ACCA Strategic Professional · Strategic Business Leader · Enabling success: disruptive technologies
Marlow Bank's board notes that fintech rivals offer instant mobile loans using alternative data. Executives propose building a small, separate digital bank unit with its own culture, systems and decision rights, free from the legacy core. Which implication of disruption theory best supports this proposal?
An autonomous unit is supported because incumbents' processes and value networks naturally favour sustaining innovation for profitable customers, which stifles disruptive models. A separate unit with its own culture and systems can pursue the new business without being constrained by the legacy core.
- AIncumbents should only invest in technologies demanded by their most profitable current customers
- BIncumbents should respond to disruption by cutting prices on existing products
- CIncumbents often fail to respond because their processes and value network favour sustaining innovation, so an autonomous unit can pursue the disruptive modelCorrect
- DIncumbents should avoid cannibalising existing revenue at all costs to protect shareholder value
Explanation
Christensen argued that established firms' resource allocation and customer-driven processes suppress disruptive ideas, so a separate autonomous unit with different cost structure can pursue them. Option A describes the very trap that causes incumbents to be disrupted.
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