owner 1 gave an example:

“Let us say that we choose between a tin-can and TetraPak [cartonboard]. In general,

TetraPak is considered much more expensive but they have so many properties which are

better in terms of sustainability and efficiency. This can result in that we will not choose the

supplier with tin-cans, even if they are much cheaper.”

Some respondents argued that sustainability and environmental aspects had become

factors which drives that industry more than merely looking for profitability. However,

one thing which has occurred with this trend is the need for recyclability. Gabrielle

believes that many actors work hard to get “the label of recycling products”, working in

closed loops. The respondent believes that this extreme focus on recycling has led to the

loss of focus on CO2 and other aspects.

Brand-owners view of sustainability

When discussing sustainability with the respondents at the case company the focus on

packaging seemed quite obvious. However, when asking the brand owners both wanted

to clarify if we wished to discuss the product or the package, as they are considered to

very separate things for actors in retail. Brand Owner 1 explains how there is a difference

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between product and packaging concerning properties in term of sustainability. We are

interested in offering the best possible product solution for our customers, then it is for

the packaging-producer to offer their best packaging solution for us. Brand owner 2

further elaborates on how they have two sustainability goals, and these are often

compared against each other.

The concept of food-waste then became central to the discussion. Brand Owner 1 explains

that during product development, the price is generally deciding when it comes to

packaging; the content is primary and the packaging is secondary; “Food-waste is the

absolute most important question which is discussed by us”, giving interesting

interpretation of the word “sustainability” in the quote presented by Adam at the

beginning of this subheading. Further explaining sustainability in the brand owner’s

perspective is that they are motivated by the most primary function of a package, which

is protecting and in no way jeopardize the integrity of its content. Brand Owner 1 argues

that nothing can be considered more important than ‘food-waste’ and they would not

change anything which would endanger the products lifetime. After this aspect is dealt

with, then sustainability and functionality in terms of the packaging are considered. In the

greater whole, if the packaging breaks and affects the product, that is the most significant

loss. Being ask about losing productions efficiency to ensure greater product safety the

brand owner (2) stated that “yes, it might imply higher costs but would absolutely be worth

it”. Followed up by asking if they would be willing to develop products, perhaps with

lower performance, being more expensive, but having other desired features, e.g.

sustainability and following customer demands, the respondent answered “Yes, it is

always a trade-off from different perspectives. Every piece needs to be considered. The

package is the carrier of the product, and since food-waste is an essential aspect it will have

to be sustainable from that perspective”.

The aware customer

“you have to be willing to take risks with today’s aware customers.” – Gabrielle

Brand Owner (2) explains how some consumers know exactly what they want – the

aware, while others might not know at all. However, what was clear from the respondents

were that the focus on solving the issue of plastic and working with more sustainable

alternatives was their focal point. Gabrielle found that most consumers are not as inclined

to recycle plastic, even if many are 100 percent recyclable. Although, the consumer is far

better in collecting paper. Gabrielle believes that in the end it is a matter of what we collect

and what we distribute, and in this case, paper is the better option. Erik has seen examples

of this in the industry, the reactions from non-sustainable suppliers of packaging. One

remark was “I believe that most people who work with plastic today experience some

concern that their business is threatened as it looks today”, confirming the shift in the

industry. Furthermore, in agreement with brand owner (2), Gabrielle explains that there

is an extremely confusing world. Customers are frequently asking about EU-directives,

different standards – in different countries – in different counties. Currently, everyone is

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screaming for paper solutions are becoming nervous about the ‘Single-use-plastic-

directive’.

4.2.2 Single-use-plastics-directive – good or bad for paper solutions?

One of the arguably most influencing directives for the paper-plastic dilemma concerns

single-use-plastics initiated by the EU. It is established to reduce marine litter by banning

ten single-use plastics most commonly found in European beaches today (EU, 2019). All

of the respondents elaborating on this regulation argued that it would be influential for

how future developments might be implemented; “I believe that the directives will affect

the way which we implement developments projects with our largest customers” (Erik).

Adam expresses his concerns about how customer problems may become reactive from

the regulation.

Even if the directive will challenge the plastic producers, Gabrielle argues that it might do

more harm than good, there are many things that is happening in EU today, and no one

usually has directly good answers. The respondent’s states “they want to reduce plastic,

but in the meantime the directives they have established may promote plastic”. What

Gabrielle meant is that due to the legislation the customer may be forced to adopt 100

percent plastic solutions, since it will easier to fulfill the regulation for recyclability. By

working around the directives in this manner could potentially lead to an increase of

shares of plastic in the market. However, the brand owners are part of an initiative to use

lesser plastic and finding fossil-free materials that are recyclable. As the EU-regulations

concerns that single-use plastic they are more focused on working collectively to solve

other issues more connected to their product offerings.

Combination materials

Even if only one respondent explicitly expressed their concern for the directive, there

were discussions around the consequences for specifically combination materials. Clas

stated:

“I believe that much of the combination material which has plastic and paper will be phased out”

Gabrielle also, insightfully, expressed that the decision will not be about paper versus

plastic, but rather combination material versus plastic. It is explained that if paper

packaging solutions consist of combined material, where 90 percent is paper and rest is

plastic it may result in the switch to 100 plastic to meet the regulations. It will be a

decision for large customers to drop combination materials and go directly to plastic.

Presenting the scenario of 90/10 share of packaging to the brand owner to, the

respondent argues that “It depends on which product the package should carry. However

generally, if we would only work towards fossil-free alternatives today than they would not

be recyclable. It becomes two goals against each other. Currently we are working towards

making the plastic packaging 100 percent recyclable”. Following up on this thread, we also

asked the respondent about the general view on what that is focused upon; plastic or

other solutions? Which were replied by: “Hmm... good reflection, there is a large plastic

focus currently”.

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4.3 Understanding of disruptive innovation

In order to find out how the respondents understand disruptive innovation, we first asked

about their general view of successful innovations. By asking about this abstract idea,

innovation, the individual showed great contemplation for the upcoming discussion of

disruptive innovation. The answers for the general view on innovation varied, some chose

to discuss value, e.g. “Something which creates value to humankind in one way or another.

An innovation is something retrospective, you can only know after it is implemented and you

can see the effects which it brings” (Adam); “Any small step towards a good thing which adds

value. It does not have to be something very new, little improvements can count as

innovations when they add value” (Frida); “Being able to create something new, which

contributes with value, which did not exist before” (Denise).

Others chose to discuss the problems and unspoken needs, e.g. “[An innovation] is only

successful if it solves a problem” (Hans); “A successful innovation fills a need which people

did not know that they had. It creates a new market in a where there are no competitors

more than what people choose to spend their money on” (Clas).

Lastly, some argued that the challenge of reaching the market was essential, e.g. “You can

make many inventions and ideas, but if you cannot get it out to the market then you have

not really succeeded. One basic criterion is that it provides with income. Innovation does not

necessarily have to be products, it can be business models as well, ways to create value for a

company.” (Erik); “[When creating an innovation] the greatest challenge is to make it a

commercial product” (Björn).

The brand owners were asked to discuss innovation in their companies in order to

understand how the company as a whole use’s innovation instead of the individual. Brand

Owner 2 explained that innovation is something they do talk about, but it is undoubtedly

not a buzzword, we use it lightly. We do try to be an innovative company finding new

solutions with suppliers for the future. Brand Owner 1 explains that in their company they

use a stepwise innovation-process, working in iterative innovations processes, with fast

sprints and much testing of ideas. One hurdle which they face is that they do not own the

company stores, instead they are own by independent partners. Therefore, if the brand

owner decides to develop some new product, the owner also has to decide if they want to

use the product, this is considered a significant hurdle.

4.3.1 The importance of innovation in the industry

When reflecting upon the innovation in the industry, the most general reason why

innovation was important was related to plastic. Denise explains that there is a will to

replace plastic with another material which is better for the environment and sustainable

development. Frida believes that if they can contribute to the solution for the global

plastic problem, even a little bit, it can be counted as innovation in the industry. As for

Brand Owner 2, the respondent argues more generally “I believe that we are always talking

about future solutions and trying to find as smart solutions as possible in many different

areas”.

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When implemented, Gabrielle explains that innovation projects are usually driven by

customers. The complexity of the projects usually decides the case company’s

interference in them, if it is low; the customer would usually implement the product

themselves, however it if it is technically demanding, they would be included. Also,

depending on the margins of projects, if they are high enough, they would instead support

answers and expertise. Hans further elaborates in the differences between the

incremental and radical projects in the company. The respondent argues that in

incremental projects they are expected to deliver much faster. Also, earlier in the stages

of the project the deliverables are usually more explicit, e.g. what to achieve, KPI’s and

results. While in radical, transformative, projects it is common not to know today what

this is going to become. In the beginning you would enable yourself to focus on collecting

information and learning, and later specify what to deliver. In the early stages, we would

test, collect insights, iterate and probably fail a couple of times – and that is how it should

be.

However, innovating in the industry is not an easy accomplishment. Gabrielle explained

that “It is very rare for an invention to become an innovation in the paper- and packaging

industry without being adapted to the current tools, or machinery”. One of the hurdles is

the structure which permeates the whole industry. Being able to create something which

is both novel and unique does not necessarily make it doable in the industry, there are

many challenges which await. Gabrielle claims that the more substantial the investment

in conjunction with the need for adoption and further away from existing solutions would

make it increasingly hard to implement it. Another factor to consider is not to go for too

long without growth, as Erik believes that when faced with the dilemma ‘profit or growth’

(Christensen, 1997), one should focus on growth since only making short-term or a single

occurrence of profit will not help be sustainable in this industry. Furthermore, the

classification of the final product needs to be within the limits of what is considered paper,

if it is overly treated with chemicals and other damaging constructs, and it is no longer

considered paper, at least in the view of Gabrielle. Although, what makes innovation in

the industry possible is commonly related to the actors in the industry. Gabrielle explains

that in their innovation projects they are usually driven by the case company and other

machine developers. Also, when collaborating with customers they can together establish

requirements for their processes in order to ensure that the project is driven in a

reasonable direction.

4.3.2 The understandings of disruptive innovation in its definition

In order to discuss the understanding of disruptive innovation in the industry, each

respondent was asked to contemplate their own understanding of the concept. Clas knew

about the issues of the definition, and explained that “the definition is used by many, in

many different ways, some very sloppy. However, some stood for the definition; they know

what they meant”. Considering other respondents, while most had not heard about the

concept before, others gave their ideas of the concept.

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“I think about disruptive, or game-changers, as something which has a major break-through and

affects more than just the physical product or business model. It creates rings on the water which

impact both up and down in the value-chain and spinoffs for other innovations” – Adam

“A project is not necessarily disruptive, but it can also be how we deliver a service. It is not limited to

“a cool new product”. A project could be perceived as disruptive from the user’s perspective” - Björn

“A disruptive innovation can be something which results in that there is not a linear development

anymore, it instead enables new developments which previously has not been possible” – Clas

“If you, by saying disruptive innovation, mean something which can change the map” - Erik

Hans does not know a definition, however he thinks about disruptive innovation as something

with high risk, where technology is unknown and we do not know how to solve it today. It can also

be that the target group is not entirely known. However, the opposite would be if we worked with

a known customer and -technology which would instead be characterized as an optimization

project.

4.3.3 Can the project be considered a disruptive innovation project?

Asking the respondents at the case company this question, the unanimous answer after

some contemplation was no. Without disclosing sensitive information about the project,

some of the current basic characteristics are; a suggested but not final target product, lack

of target market and technical challenges still under investigation. However, it has one

distinct property, or feature, which could differentiate it from previous (successful) paper

solutions in the industry. However, with a more detail description of the project and not

this very simplified one, the respondents were able to make some assumptions about the

characteristics of the project and whether or not it could be disruptive.

Clas argues that this project “is not that kind of innovation, but rather a replacement. It will

not create a new market, but will enter into an existing one”. Furthermore, the respondent

believes that attempting to enter a market, with already strong actors and try to create

high revenues will not be likely with this project. When Frida was asked the questions, the

respondent reasons like “Change what, some part of the packaging industry? Maybe in the

future, but it will take a long time. For now, it is still a substitute product”.

Others resonated more about the effects which this project could have. Based on the

previous understanding of the concept, Erik argues that “if the project needs to be

groundbreaking, then I would not suggest that it should be disruptive”. Adam discussed a

perspective where the project would “make rings on the water”, however about the

project the respondent was uncertain. It would perhaps be possible, but far from sure.

Denise also thinks about its possibility to “make rings”, however the respondents argued

that “it will largely depend on the properties of the final product. If it gets too expensive, then

maybe no one will be interested”. Furthermore, the respondent does not believe that the

project could completely disrupt the plastic market, not unless the industry displays a

strong will to change.

However, one aspect which was discussed by many were the properties or features the

final project would have. We suggest that many believed that the current objectives lacked

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the novelty and uniqueness, making it unappealing for the more profitable market. “The

project could be disruptive, but not with the terms which we believe that the project has

today. It will not be possible to shake the whole market” (Hans). However, Gabrielle reasons

that if they keep on developing the project and add other features that there would be

more advantages, “how the final packaging solution is created will be very important, with

the right properties, and price, it could be disruptive”. Erik believes that it could be

successful, however it will be connected to what the demands will be for the final product.

Denise argues similarly, and that the properties will change depending on its final

application. Lastly, Björn argues that it does not necessarily have to be the final product,

but how they choose the deliver the service. “The project could be perceived as disruptive

for the user’s perspective, especially if the feeling and property truly is paper”.

The project

The origin of the project is somewhat ambiguous, some respondents claim that it started

as a collaboration between the case company and one of the most prominent universities

in Sweden with a customer problem in mind, while others only discuss it as a R&D based

project. Hans discussed the project's structure, being uncertain about whether or not

there is a business ambition or only a development project. However, one common

denominator for why it is conducted is expressed by Frida, “the project is very interesting

as it is supposed to replace plastic”. Clas argues that it will compete with other packaging

solutions by being a more environmentally friendly option.

Currently, the project has a target product in mind. However, during the interviews there

have been many different views on its relevance. Asking the respondents about the most

obvious market for the product, all of the respondents suggested a subsegment of the

mainstream market in retail and groceries based on its particular feature. Clas believes

that having a target product to discuss as the project develops is essential, even if it does

not have to be the final version. Frida also reasons in a similar way, “having set out a target

product for the project, a goal we want to reach”. The respondent further argues that this

current product is a good first ambition, it will not need high tensile strength, nor

excessive properties, and instead just being ‘simple’ with one specific feature. However,

as the project is further developed there will be a necessity to get more feedback from the

market, find new ways to develop it, but that time is not now.

As the respondents reasoned about the most obvious market and perhaps the most

desired market, there were different views of what was in their best interest. Denise

explained that they are addressing customer needs and wishes in the project, however

both Gabrielle and Hans explained that this might not be the case. They argue how the

feature which the project is developing might not be as relevant in the market as they

have believed; “It is only a commonality to have the features which the projects want to

address” (Hans). Gabrielle has followed another development project where the

packaging could be solved more easily, for this specific target product – suggesting the

revising the target product might be relevant. However, if they would increase their

technological innovation in order to address a more complex paper solution, the technical

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challenges would significantly increase. Hans believes that “when it comes to the industries

demand for this feature, we are not completely sure that it can meet the demands”. Further,

Hans states that there are also researching another feature and how combining these two

would be a dream. However, the main features would suggestively collide as they are two

very different technical challenges, not working in favor of each other. The respondent

lastly states that their spontaneous thought is that they should find an ‘actual way to go’,

and finding another application which is easier to reach in terms of the feature.

However, the individuals who are controlling the outcome of the project is believed to be

open-minded; “It is a good starting point to go for our target market; however, we should

remain open-minded” (Björn). Denise reasons about this similarly “We first aim for this one

target product, however there are other areas which may be willing to pay more, but it

desires perfected featured which are a difficult technological challenge”. They argue that

their project could be either customer-oriented or technology-driven. They believe that

the needs might not be apparent in the near future and therefore are willing to go for a

project which shows technological potential and future customer needs. However, one

thing remains rigid “the cost and the properties of the product should be able to compete

with plastic” (Frida), however this would be a challenge without regulations according to

Clas. Even so, the vision for this project remains positive however Hans argues that it will

be crucial to find an industry which can accept the lower performance. Erik offered a

reasonable quote for this as the respondent reasoned about the final application and said:

“There might be lower hanging fruit which you also can pick” – Erik

When discussing if it would be an issue by making a product “too” featured in the industry,

Frida reasoned that “No, I do not think so. If they know that it is a bio-material and also

sustainable maybe it does not matter. Personally, as long as the packaging material is

biodegradable, I will go for it. For me the appearance [feeling and sounding like paper] is

not that important, if I know that it is sustainable and bio-degradable then it is fine for me”.

However, the concerns with Gabrielle were quite different as the person said “if the

features are too good, they might be confused with plastic”, not the packaging solution they

have been claimed to go for.

However, by the respondent’s suggestion for the ‘most obvious market’ we decided to

follow up on their suggestions as we interviewed two brand owners in their value chain,

acting in retail and specifically groceries. The brand owners (1,2) added one aspect which

the case company had not discussed as much it concerned the sustainability of the product

which the package preserves. A feature which they will not compromise on its safety,

something to further consider. However, presented with the feature of the project, and

target product, brand owner reasoned that “I think that the target product in the project

might not have the demand which you are looking for. You should increase your ambition,

that is my view. If you think like “we have changed this feature from plastic to paper to save

on the environment”, it will not be as impactful as saying that this whole packaging is

changed from plastic to paper – it is an entirely different force”.

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4.4 Being an actor in the industry

“Today even with our great paper factories and machines, if you would want to develop a

break-through material innovation you would have to make large investments for that to

happen, and then you will get there, however doubtful” – Clas

Developing in the paper- and packaging industry does have its norms and things you are

expected to do to be successful. It is found that almost no one of the actors in the industry

innovate alone, but instead collaborates with others to share resources, knowledge and

risks. Gabrielle explains that “you have to tick in all the boxes to innovate in the industry,

for example you need to use existing machinery because there are so long delivery times and

you also have to find people who have invested in machines that you need since they are few

and expensive”. Erik reasons that it usually takes a very long time to change the actors

existing packaging solutions, most of them have established processes and depreciated

machines; “It is not so easy to make a change in paper factories”. Brand owner 1 explains

that when the person thinks about paper and plastic, it is about material and enormous

volumes and also very practical machines, it is not a thing which you just move or change.

It is also a significant cost to stop a machine and change something. It is not just something

you do; it can cost millions SEK. However, Adam explains that sometimes you will be

better off selling the system and no the material, Erik continues as it is not unique to let

someone else have access to your technology.

When discussing challenges in this industry, they were plenty, e.g. existing machines, need

for growth, production volumes, capital. Adam explains that “one obstacle when entering

the market [with a new packaging solution which could replace plastic] is that the existing

production lines and machinery available are probably producing plastic at the moment”.

Denise believes that if it is possible to get the new product developments to work within

existing processes, the costs might not be as high, and more doable for smaller customers.

Furthermore, Gabrielle believes that it is hard to achieve fast growth in the industry, there

is much which have to fit. Erik believes that one of the reasons that you would want fast

growth in the industry is because you want to ‘earn your place’. Having too little volume

in an industry characterized by large volumes would not be recommended. Gabrielle

argues that “You cannot just do something one time; it has to continue successively

afterward as well”. However, there are limitations for those as well. Clas explains that

there are limitations for how much you can produce in factories. The respondent

continues and explains that one way to deal with this, which does not necessarily cost so

much capital for machinery, is to compete more within the service sector. Both Gabrielle

and Hans suggest that it is important to find other ways to earn value, stop charging per

tons and instead find new pricing models.

4.4.1 Incumbents and entrants

Entering the industry is not impossible, but it does require the support from the

established actors, the incumbents. The industry has been slow and there are usually large

investments and execution-times involved. Gabrielle believes that the mentality has

44

speeded up, however the lead-times are still rigid which are needed to build the

machinery. Therefore, we found that some of the reasons why incumbents remain

essential are:

• They have capital

• They have access to volumes, in terms of raw material and capabilities

• They have access to expensive and rare machinery

• They have knowledge and expertise

Being a large actor usually entail that they have the finance muscles which are needed to

‘pull the weight’. Erik argues that “In order to get into the industry, I must display a

reasonable volume to show that I exist”, and this also explains the difficulty for entrants as

investing in brand new machines if commonly way too costly or risky for an entrant.

Gabrielle states that “even with these new interesting solutions there is no real possibility

for smaller actors to produce them. You would need to develop a machine while having

someone willing to invest in the new technology. What they need is the ‘muscles and volumes’

from the incumbents, and smaller customers are usually more restrictive to obtain these

themselves”. Furthermore, the respondent explains that it is usually the large brand

owners in the industry who are most willing to take risks - they sign and pay to be part of

the journey.

Even if the general suggestion is that the incumbent is necessary to drive the biggest

innovation projects, some smaller actors, or entrant, are doing much work as well. Adam

agrees that smaller actors usually do not have to capital to change, however he also finds

that some of the smaller machine-producers only have one machine and are ok with that;

“not all of them dream about being large firms”. Brand owner 2 further explains how

“smaller actors are very driven in creating single package solutions and they want to sell

their solutions to us. However, I believe that it is the larger actors with greater power who

can influence which material to use. It is a matter of balance; we need smaller actors to show

us the way. It is often the larger actors which makes solutions a reality, but inspiration and

ideas are gained from smaller actors”. Erik also reasons in favor is smaller actors; “many

smaller customers are interested in joining and developing in the value chain”. The

incumbents are usually rigid and needs plenty of time to make changes; “I believe that if

you find a smaller customer with the right attitude it would be faster to get an innovation to

the market, showing some quick profits and actually creating something and making a

statement that it actually works with a smaller customer. I think that would be an easier

way out than talking with a larger customer” (Erik).

In terms of collaborations between actors, they usually vary. Erik explains that the terms

and conditions for collaborations are essential. “It doesn’t have to be 50/50 share, usually

in order to enter a partnership it would require that they have something which we don’t,

for example certain converting lines, expertise in an area or access to certain customer”.

Brand owner 1 also discusses this aspect and says that “it is very relative, depending largely

on volumes and the incitements for actors to be available. A smaller actor might also have

lesser means - we have many collaborations where we have entered with half or all of the

45

funds, providing that they have access to volumes”. Furthermore, the respondent explains

that when it comes to researching new solutions it is mostly externally, either from

students or consultants. However, many development projects are driven internally being

cross-functional between them, suppliers and machine developers.

As for the project, its origin might be a little uncertain, however it is a collaboration

between actors. While being an R&D-based project, with no apparent connection to

customers, it still is developed with one of the largest universities in Sweden. Denise

explains how the project was offered as an inquiry to the university to research the

subject, and now the case company is funding it. They are doing some lab experiments

with them as well. However, as explained previously, the case company are excellent

technology developers and the real challenge will come when it should be adapted to the

industry. Erik explains that “it would take a long time to change the converters existing

machinery, they have established processes and depreciated machines. As for us we would

have to make big changes to our production in order to make this project work. It might not

be worth it if it concerns a small share of the production, in this case we might instead sell

the technology and let someone else do it”. A solution from Erik and Clas is that it might be

possible to build a new company – business model if the project would be eligible. Clas

states that “depending on how replaceable this material will be, if it can step into existing

production lines, then you might get tempted to build whole new organization and

machinery around it. However, if it requires special adaption, then it can be hard to get

customers to follow that trail and you might have to do it by yourself”.

4.4.2 The case company and the brand owners

The case company is an incumbent actor in the industry which made some remarks about

how they manage innovation. Gabrielle for example states that “we always think about

having good margins”, a rational decision for an incumbent. Adam explains that they are a

powerful actor, they “have a strength in scaling up material-production, which is often more

complex and harder than for others. We have the ability to take something from lab-scale to

something much greater with our extensive processes and production capabilities 24/7”.

Even more, Hans explains that in his department they work with several very different

projects, all of them demands some type of procurement or joint-venture, even virtual

joint-ventures. They cannot be entirely dependent on organic growth; “everything we do

is based on partnerships”.

One way to validate the findings of the incumbent actor were to discuss the industry with

other large brand owners, working closer to the consumers in the value chain. The

answers were quite similar, e.g. brand owner 1 states that “the obstacle we are dependent

on is the existing machinery”, and brand owner 2 stated that “you usually collaborate with

the incumbents”. One of the reasons for their collaborations was that they do not own any

packaging factories themselves, making the existing machines and conditions which are

in-place fundamental for their packaging-innovation-ambitions. Brand Owner 1 suggests

a scenario where they could have a unique solution for packaging, what would prevent

the producer from not doing it first? However, this is precisely the type of competition

46

one would need to stay in front and be the actor which makes the suggestions. Brand

owner 1 further elaborates on the creation of something new.

“If it comes something new and we believe in it then we cannot just invest 6 million SEK in new

tools since it is not our machine. However, being a larger incumbent, with large volumes at a

supplier, we have the possibility to influence which material they use or which type of machine

they will purchase next. We have also come a long way by not only wishing for a solution but also

set demands, much is connected to sustainability.”

Regarding the demands of the producers, brand owner 2 explains that they put many

demands on the material from their suppliers. Even if the suppliers stand mainly for the

innovation regarding packaging, they help to set the criteria for the innovation. Often, it

is a question of cost, but depending on how compelling the proposition is they would

always consider the bigger picture – all advantages must be considered. The brand owner

(2) continues by explaining that if a supplier decides to change their machine in

accordance to a solution which they believe are the future and investing resources in it, it

is not uncommon that they would support them by buying their product. Brand owner 1

also discusses the scenario, “If we have a collaboration with a supplier, and they are open-

minded to testing something new and we want to increase the value. Then we can suggest

that we increase the purchase volume of one product from them if they are willing to test

something on the machine - there are always ways”. Lastly, brand owner 1 gives an example

of another project which they were part of for a while in the industry. However, the

investment was very high, the volumes were large just to test it, and the reward seemed

fat into the future, so they backed down. However, still curious and keeping track of the

development.

4.5 The role of the customer

In an industry where the consumers are far from the producers it is challenging to know

what the customer wants. Adam explains that while the case company is very skilled at

creating new products with their technical expertise, they have difficulties in releasing it

to the market. Hans explains how it is important to match what they are selling to the

consumer, because usually they sell products to the actors who then reap the value from

their final customer; “the material is providing value to our customers-customers, and we

want to find ways also to get access to that value”. Discussing the role of the customers

with the brand owner 2, the respondents told us that the “aware consumer always have

good questions regarding material”, often questions about plastic arise; e.g. plastic bags in

stores? Fruit bags? Is it compostable? Are there paper bags available?

Learning more about the role of the customer in the industry, the respondents were asked

about customer problems. Contemplating generally about customer problems enabled

the respondents to discuss further the relevance of innovating with customer problems,

but also in connection to the project and the industry as a whole, some examples:

47

“[A customer problem is] can be something which the customers cannot do, or have not even

have thought about doing, or something which stops the customer from doing business” –

Erik

“A customer problem could be if they risk being shut out from the market by not being able

to reach the new requirements in the industry” – Clas

“A typical customer problem usually involves the desire to get something sustainable,

compostable, life-cycle considered all at the same time” – Gabrielle

Adam also found that even as a problem can come from inside the customer, it also can

come from the pressures of the surrounding environment – there is a little of both. One

problem that frequently occurs according to Gabrielle is the question about recyclability,

much of the material which the respondent works with are combined material of plastic

and paper. Clas also reasons about the problems of the customer. The respondent has

often found that both the size and number of customers influence the ability to start

innovation projects. One view is that you often start projects with the customers you care

most about, they are also the one which often demands most of the case company. Another

view is that if there is a small customer with a problem, they might not develop their

product, however, is there are many customers with the same problem their project is

more likely to be initiated.

4.5.1 Customers and projects at the case company

Generally concerning projects at the case company, Adam, Björn and Clas believe that

there is a good mixture of projects driven by customers while others are technological.

Björn explains that some of the projects are completely initiated by current customers

and others should not be strongly related to customers, it depends on its purpose. We

found that while Denise, Erik and Frida displayed a strong interest in developing the

technology, they were also interested in the customers and their feedback. Hans argues

that “it would be a dream to have every product from a customer need, however it is not

true”. We suggest that Gabrielle and Hans have the ambition to serve their existing

customers with great products; however, the Denise, Erik and Frida are focusing on

creating exciting and novel products – which the customer might not have even seen

before. Concerning which type of customer who drives the customer-oriented projects,

Adam and Hans believe that it is often the largest of the customers who drive the

development.

The project

Regarding the project of the study and its target product, Denise and Clas seem to believe

that the people involved with the project are aware of the customer problem. Denise

explains that there are demands from existing customers, however, they do not have

anything to offer yet. The respondent does state that there is a wish for the project, and

therefore it feels important. Erik argues that if they do not have the same picture of what

the customer problem really is, it will be very unlikely that they will come up with the

same solution. However, Gabrielle and Hans have collected exciting data and make astute

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observations from their expertise. They explain that the demand, or problem, which this

project is attempting to address is just something which the consumers has “painted up

for themselves”, and that it can be solved in more accessible ways. Final words from Hans

are that it would be hard to suggest what the future for the project is without knowing

what the customer problem actually is. In response to this, Denise believes that it would

be a good idea if they could send documents with business managers in order to learn

what more accurately what they want and which properties they would need. Frida

elaborates further on this and says that “there are no customers involved at this stage, we

need to have an existing product in our hands before we start getting feedback. We should

focus on the environment and regulations which are coming due to plastic usage, the

customer will also have to adapt to it”.

4.5.2 Developing with or without customers

Hans explains that the valuable aspect of including the customer is that they can explain

which demand they have and at the same time offer a specification. This helps to verify

that they are developing the right product and that the customer will want it. The

respondent explains a scenario from a project.

“In one of my projects we have a concept which we have presented to a customer without a complete

solution and then the customers can set their demands. Usually they say that they want the same

performance but with better paper-based material, in this case it is not so hard to figure out what

the customer wants. However, it will help us to know exactly which demands they want and by

providing us with a specification, then we know what to achieve.” – Hans

Gabrielle also argues that when they are developing something for the customer, it will be

important that it works with the demands of the customer; “and that’s why we are doing

it with the customer”. However, Hans further argues that it can be a trade-off; “Then again,

you can choose to include the customer more or less. Sometimes we know that customer very

well and know their issues and can solve them without them, but that is far from always the

case”. This also applies to the work within the project, Denise believes that from the desire

there is also an underlying problem. Denise argues that they are usually very good at

offering the customer what they want. Erik explains that they often use the customers to

find demands, however it is important to time this inclusion accordingly. The feedback

from the customers usually comes at a point where we want to test the product in the

market. Also, a common understanding of the customer problem is often challenging,

especially early in R&D-based projects. When asking Brand Owner 1 about the inclusion

of customers in project, the respondent argued “When we are doing larger innovations

projects which are cross-functional which might be about establishing new concepts, then

we need customer insight or else it will fail”. Further, how important is the customer in the

development project? “Super important, all of our innovation development is customer-

driven. We refer to it is customer insight driven innovation. I do not have any arguments for

why you should not do it that way”.

However, there is another way – developing without customers, and in this industry, it

might be necessary from different types of projects. Brand owner 2 explains that they do

49

not always develop according to the customer needs; “they are of course very important;

however, it is also important to remember our responsibility as brand owners, and what we

want to communicate through our product. When we do not drive a project from a customer

perspective, we are using our strategies for its foundation. The hard part is then to make

sure that the customer sees the new offering at the stores, the challenges arise as the product

is released”. As for the case company, Hans describes how one of their projects was not

initiated by a specific customer, however, they were brought on the journey at a later

stage. Erik explains that they would not normally talk with customers without being able

to scale up the process, the volumes are still essential in the industry. Frida explains

further how in R&D they do not really work with customer problems so hard. It should be

studied by business managers and in the next step of the project. In this stage they do not

study this at all, however “we know that there is a big problem [plastic] that needs to be

solved”. I believe that it is enough to know that plastic is a big issue, specific customer

problems or demands does not matter that much in this stage.

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5 Discussion

5.1 RQ1: The concept of Disruptive Innovation

RQ1: How are individuals in the paper- and packaging industry understanding and

conceiving disruptive innovation and why a common understanding is valuable?

In order to answer the question, we collected material about an innovation project which

could substitute the current plastic solution in the market. Following the shift in the

industry, this could be one project which further advances the desired fiber-based

solutions trend in the market. The project shows technological promise, however, the

respondents are in disagreement on which features the final product should have, where

it should be released and the consequences of the project. When considering aspects like

this, it created an exciting opportunity for us to discuss how the paper- and packaging

industry reasons about their innovation project, and draw connections to disruptive

innovation theory.

In the research we found that one big challenge for the case company is bringing products

to the market. They argue that they are good technology developers but often challenged

when they attempt to implement their product. Therefore, discussing Christensen’s

theory about disruptive innovation in relation to their ambitions to launch new exciting

products have brought interesting discussions. Asking the respondents about disruptive

innovation, none of them applied the word with the same meaning as Christensen. What

we instead found was consistent with Gobble (2015) and Christensen, et al. (2015)

argument that some use the word ‘disruptive innovation’ to describe any situation where

the market is shaken up, e.g. when Adam talks about game-changer, rings on the water or

when Erik mentions something which changes the map. The argument that ‘disruptive’ is

overused, overexploited if often true (Christensen et al., 2015; Gilbert, 2014; Gobble,

2016; Lepore, 2014), however we found that this was not the case in the paper- and

packaging industry. In fact, many had not even heard about it before. It might not have

been a buzzword (Christensen et al., 2015; Lepore, 2014), but neither had it become a

cliché for, most of, the individuals. Clas however expressed the issue, confirmed by other

authors (Danneels, 2004; Gobble, 2015), that “the definition is used by many, in many

different ways, some very sloppy”, however, we got the impression that these individuals

which he refers to were not necessarily in the case company. Clas then continues with

stating that “However, some stood for the definition; they know what they meant”, which is

a good connection to Christensen, or any other author, which decided to apply the word

to a particular meaning.

Christensen has spent some time trying to establish an acceptable definition (Christensen,

2006; Christensen et al., 2015; Christensen et al., 2018). Originating in 1995 (Bower &

Christensen, 1995) it has been refined and acclaimed through various books by

Christensen (Christensen, 1997; Christensen and Raynor, 2003; Christensen et al., 2004);

however, we saw no apparent application of his definition in the paper- and packaging

industry. Christensen and Raynor (2003) explains how disruptive innovation should be

51

considered a process and disruptive regardless of the incumbent would fail or not

(Kumaraswamy et al., 2018; Yu & Hang, 2010), and therefore suggesting that a disruption

is an occurrence as rings on the water, or ground-breaking does not directly comply.

However, Christensen, et al. (2015) acknowledges that succeeding as a disruptive

innovator will not apply to every company in a shifting market. Managers might use

wrong tools for their context. Reflecting upon this powerful tool (Gobble, 2015), we

suggest that it might be wrong for this context.

5.1.1 Make a strategic decision for the project, go sustaining or disruptive

When discussing the disruptive character of the project at the case company the

respondents did not believe that it would be a disruptive project in their view, at least not

now. However, only motivated by the features and suggested application of the project

does not agree with Christensen, et al. (2018) which argue as decisive for classifying a

project as disruptive. They believe that no project is inherently disruptive and it would

instead depend on how it is implemented in the market (Christensen, 2006; Gobble,

2016).

This discussion of the project has made us realize that the final product could be subjected

to two different paths for its further development; a sustaining project or disruptive

project. The first alternative would mean to “cram” the technology into the existing

sustaining innovation process, using the existing customers to guide the project and shape

it after their needs in the mainstream market (Ahlstrom, 2015; Christensen, 2006;

Christensen and Raynor, 2003; Christensen, et al. 2018). The other alternative is to release

it as a disruptive project, use the current, or similar, target product and launch it in a low-

end market and make incremental improvements until it reaches the mainstream market.

At the moment, the origin of the project is somewhat ambiguous; however, it is a

collaboration between the case company and one of the most prominent universities in

Sweden. The university is making most of the research and the case company are funding

it. If it started as a customer problem or R&D project, initiated by the plastic-to-paper

shift, can be debated. However, currently there is no customer involvement but they have

a target product in mind which we believe is a subsegment of their mainstream market. If

they follow this path, it can be regarded as a sustaining innovation (Christensen, et al.

2018).

The more refined (sustaining) product, Beta, or the current target product

(potential disruptive), Alpha?

For the remaining part of the thesis the more refined product will be denoted to Beta,

while the first target product is referred to Alpha. Initially, all respondents did not believe

that developing Alpha in the project would not make it disruptive. Proposing to launch a

product which would underperform in terms of the demands of the suggested customer

would not make it disruptive in the views of the respondent. However, that the product

would underperform is an important ingredient for Christensen (1997a) when he

discusses disruptive technology. Some respondents also expressed an interest to go

wider, looking for more markets and applications for the final product which speaks in

52

favor of a disruptive innovation (Christensen et al., 2018). However, while most were still

in agreement that the Alpha product would be a viable target for the nearest future. The

respondents argue that they might change the properties of the final product; “with the

right properties, and price, it could be disruptive” (Gabrielle). However, we would argue

that with Christensen’s view that this is not necessarily true. The properties will not make

the project disruptive; however, it can influence how easy it will be to create and

implement in the market.

Discussing the opinion for creating a more complex product instead of the current target

product, Gabrielle and Hans argue that the Alpha product would be unappealing for the

subsegment in its current state. They believe that the feature which the product would

have is only a commonality for consumers and provided with another, more accessible,

alternative they will not need it. Their recommendation would be to develop the product

(Beta) further to reach another more relevant market. One suggestion would mean

increasing the products’ properties to appeal to a much larger, suggestively more

profitable, market where it could significantly compete with the plastic solution.

However, some believe that the technological challenges might be too high. Involving

Christensen in this debate, Yu and Hang (2008; 2011) criticizes him for taking the

technical development sometimes too lightly. Only because there is a need for a sustaining

and biodegradable alternative to the plastic solution, it might not be easy, nor cheap, to

create it. Making this product would be what Christensen (1997a) argues as a sustaining

innovation, which entails creating the product after the demands of the incumbents

existing customer. The improvement could be either radical or incremental, however they

would target the profitable ‘mainstream’ customer (Christensen et al., 2015; Rosenbloom

& Christensen, 1995). For the case company this would mean to make something which

the customer care about and desires, which in return would make them more profit and

enable higher margin sales.

The alternative would be to stick with the Alpha product. Frida explained how the product

would not need as high tensile strength, excessive properties and be easier to handle,

making it a good candidate for what Christensen, et al. (2018) believes should be in a

disruptive project. Several respondents did argue that they remain open-minded for the

final target product, however it would be important to have something to aim for when

developing. Staying with this “simpler” Alpha product would instead be easier to develop

and implement. When they introduce it, it may offer advantages which appeal better to a

low-end market. Being cheaper, more accessible, and more convenient, however inferior

in attributes makes it unattractive for the mainstream market (Christensen et al., 2018).

By talking to the brand owners, which might be recipients of the Alpha product they did

express concerns about the properties. The “mainstream customer” does have one feature

which they cannot deviate from, which is the safety of the product. Creating a packaging

which underperforms in their most important feature will make it an impossibility to be

released, even if it is excellent in other attributes. The packaging, the solution by the case

company, will be secondary for the brand owners, their main focus is to have a package

which can preserve their primary, the content/product. However, they also discuss the

53

current target product and believed that this product might not have the demand which

they are going for, however in our view, depending on how they want to release product

it might be, low profitability but less competition.

Christensen (1997a) believes that developing a disruptive project often implies that you

compromise on the ‘mainstream attribute-criteria’ and focus on another feature in order

to disrupt (Govindarajan & Kopalle, 2006; Adner, 2002). However, this is not an option

for this industry and both brand owners stated that they would not accept a packaging

solution which does not support their ambition to limit waste of food. There is a lowest

criterion in order to compete in the industry, this means by definition that a low-end

innovation is not possible and therefore resulting in problems for Christensen’s theory.

The mainstream market or low-end market?

Clas argues that it will not be an innovation which creates a new market as it will replace

another material, it will enter into an existing one. Based on this remark however,

Christensen (1997a) would not exclude this project from ‘disruptive project status’ so

quickly. Christensen (1997a) argues that a disruptive innovation would be launched in

either two ways, either by entering a new market or in a low-end market. It is not vital

that it would create a new market. Based on this, it is still possible for the project to be

disruptive if it would be launched in a low-end and not mainstream market.

Going for the mainstream market for the case company would mean that they would

develop the product to appeal to the existing customers (Christensen, 1997a). By also

doing this, they would also face the incumbents of the plastic industry which would

compete with their market shares. Clas believes that it would be unwise to compete with

the Alpha product in a market with already strong actors. Some other respondents have

also explained their interest in the mainstream market and how they find that the Alpha

product would be unappealing in its current state. However, Christensen (1997a) would

speak in favor of going for the low-end. He argues that when launching a disruptive

innovation, one needs to target the low-end or new market, and in this case, they should

not contend for the next market directly, but instead find a foothold on the market and

from this position develop their product. There will also be less competition from other

incumbents in a low-end market. Another discussion-point was the price, if the project or

final product would become too expensive then maybe no one would want it. We believe

that this was a valid point, making something too expensive with the one feature would

perhaps no longer be interesting for the low-end market.

Foundations for making a decision

For the final decision of which path to pursue for the project, we believe that it comes to

a choice between high profitability and challenges against lower profits and fewer

challenges. Choosing the disruptive path, Alpha product, would entail implementing the

project in a market where a plastic producer previously has overserved or ignored. Then,

develop the product until it starts to appeal to the mainstream customer and they chose

to change from the current plastic solution. The other alternative market would be more

challenging at first, entering a market which is more profitable but also more desirable by

54

the plastic producer. This will be a sustaining innovation approach, with a suggestively

radical project with a much greater technical challenge for the development team. The

project would however have a better customer understanding and be adapted to the

needs and demands of the customers during its development. However, independent of

which alternative they would choose it will take a long time to make changes to their

customer machinery as they would probably have established processes and depreciated

machinery in place. Another alternative is to build a business model around the project it

is profitable enough, however, it will still need to comply with available machinery.

Making the product to work with existing machinery could significantly reduce cost, and

in contrast, if the adaption would be too great it would not only be challenging for the case

company but also customer adopts the product.

For the final product however, it will also be a question of how many features they are

willing to develop. This can relate to Christensen idea of overshooting. When Christensen

(1997a) explains overshooting, he means that a product's performance can be over-

featured and that exceed the rate which the customer can absorb it. However, Frida does

not believe that it is a problem in the industry. Offering the market what they desire, an

alternative to plastic packaging, will be difficult to overshoot; knowing that it is a bio-

material and sustainable is often enough. Therefore, making a packaging too sustaining is

not an issue for them. However, one thing which will be interesting for the final product

is the way which Gabrielle showed concerned that if the features of the paper get too

developed it might get confused with plastic, which is not an outcome they want. It might

not get the impression of making a tremendous change to plastic-versus-paper, but as

long as it would get a foothold in one category of groceries it would still be possible to

develop it further, and maybe reach the brand owners demands in time. Furthermore,

receiving the attention that ‘this whole package is changed from plastic to paper’ might

not be the best choice for the project, unless they are willing to compete with plastic

producers in this early stage. Keeping down the costs by only developing the necessities

of the project and releasing it without the ambition of making tons of money instantly in

a low-end market would is an alternative.

5.1.2 The value with a common understanding of disruptive innovation

Discussing the value of a common understanding originates from the need of separating

radical and disruptive innovation terminology in the industry. Yu and Hang (2011)

believe that it is important for managers not to confuse disruptive innovation with radical

innovation. When reviewing the answers of the definition with the respondents, we did

not see that their suggestions complied with Christensen. However, we do not believe that

it is not because the actors in the industry weren’t aware of this definition, neither that it

is ignored, moreover that it has not been that common. Many did not wager a guess and

others explained their ideas when presented with the term; however, we did not find

coherency in the answers for what disruptive innovation can be. However, what we did

find was the connection between how radical innovation and disruptive innovation tends

to have similar meaning for the respondents. Discussing ‘rings on the water’, ‘shaken the

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industry’, uncertain customers and markets, is all generic descriptions of what we believe

to be radical innovation. The literature agrees, disruptive innovation does share features

with radical innovation, depending on how you would define it. Yu and Hang (2011)

explain that disruptive innovation can be created during high uncertainty, especially if it

would be based on scientific discovery. However, the main difference between disruptive

and radical innovation should be how the company decides to release it to the market.

Disruptive innovation, by definition, targets a low-end or emerging market where new

customer’s needs and demands have to be addressed (Christensen et al., 2015), while

radical innovation concerns delivering superior value to the company’s existing

customers-base (Chandy & Tellis, 2000).

One interesting discovery was how the case company often pursue both high profits, large

markets and ‘radical’ innovations, and then argue that they have issues launching

products. We believe that because they set these targets for their projects, they also face

tremendous competition from the incumbents in the plastic industry, which complicates

their launches. Moreover, Christensen (1997a) theory does suggest that this is exactly the

type of challenges they should expect when launching a sustaining innovation. In order to

understand this scenario, we believe that Christensen’s theory could support the

managers. As we found how many of the respondents consider the project from a

sustaining perspective, we believe that it could be even more valuable learn and revise

how they also could discuss what it would mean to be a disruptive project. However,

Govindarajan, et al. (2002) finds that company’s, as our case company, with a mainstream

customer-orientation are more likely only to introduce radical innovation, and not even

consider disruptive once. This in return would imply that the case company would lose

the opportunities to gain new value (Govindarajan et al., 2002).

If one wants to use disruptive innovation more frequently, they must consider whose

definition to apply. Meaning that if they would use Christensen’s definition, they first need

to establish a common understanding of what it is. Danneels (2004) and Nagy, et al.

(2016) discuss the vagueness of the term and what actually constitutes the term. Gobble

(2016) also discusses this and how it would be important to claim ownership of a term,

or else it will be difficult to have a common understanding of what is being studied, or

discussed. There are many authors who have made their definitions since the

introduction of ‘disruptive’, (see table 1 in section 2.2.1), which only confirms that the

concept has been widely applied, therefore by not having a coherent definition reaching

this industry might not be so strange. In our case, there was a divided opinion for what

constitutes the definition, and could therefore create confusion discussion between

people. Tidd, et al. (2005) confirms this as they discuss the perception of the definition

may also lead to the reaction of its outcome. Knowing the difference may help one to

understand why a person would go for a less profitable market in one instance and to the

mainstream market in another. Lastly, we believe that considering frame analysis, we

should consider how our understanding, perceptions, experiences make up for how we

act in certain situations (Fay, 1996; Goffman, 1974). Having a common perspective for

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what constitutes the term will be immensely helpful (Goffman, 1974), especially when

discussing a subject as innovation in the first place.

5.2 RQ2: Innovator's dilemma in the paper- and packaging

industry?

RQ2. How is Christensen’s concept The Innovator’s Dilemma applicable in the paper- and packaging industry and does it influence how actors manage projects? Christensen (1997a) believes that there is a dilemma which is built upon the premise that

an entrant will overcome an incumbent by releasing a product to a low-end market, gain

traction to market share and lastly take over the market from the incumbent. We have

found how incumbent (case-company) allocate resources to satisfy their existing

customers; however, they do not seem to live in fear of becoming disrupted nevertheless.

We would not argue that it is not due to ignorance or avoidance of the dilemma, but rather

the premise which The Innovator’s Dilemma it built upon is not occurring in the industry.

When Christensen made his first findings for the disruptive innovation theory, he and

Bower (1995) research the disk-drive industry, one thing they reacted strongly to where

the resource-allocation process. Relating this to the paper- and packaging industry, we

found many cases where this also was the case, e.g. the machinery, production facilities

and large purchases of raw material, and developing in accordance to their customers’

demands. Furthermore, we also found how an incumbent in the paper- and packaging

industry would not in a rational decision want to invest in what Christensen’s refers to as

a disruptive innovation. Christensen, et al. (2018) explains how incumbents usually are

unmotivated to develop an innovation which promises lower margins, smaller markets

and inferior products, which is also true. However, this is so far that we believe the

Christensen theory is able to explain ‘the paper- and packaging industry’ and we have

identified three discussion points for why this industry is unlikely to get disrupted; (1)

external forces, the shift of plastic-to-paper, has a significant impact on decisions for in

projects, (2) the collaboration between entrants and incumbents are necessary and (3)

customers are an essential part of the innovation process for all actors. Therefore, the

concept of Innovator’s Dilemma has a low impact on how actors manage their projects.

5.2.1 Innovating due to a strategic shift

In order to elaborate on the relevance of Christensen’s idea in the industry, we first need

to review the developments of the industry. Not more than thirty years ago the industry

was focusing on achieving high production volumes and decreases of cost, and today it

has shifted towards customer-orientation and innovation (Olander Roese, 2014;

Ottosson, 2008). Having this history of change, the industry is excellent at adapting when

the market demands it. Now, the industry has been pulled into another shift, the battle

against oil-based solutions against alternative materials which are more sustainable.

When asked about the specific reasons for innovating in the industry, the answers were

quite general, overall the reason for innovating had to do with bringing value to

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humankind. Making small steps to improve everyday life. Fulfilling customer needs they

did not know they had and solving problems. However, we did find that the most

discussed aspect was about how they seek to develop a more sustainable alternative

compared to plastic packaging. From the research, we identified four drivers which affect

their decisions for which projects to pursue.

First, we found that a big driver for why they are innovating comes from the shift which

has influenced the industry. Being able to contribute to the solution for global plastic

issues, even a little bit, is what seems to motivate the case company when they are

developing. However, creating alternative materials is challenging, Clas believes that it

will not be possible without regulations. Brand owner 1 explained how plastic is still a

fantastic material with good properties which still are appreciated by the customer,

however, when it comes to dealing with the product after its use the issue arise. Second,

all of the respondents acknowledge how people pay more attention to sustainability

nowadays, therefore innovation in this area has been important. Paper packaging is one

segment of the packaging industry which have done impressive work to create value from

it. Denise believes that if there is a trend in the market today, it will work in their favor.

Once, the attention for sustainable material was only a demand from the customer, now

it has grown to be a problem, the actors need to show that they are making an effort. Even

the brand owners are sure to keep track of changes in the environment, scanning for

changes and opportunities to serve the customer better. Third, the aware customer has

been very positive for the actors working against plastic, the customer wants better and

more sustaining products and packaging and the actors are eager to serve them. In this

case, customers are believed to be more willing to deal with paper than plastic, therefore

providing new and better solutions makes an excellent opportunity for a paper producer.

Furthermore, since the customer is more interested in these products, Erik has found that

plastic producers seem to get more nervous for their current business as they are feeling

a threat from the customers’ demands. Fourth, the respondents explained about

regulations which are influencing their future for packaging. One is the single-use-

plastics-directive; however, this regulation is not specifically for reducing plastic

packaging but instead of single-use-plastic products. Gabrielle believes that these types of

initiatives might not work in favor of paper producers. While it aims to decrease marine

litter, it focuses more on recycling than decreasing, thus putting more effort for plastic

producers to make smarter products, not less. This will affect much of the case company’s

current offerings of combination materials; they will have to develop something which is

entirely paper instead. Currently, the view is that the most people prefer to talk about

improving plastic rather than replacing it with better materials. The focus is on plastic,

making it 100 percent recyclable and then they can look for other alternatives, making it

even more challenging for paper producers.

In order to explain the changes which occur in the paper- and packaging industry one

would need a theoretical framework which handles a wide array of problems. McDowall

(2018) claims that Christensen’s theory is not of this characteristic. Incumbent companies

may find themselves in the presence of disruptive technology, but the effects are small in

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the relevance of the broader socio-technical system. Christensen’s theories exclude a

wider perspective and the systematic interactions and problems which may occur. The

solutions which the innovation stands for does not change because the present technology

is replaced by another. It may have been structural changes to the market, however the

broader perspective is about creating sustainable solutions to the market and not

replacing incumbents’ firms or their technology. Christensen argues that external factors

do not drive the industry’s development (McDowall, 2018), e.g. the plastic-paper shift, the

aware customer and sustainability trends, however this fact cannot be denied in the

industry. He has to consider this shift which the industry is subjected to, not just the share

of entrants and incumbent with the possibility innovating disruptively. There is much

more in this industry than a strategic choice of going disruptive or sustaining, we have

this whole shift guiding companies to figure out what to focus on.

5.2.2 Collaborations between incumbents and entrants prevent them from being disruptive

The idea that an entrant, or smaller actor, would successfully be able to develop and

launch a product in the paper- and packaging industry which would disrupt an incumbent

is unlikely due to one specific reason, collaborations. We have found that the incumbent

actors almost always are part of the development of new technology. With this

collaboration, all included actors tend to have insight into each other innovation

processes, and thus making it uncommon for an entrant to develop something without the

support of one or multiple incumbents. Christensen (1997a) reasons about how

incumbent only tend to invest where the return is at its highest, and therefore miss the

threat of emerging actors. Even if a smaller actor generally would be less limited by earlier

commitments to technologies and networks (Macher & Richman, 2004), the entrance for

a new actor is challenging in this industry. Kumaraswamy, et al. (2018) believes that there

is often a significant challenge when gaining access to resources held by incumbents,

especially if the entrant wants to take share from their profitable markets – something

which we identified in our findings as well.

The research has found that being an actor in the paper- and packaging industry is tough.

You can be creative and technically able to create a product, however, there are many

things which has to comply in order for a project to be realized. First, it is found that no

one in the industry innovates by themselves, they depend on collaborations for sharing

resources, knowledge and risks. They also need to work within the existing machinery

and have access to large volumes of material. The industry is generally slow and takes

investments takes a long time. You need to achieve fast growth in volumes to ‘earn your

place’ and be seen by other actors. You will not be able to sustain yourself by just

producing something once, it has to be a successive process where high outputs are

necessary. Clas explained that if you would manage to work within the existing machinery

and develop a break-through material it would still be challenging to produce it

sufficiently to satisfy your customers. Furthermore, producing enough material might be

considered a challenge; however, there are also limitations of how much you are allowed

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to produce. Creating something “really simple” can also have its limitations, you would

need to find a balance between quality and efficiency for the output. However, we also

found that there were two ways which you could avoid the challenges of innovation in the

industry. First, Adam explained it is not that uncommon to let others have access to your

technology or even selling the system, thus avoiding the limitations of the industry.

Second, you can work with services for the industry instead, e.g. offering expertise and

knowledge, this would be a way to avoid the limitations of machinery, volumes and

finances.

The brand owners view of the packaging industry is that there are large volumes and

material, very practical machines and is not something which you would easily move.

Asking them about the challenges, they also expressed concerns. As they do not own any

packaging factories by themselves, they cannot test and produce their own packages.

They can come across a scenario where they have an idea for a new solution for a

packaging solution, however, they cannot just invest millions of SEK in a new tool since

they do not own the machines.

Relationships between actors

However, even with all these challenges, the paper- and packaging industry develops and

advances rapidly with the shift in the packaging industry. The most prominent reason was

the relationships between the actors in the value chain. Entering the industry is

challenging, however not impossible with the support of the incumbent. Gabrielle

explains that even if an entrant has an interesting solution for a new packaging type, there

is not really a possibility for them to produce it. They would need access to an expensive

machine, raw material and finances to even try to develop the packaging. What Gabrielle

also found was that smaller actors are restrictive to obtain these by themselves. However,

finding incumbents who have access to the necessities in the industry and want to

collaborate is believed to be the way to innovative in the industry. If we connect this to

Christensen, he and Raynor suggested that a solution for the Innovator’s Dilemma would

be to establish ‘autonomous organizations’ which independently can develop and

commercialize innovations (Christensen & Raynor, 2003). Being able to separate

processes, values and cost structures enables stronger opportunities for innovations.

Christensen (1997a) claims that this would be essential to succeed with disruptive

innovations (Chesbrough, 2001; King & Tucci, 2002). However, in this industry we see

that the collaboration instead enables the innovations. They might be more sustaining

than disruptive; however, following the norm in the industry this is how they innovate. If

they would create discontinuous innovation (Tushman & O’Reilly, 2002), we suggest that

many of the actors would do this together as well.

Erik explained how the terms and conditions for the collaborations are essential. For an

incumbent, like the case company, they would not always agree on a 50/50 share, but

instead they would identify the needs and contribution of each party and then decide how

to divide the responsibilities. In this industry it could concern converting lines, expertise

or access to a customer. Brand owner 1 has also been in a similar position. If the smaller

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actor would have lesser means, they can be willing to enter with half or all of the founds,

providing that they have access to something else we need. Brand owner 2 also gave an

example of how smaller actors which have good ideas and are very driven in creating

single package solutions to sell them. However, it is often the larger actors which makes

the solution a reality and decides which material they use. In terms of innovative

capability, the suppliers stand for innovation, however brand owners set the criteria for

what is necessary to adopt it. Cost is essential, but they also consider aspects for their

packaging, sustainability. There are also familiar with investing due to interest, e.g. if there

is a promising idea the brand owners could invest just to follow up on the development.

Another way is to purchase more volume from a supplier providing that they are willing

to try something new.

Characterizes of the incumbent and entrant

The incumbents of the paper- and packaging industry are known for their access to

capital, volumes in terms of raw material and production capabilities, expensive and rare

machinery, knowledge and expertise. They are believed to have the “muscles” necessary

to pull the weight of a project. They are also the actor which are most prominent to risk-

taking, investing in uncertain new technologies to be part of the journey for cutting edge

solutions to compete against plastic packaging. However, they are also known for being

rigid, margin-focused, dependent on established processes and depreciated machines. As

for the case company we have empirical findings stating that they are a powerful actor

with muscles to implement projects. They have the ability to scale up material-production,

taking something from a lab-scale and making it much greater with their processes and

production capabilities. However, even as the case company is an incumbent with

“muscles”, they still rely heavily on partnerships. Being entirely dependent on organic

growth is not an option, even with the ability to produce large volumes.

Most of these remarks comply with what Christensen (1997a) argues is typical behavior

for an incumbent. They allocate resources for their most important processes and usually

have substantial control over the available resources in the market (Kumaraswamy et al.,

2018). However, being a “close-minded” incumbent in this industry does not mean that

you are in danger of being disrupted, since they still rely heavily on the collaboration of

others. It is suggested hos most of discontinuous change and innovations come from

entrants (Christensen & Bower 1996; Tushman & Anderson 1986) however, have found

that these innovations have been developed with the support of the incumbent.

The opposite is the entrant, in this industry they need to have a reasonable volume to even

show that they exist. They also are considered to have low capital for the industry and are

unwilling to invest in machinery to enter the market. However, Erik believes that

generally have a good attitude for quick profits and quickly create something which you

can bring to the market, making it easier than talking to a larger actor. Christensen

(1997a) agree that creating quick profits are essential when launching disruptive

innovations. He further claims that growth is secondary and should be a long-term goal.

Researchers suggest that entrants tend to be more flexible and eager to seize

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opportunities, an advantage for disruptive innovations (Obal, 2013; Christensen, 1997a;

Tushman & Anderson, 1986). Although, in this industry many of the smaller actors are

also usually very interested in joining the incumbents regardless, it is necessary to be able

to develop anything in the value chain.

5.2.3 The necessity of customer involvement in the innovation process

Olander Roese and Olsson (2007) explained that in the 1990s it was realized that the

industry was subjected to the shift, from production and standardization towards

customer focus. However, since then, the industry has been far from customer oriented.

Berg (2005) and Hayhurst (2002) also wrote (as cited in Olander Roese, 2014) that the

industry has been accused of poor listening to the market and other actors in the value

chain. In the 2014 study, Olander Roese (2014) states that increase the market- and

customer-orientated view will be essential for the continuous development of the

industry.

Now, we have found that listening to customers has become fundamental in the paper-

and packaging industry. In fields which are market- or customer-oriented it is crucial to

listen to the customers when developing technologies for long-term success (Slater &

Narver, 1998). It can be considered as ‘conventional business wisdom’, however giving

the customer what they want is important for a competitive advantage. Brand Owner 1

stated clearly that “we need customer insight or else it will fail” and therefore drives their

innovation process with customers in the center. Hans explains how it would be

considered a dream if every project was customer-driven, serving the customers with

what they want - following today's “aware customer”, with new regulations, creates a pull

in the market which is valuable. The respondents agree that customer insights in today

fast-changing world is necessary, thus making the perspective of von Hippel (lead users)

more relevant in this industry (Thomke and von Hippel, 2002: 5). Christensen (1997a)

agree that listening to the most valuable customers is rational behavior for an incumbent.

However, it will lead to the pursuit of sustaining innovations, which can be either

incremental or radical as long as it appeals to the most demanding customer. The main

idea of Bower and Christensen (1995:50) is how “customers are reliably accurate when it

comes to assessing the potential of sustaining technologies, but they are reliably inaccurate

when it comes to assessing the potential of disruptive technologies”.

In fact, Christensen's (1997a) assert that incumbent firms often have the technical

competencies and resources to develop new products and indeed do so, but have trouble

to launch them. The reason for challenges as Christensen's claim is due to the strategic

choice to serve the most demanding customer (Christensen, 1997a). Some respondents

however did not see a problem with technical initiated projects that have a loose coupling

with potential customers (Brand owner, 2; Erik; Frida). This can occur for several reasons;

(1) you do not always include the customer until you know if you can scale up the

manufacturing processes, (2) sometimes technical projects are developed for long-term

goals and does not have customers in mind, (3) not introducing the customer before we

know will be the final product.

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The difficulty of knowing what the customer wants

Even as customer insight seems to be fundamental, respondents argue that identifying

customer needs are often challenging, especially further down the value chain. Hans

explained that it is hard to capture the value from the customer they provide material too

because the true value from the supply-chain lies (is created) at our “customers-

customers”, which makes it hard to understand that value.

Adam does find that they have strong technical expertise for developing the technology,

but often lack the market-oriented and customer insights. The biggest challenges usually

come with new customers as Erik believes that they are very good at serving their existing

customer. We found that the mantra “listen too closely to the customers” might not be an

issue in this industry, as a matter of fact, you need to do so. In instances where firms are

highly focused on their customers, developing close relationships for insight into their

needs and demands are common. Many companies do this in order to obtain a competitive

advantage, and Slater and Narver (1998) refer to this as a customer-led business. Slater

and Narver (1998) explain how customer-led business seeks to create an understanding

of the expressed desires of their customers - creating products and services which can

satisfy their desires. The problem is however that customer-led philosophy is often short

term, high focus and fast reactivity, making drastic changes due to switches in desires.

Adam and Hans express a strong need to listen to the customers but find it hard in cases

where new customer relationships have to establish to get the chance to interact with the

consumer, where the value is created. In other projects Brand owner 2 say that sometimes

they know the customer very well and their problem which enables them to innovate

without them, it is a matter of the established relationship to the customers. However, one

aspect that Hamel and Prahalad (1994) put forward is the downsized effect of the

eagerness to stay close to the current customers, which make the incumbent firm less

likely to learn about new emerging markets and customers, which is vital in a fast-

changing world.

An industry dependent on volumes

When innovating in the industry it is uncommon to create something without the insight

of the customer, one specific reason is that in order to invest in a machine which can

produce large amounts of volume, someone also has to buy it. Hans asserts that customer

knowledge which they share with them are valuable in the innovation process. The paper

- packaging industry has its limitations in terms of high investments costs and need of

high volume in order to gain profit. This implies that when new products are created, they

have to make sure that high volume can be guaranteed. The high volume means that you

have to get along the big mainstream customer. It would be impossible for the industry to

launch a new product to the low-end market even though the product itself might have

the inherent characteristic of disruptive innovation. Christensen (1997a) would argue

that the product only can be successful in a low-end or new market, but as all of the

respondents said, it would be impossible to launch a product in such small volumes to

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segment that are not willing to pay premium prices. In this industry it means high volumes

from day one.

The dilemma for new developing technologies is that you will not innovate in small

volumes and neglect specific attributes to make the product more appealing to the low-

end market. Serving the most demanding customer does not come for free, firms have

scarce resources and need to allocate them sufficiently between projects (Christensen,

1997a). Often project that targets customers which entails uncertainty, e.g. emerging or

new markets, will make incumbents to neglect them (Govindarajan et al., 2011; Pérez-

Luño & Cambra, 2014; Reinhardt & Gurtner, 2011; Utterback, 1994). Brand owner 1

mentions an example where they decided not to join the project since it required a large

volume just to test the product and in that point of time, they did not have any clear

customer segment whom potential would buy the product. This finding tells a lot about

how new developments requires that you have customers that are willing to pay for it.

Usually you find those customers in the mainstream market. It can be argued that you

need to have a robust mainstream customer orientation and continuously serving them

what they want. However, as Atuahene-Gima & Ko (2001) argue the types of innovation

that arise can only be applied in the current firm’s environment. This led to that resources

are spent at those customers, but in this case is not a bad thing, you have to do it.

Necessary properties for packaging solutions

When considering the properties and features of a final product, Christensen (1997a)

tends to argue that you will have to compromise on the mainstream most favored

attributes to create a disruptive innovation. However, we have found properties which

you cannot compromise on this industry, i.e. safety of the product, recyclability. In this

shift, we can probably see how customers will be forced to adapt to change for plastic

solutions towards an alternative material. Adam believes that the surrounding

environment (laws, regulations) will have a significant impact on what they will need to

focus on when innovating. This also relates to what Gabrielle and Frida discussed about

recyclability and how new development will need to include this requirement, regarding

what the customer says. Christensen (1997a) however discusses how the perceived

importance of various attributes generally change over time for customers. Knowing

which attribute that is most important to focus on for future development in the future is

a big challenge for developers in the packaging industry. Currently, we found that for

brand owner 2 the most significant attribute is the safety of the product and its

sustainability. Investing in packaging which might be more expensive, but have other

desired features could be relevant for them. Every aspect needs to be considered, in this

case the safety of the product and food-waste weighs the strongest.

Discussion of properties relates to Christensen (1997a) idea of overshooting. Our findings

show that there is no case of overshooting for valuable attributes in the industry, because

these attributes have to reach a common standard by law. This implies that customer in

the low-end or new market has to pay for these attributes no matter what. This aspect of

stable attributes that have to have a high standard is neglected in Christensen’s theory.

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When discussing if it would be an issue by making a product “too” featured in the industry,

Frida reasoned that it would probably not be a problem. King and Baatartogtokh (2015)

have also identified cases where some firms are not faced with the dilemma which

Christensen suggests. Sometimes sustaining innovation can also be too slow to keep up

with what the mainstream customer would want, in this developing something fully

recyclable, sustainable and alternative to plastic.

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6 Conclusions

6.1 Concluding remarks about research aim and questions

The thesis aimed to investigate Clayton Christensen’s disruptive innovation theory in

order to problematize it in a new context, the paper- and packaging industry. This was

done by discussing how individuals argue, understand and use the term ‘disruptive

innovation’ and also discuss Christensen’s Innovator’s Dilemma in relation to how

incumbents tend to manage their innovation projects in the industry. Based on our

discussion of the research questions we suggest that Christensen’s theory is problematic

in this specific context.

Christensen theory could be useful when considering their attempt of implementing

products; however, none was applying disruptive innovation in the same way. We instead

found that they apply disruptive to explain things which can shake the market, be ground-

breaking, have high uncertainty. Research suggests that the word has been overused,

overexploited (Christensen et al., 2015; Gilbert, 2014; Gobble, 2016; Lepore, 2014),

however we did not detect this in the paper- and packaging industry. The more concrete

example in the research was the project which the thesis has been conducted around. We

found that most respondents did not argue that this project would be disruptive; however,

we offer suggestions for how it can be disruptive, in the view of Christensen. There are

two path’s which we believe that the project could take, a sustaining, and possibly radical,

project or a disruptive project. It would consider choosing between making the more

advanced Beta product for the mainstream market, or keep on developing their current

target product Alpha for a low-end market. The final decision will be influenced by how

the case company reasons about the advantages and weaknesses of each product,

depending on how they want to release it to the market. It will also concern how many

features they are willing to develop for the final product, the suggested Beta product

might have too high technical challenges, making it unreachable in a reasonable time-

frame for the company. An important conclusion is to learn to differentiate between

radical and disruptive innovation in terms of terminology. By having different

perspectives of the definition, it can hinder a valuable use of the term disruptive

innovation for individuals who are discussing their innovation projects. When discussing

the nature of technology in a project, it can be both radical and disruptive; however, how

it is released to the market is what differs. The case company as the case-company has a

customer-oriented view it implies that they may not have considered these types of

projects before (Govindarajan et al., 2002); however, if they would start, they could

possibly find new opportunities to create value for the company.

In terms of how Christensen’s theory relates to how incumbents manage their innovation

projects, we suggest that it does not significantly influence them. When managing

innovation projects in the paper- and packaging industry you would need to consider

several aspects, e.g. the necessity of large volumes, substantial investments in machinery

and lastly established networks to gain access to basic raw materials, customers and

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expertise. The theory has been well-developed since 1995 (Christensen & Raynor, 1995),

however there are anomalies in the paper- and packaging industry which he does not

account for. We have found aspect which corresponds with what Christensen would

expect from an incumbent actor, e.g. they allocate resources to satisfy their existing

customers, invest heavily in current processes, machinery and purchasing raw material.

They also seem to be less interested in low-end, less profitable, market opportunities.

Nevertheless, they did not appear to feel threatened by the potential of being disrupted.

We argued that it is due to three reasons; (1) external forces guide the innovation projects,

(2) collaboration between entrants and incumbents, and (3) having a customer focus is

essential for all actors.

1. Innovating is not always a strategic decision for actors in the industry, and is often

influenced by customers, regulations or large technological shift (from plastic-to-

paper). Having an idea usually need to comply with external forces in the industry,

and therefore most actors are moving towards to same goals.

2. A reason that incumbents are not disrupted by innovations is due to collaborations.

Collaborations lead to insights into each other processes and awareness of the

incumbent in the innovation process. Being a creative and entrepreneurial actor is

not enough to innovate in the industry, you need access to several things, e.g. e.g.

machinery, volumes, expertise, which is often easier available at an incumbent.

Producing something once, five or hundred times is not sustainable in the process

industry, you need to develop a successive process which high in- and output. The

entrant and incumbent are dependent on each other to complement their needs.

3. An industry which was accused of poor listening to customers has now become

fundamentally dependent on the customers, addressing their most desired needs. It

is challenging for producers to know what the customers-customer need; however,

they are attempting to learn about the needs throughout the value chain. However,

the customer-focus is not only for ‘satisfying their best customers’ but also due to the

volume dependency which constitutes the industry. Making something which appeals

to only a particular niche customer will not be viable in the long-term. The industry

produces large volumes of product and therefore they also need to have ensured that

there are customers who will be willing to purchase the products which they produce.

6.2 Theoretical contribution

From our original outset from the problematization we sought to test Christensen’s

theory to a new context. Our theoretical contribution is how we identified an anomaly in

the paper- and packaging industry. The industry is unlikely to be subjected to disruptive

innovation in the way which Clayton Christensen proposes. Actors, incumbents and

entrants, are too aware of their surroundings as they are developing with each other with

shared objectives, e.g. alternatives to plastic packaging. Therefore, we have problematized

Christensen’s theory in the paper- and packaging industry and suggests that disruptive

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innovation theory should not be a primary theory to be used to analyze post hoc

innovations as it would be inadequate in explaining the actions which actors in the

industry take. The reason is that the ‘disruptive process’ which Christensen describes is

unlikely to occur in the industry in the same way. Entrants and incumbents are

collaborating to innovate, resources, machinery and volumes typically need to be

exchanged and therefore, suggesting that an entrant would disrupt an incumbent is

unlikely. We also find how another Bergek, et al. (2013) have made similar findings to our

own. They investigated a scenario where products like gas turbines which have very high

unit cost, high investment of machines, large facilities and very costly tests were also

unfamiliar to the effects of disruptive innovations. They experience a case of large socio-

technological systems which changes the dominant technologies in the industry. We find

it interesting how our research shares similar traits and therefore does not only

contribute with one anomaly, but also builds upon other existing research.

6.3 Practical and managerial contributions

This research also offers practical and managerial contributions, especially for managers

in the paper- and packaging industry. We found that most of the respondents who

discussed disruptive innovation displayed a similarity to radical innovation. Aspects such

as “rings on the water”, “shaken the industry” under uncertain conditions emerged. We

suggest that without claiming that we have a perfect definition for radical innovation that

we instead could offer a better collective understanding for what disruptive innovation is

and how it can be valuable for the case company in upcoming innovation projects.

Knowing which possibilities and effects a disruptive innovation project could have

compared to a radical sustaining project could improve upon coping with some of the

challenges which they have presented in the study. We suggest that by considering

Christensen’s definition for disruptive innovation in relation to sustaining innovation, i.e.

radical and incremental, it makes for a powerful managerial tool when discussing

innovation projects internally and externally in the industry. Knowing about the

difference between a radical project, and a disruptive project, could make affect how

board groups can discuss the relevance of different innovation projects, e.g. some might

not be as profitable when it is launched as others; however, it does not necessarily imply

that they should be canceled. Even as Christensen’s perspective on disruptive innovation

was not the norm in the industry, his ideas concerning innovations can be proven quite

useful for a manager who seeks to do business differently in the industry. Christensen, et

al. (2004) believe that theories should be used to predict future outcome; therefore,

knowing and understanding the core concept should help managers to understand and

act accordingly in order to achieve predicted outcomes. We are aware of other

perspectives where the understanding for a definition is not that important and how it

can be possible to succeed without knowledge of a theory. However, we argue that this is

not as relevant in this case. Being able to develop disruptive innovations without theory

is possible but knowing why, how and where to launch them, anchored in theory, we

believe could make for a far better outcome and consideration of a new type of value.

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We recommend taking a look at Christensen’s theory to understand more thoroughly the

differences between a sustaining and disruptive (see section 2.1.1) and attempt to revise

their definitions towards something more of a process, than an occurrence. Below, we

present a scenario where the difference between a disruptive innovation project and

radical, sustaining project, can be considered in the industry.

Imagine that you are a newly hired innovation manager in an incumbent company in the

paper- and packaging industry. You have been presented with a project. The technology

can be “ground-breaking” but is not fully developed, and now your supervisor asks you

for a strategy its future development, what do you do?

You need to consider the basics of industry; there are expensive machinery, massive

volumes to purchase but also to sell, significant investments in R&D and incumbents

which have the “muscles” and resources in the industry.

Being knowledgeable in Christensen’s theory about disruptive and sustaining innovation,

you are aware of two alternatives for releasing the product. You can either attempt to

make a disruptive innovation, this will entail; looking for an emerging or low-end market,

make sure that the technology has features which are good enough for the low-end and

probably not enough for the mainstream market. However, no need to worry, the

technology will only by unappealing for the larger market for a while and be developed

incrementally once it is implemented. Further, by choosing the low-end market you will

probably also avoid the biggest incumbents and therefore not be challenged for this small

market share. If you can identify a market which has been overshot or overserved by an

incumbent it will also work in your favor since there should be a customer who does not

need the over-featured product. Introduce a disruptive innovation in the low-end of the

market while keeping the overshot attribute “good enough” while creating other

disruptive attributes (e.g. simpler, more convenient, ease of use) that the customer values.

This make your product more eligible. The other alternative is to make a sustaining,

radical, innovation. Following the norm in the industry you will contact your existing

customer; listening to their needs and customize the technology after their demands.

However, once the product is developed and you want to expand into the rest of the

mainstream market, you face stronger competition from the incumbents, rationally

wanting to protect their most valuable customers. You can get access to a significant

market share, ready to buy much of the volumes you have estimated to produce; however,

this implies that you successfully implement the project to start with.

Having these two alternatives, you must once again consider basics in the industry.

Disruptive might be harder to adapt to machinery, securing large volumes and getting

access to resources without alerting the other incumbents. The sustaining would ensure

better adaptability, access to resources and volumes; however, we would compete against

the strongest rivals. Making a sustaining, radical, innovation project might seem most

rational for you since you get access to the necessary basics in the industry.

Then, the conditions for the project are progressed. You get an opportunity where you can

get access to volumes and the technology is adaptable to current machinery. However, the

69

customers are not involved yet. The technology is still “ground-breaking” and now the

decision is if you want to talk to existing customers, alert the incumbents in the industry

to prepare for the new technology; or, go for a low-end market where you can easier

implement the project in the market and then gradually improve upon it. Now, which

recommendation will you make to the board?

The example above concerns a scenario with “ground-breaking” technology, that have an

opportunity to make a significant impact on the market. However, only reasoning about

this project as radical can make managers close-minded for their alternatives. We have

found that managers tend to be drawn towards the most profitable mainstream markets,

especially in this industry. However, by knowing the difference between the possibilities

and consequences of a disruptive and radical project would be valuable for decision-

makers. Note that Christensen prefers to use the notion ‘entrant’ (Christensen & Raynor,

1995; Christensen, 1997) instead of ‘smaller actor’, and this could imply that when an

incumbent paper producer might want to enter into a territory for plastic producers, and

focusing in low-end or new market might facilitate the implementation into their market.

The case company is known by us as being excellent product developers and if they want

to challenge a previously plastic packaging solution, we offer a suggestion which could

potentially disrupt the market. Not in accordance with the norm of the industry, but with

a new perspective based on Clayton Christensen’s research. There is much that can be

missed when dependent on the existing customers; managers are often faced with

strategic decisions and we want to make sure that they carefully consider all their

alternatives. We are shaped by how we frame and perceive situations, and what we have

learned before when making a decision. Having a clear understanding when moving

forward enables a powerful way to guide their projects.

6.4 Research Implications

Contemplating about research implications we have identified four different aspects

which may be relevant for our study. First, we argue that the research can advance the

competitions against plastic producers by supporting the developers of alternative

materials. Considering the practical contribution, we attempt to introduce, as Gobble

(2015) refers to it ‘a powerful tool’ which they can consider when improving upon their

products. Second, even if there are customer trends and brand owners are screaming for

better alternatives, we also have to consider who that might be replaced by applying our

research in a real context. We think about how the research may influence other actors in

the packaging industry. As paper producers compete against plastic, we have to consider

the impact which may impact the plastic producers. If the alternative way to compete

would be successful we might endanger the businesses and employees of their industry,

and outcome which is never desired. Third, based on the research we need to consider

that managers might be more tempted to create disruptive innovations and whether this

is good or bad for the industry. Incumbents risk getting disrupted by entrants; moreover,

we argue that this is not the case right now. However, if it is possible to create affordable

machinery which needs less raw material to be produced, it can become relevant for the

70

industry. Consider the example of particleboards in relation to solid wood in the carpenter

industry, which has influenced how we create furniture. We should not reject the

possibility of this type of innovation to emerge when creating packages. Fourth, by

researching innovation and introducing managers to new ways which create value we

may influence the sustainable development for society, economy and environment.

Innovation is the driving force of economic growth and by accelerating its pace of

development we could contribute to its progress.

6.5 Limitations and future research

The research has been limited to both time and scope. For almost 20 weeks we have been

researching the paper- and packaging industry, establishing internal and external

contacts for data. We did collect detailed and comprehensive material for our specific case

study, complying with our initial approach when conducting the case study; however, the

research could have been improved by conducting more interviews internally and

externally with stakeholders, e.g. converters and consumers.

For future research we believe that it would be interesting to investigate how firms in the

paper- and packaging industry does fail. If not according to the Innovator’s Dilemma, how?

As the dilemma has been proven successful in explaining the changes in, for example, the

disk-industry it makes the questions which type of occurrences that make a process-

industry fail. Suggestively, we would believe that aspects such as lack of finances, access

to the value chains and raw material, could be significant issues.

Another suggestion for future research is to further validate our conclusions by

investigating a similar context, industry, which can offer comparable results. We argue

that another process industry would be suitable, e.g. steel mill, sawmill or others which

are dependent on the same variables as the paper- and packaging industry, i.e. high

volumes of production and supply of raw material, expensive machinery and vast value

networks.

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