Unpacking The Disruption Process: New Technology, Business Models, and Incumbent Adaptation

Unpacking the Disruption Process:
New Technology, Business Models, and Incumbent Adaptation
Alessio Cozzolino*
Assistant Professor of Strategy
Michael Smurfit Graduate Business School, University College Dublin, Dublin, Ireland
[email protected]
Gianmario Verona
Rector, Bocconi University, Department of Management and Technology, Milan, Italy
[email protected]
Frank T. Rothaermel
The Russel and Nancy McDonough Chair, Professor of Strategy
Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia, U.S.A.
[email protected]
* Corresponding Author: Alessio Cozzolino.
Keywords: Disruptive technologies and innovations, Business models adaptation, Incumbents,

Process model.
This article has been accepted for publication and undergone full peer review but has not been
through the copyediting, typesetting, pagination and proofreading process which may lead to
differences between this version and the Version of Record. Please cite this article as a
Journal of Management Studies (‘Accepted Article’), doi: 10.1111/joms.12352
This article is protected by copyright. All rights reserved.

Unpacking the Disruption Process:
New Technology, Business Models, and Incumbent Adaptation
Abstract. Despite the growing importance of digital transformation and the notion of disruptive
innovation, strategy literature still lacks a more complete picture of how incumbent organizations
adapt their business models after disruptions. This research sheds light on this important process by
analyzing a major Italian news media publisher reacting to the advent of the internet and the
emergence of new business models by entrants into the industry (1995–2017). We specifically
examine: (1) the drivers and impeding factors of business model adaptation; (2) how incumbents
change strategies to cope with different components of the disruption process; and (3) how a closed
business model can be renewed to develop an open, platform-based business model to seize external
opportunities, incur lower costs, and fend off disruptors. This study contributes to the burgeoning
literature on disruption, business models, and platforms.
Keywords: Disruptive innovation, incumbent adaptation, open business models, value creation and
capture, digital platforms

“We can no longer make a lot of money from a few readers, but
we will make relatively little money from many more readers”
Jeff Bezos, chairman and CEO of Amazon and owner of The Washington Post.
“The Future of Newspapers” conference, Italy, 2017, organized by GEDI and La Stampa.
INTRODUCTION
A popular stream of research in strategic management has documented how challenging it is for
incumbent firms to adapt to technological disruptions pioneered by new entrants (Christensen,
1997). Among a variety of reasons for incumbents’ inertia in the face of disruptions, scholars have
highlighted: resource dependence upon mainstream customers (Christensen and Bower, 1996),
rigidity of existing routines and competences (Gilbert, 2005), demand uncertainty (Adner, 2002),
institutional tensions in managing the different organizational demands of disruptive innovations
(Markides, 2006), as well as economic incentives and reliance on established value networks (Hill
and Rothaermel, 2003). Together, these elements act as inertial forces impeding profound
modification of existing business models, which is typically required after disruptions (see, e.g.,
Chesbrough and Rosenbloom, 2002; Christensen, Raynor, and McDonald, 2016; O’Reilly and
Tushman, 2016). For instance, a book retailer such as Borders, which filed for bankruptcy in 2011,
failed to modify its brick-and-mortar model by not developing a digital platform with integrated
distribution to respond to Amazon’s new model of online book retailing and home delivery.
Despite the importance of the topic and the recent attention on business models in strategy
literature (Wirtz, Pistoia, Ullrich, Göttel, 2016; Zott, Amit, and Massa, 2011), we still only have
limited empirical evidence of how companies adapt their models (Foss and Saebi, 2017) and how
they accomplish this modification in the face of disruptive innovations. Moreover, the problem is
managerially relevant because incumbents in several industries are seeking to renew their business

models after the advent of digital disruptors such as Facebook, Netflix, Udacity, and Uber
(McKinsey, 2015). A systematic understanding of the antecedents and the processes through which
firms adapt their business models is necessary and missing (Doz and Kosonen, 2010; Sosna,
Trevinyo-Rodriguez, and Velamuri, 2010; Schneider and Spieth, 2013). Therefore, we decided to
tackle this important issue from the perspective of an incumbent organization by posing the research
questions: What are the triggers that stimulate incumbents’ reactions after disruption? How does the disruption
process unfold, and how does business model adaptation evolve over time?
To address these questions, we conducted an in-depth longitudinal study of a major news
publishing house in Europe, namely, the Italian company GEDI Gruppo Editoriale SpA (hereafter:
GEDI). We selected an incumbent in the media industry because this sector was historically well
protected and now it has been profoundly disrupted by the internet (The Economist, 2011; Forbes,
2015) with a dramatic impact on publishers’ business models (The Wall Street Journal, 2016). GEDI
is a large and traditionally vertically integrated company owning three national newspapers (one
being La Repubblica, the Italian equivalent of The New York Times in the US and The Guardian in the
UK), 13 local newspapers, three radio stations and a TV station, several digital properties, an
advertising house, and several downstream printing plants. To examine how the company
transformed its original business model, we considered a long-time horizon (1995–2017) that
includes the early advent of the internet, when new digital tools were first made available, and its
subsequent developments, when new entrants became stronger (e.g., Google or Facebook). Our
approach can be seen as a quasi-experiment in a natural laboratory setting because we were able to
observe the effects of an exogenous treatment (the disruption caused by the internet) on a
company’s business model and to track the strategic reactions put into practice by the company.
Our study presents a series of important findings. First, we disentangle two separate forces in
the disruptive process: (1) the initial advent of disruptive technologies; and (2) the subsequent entry

of disruptors introducing new business models. We specifically highlight the mechanisms through
which these forces trigger business model adaptation (BMA) in incumbent organizations. The
availability of disruptive technologies offers new opportunities, favoring “incumbents’
experimentation” with new business models (that is, new forms of value creation and capture). The
emergence of entrants employing new disruptive models tends to represent a threat and induces
incumbents to respond more defensively, through “alliances and acquisitions” to speed up the
adaptation process. This first main finding addresses the identified gap in business model literature
regarding the drivers and mechanisms of BMA after disruption (see e.g., Foss and Saebi, 2017). It
also extends the analysis of disruptive innovation by breaking down the process into two separate
components: technologies and business models (see also Markides, 2006 for a similar conceptual
point). Furthermore, it empirically reveals the effects on the incumbents’ adaptation process, in
terms of opportunities and threats, leading respectively to stand-alone experimentation and
alliances/acquisitions.
The second major finding relates to how incumbents reconfigure their models after
disruption. We examined the specific case of disruptions in manufacturing, distribution, and sales—
that is, the downstream complementary assets of vertically integrated incumbents (see Teece, 1986).
We argue that, when disruption occurs in factors of production, incumbents tend to increase
external knowledge access. This pattern occurs because disruption in the factors of production
results in positive external economies (Marshall, 1920), as the new technologies, such as the internet,
are available to all. To create and capture value from the new technologies, incumbents increase
external knowledge access. In sum, we provide theoretical explanations and empirical evidence of
the phenomenon of “opening a business model” to external sources. We also acknowledge the limits
of this open strategy and the importance of maintaining a balance between internal and external
knowledge sourcing (that is, “mixed closed-open” business models). These findings contribute not

only to incumbent adaptation literature, but also to studies on open business models (Chesbrough,
2006; Vanhaverbeke and Chesbrough, 2014) and the tensions between conflicting logics (Sauermann
and Stephen, 2013).
A related finding of the new mixed closed-open business model after disruption is that we
document how incumbents can react to disruptions by transforming a product-company into a
multi-platform business (e.g., Gawer and Cusumano, 2002; Schlesinger and Doyle, 2015). Based on
our in-depth case study, GEDI moved from being a vertically integrated company based primarily
on internal production to an organization that manages and interconnects multiple platforms,
audiences, and advertisers through a mixture of internal and external knowledge producers.
Our findings are generalizable to many industries disrupted by the internet and related digital
transformations. Sectors such as the music business, movies, the hospitality industry, or the
education industry, have in fact all confronted a two-phase disruptive process. Consistent with what
we predict, most of the incumbents in these industries have reacted with initial stand-alone
experimentation and subsequent alliances and acquisitions, while developing platforms and
increasing their access to external knowledge sources.
DISRUPTIONS AND BUSINESS MODELS
Disruptive Innovations
The concept of disruptive innovations has received considerable attention among both practitioners
and scholars alike (e.g., Ansari, Garud, and Kumaraswamy, 2016; Christensen, 1997, 2006; Danneels,
2004; Henderson, 2006; Markides, 2006; McKinsey, 2015). The phenomenon refers to a unique type
of innovation in which a specific process takes place and incumbents are ultimately disrupted by
entrants (Christensen and Raynor, 2003). In their seminal paper on the disk drive industry,
Christensen and Bower (1996) describe disruptive technologies as new technologies introducing new

performance parameters that satisfy emergent customers, but that underperform on existing
attributes that satisfy mainstream customers. Over time, disruptive technologies also improve on the
attributes demanded by the mainstream market, hence invading each market segment from the
bottom up. One key characteristic of disruptions is that the underlying technology improves faster
over time than improvements are demanded by customers. This factor in turn explains why a
disruptive technology moves from the low end of the market to the high end over time. Disruptive
technologies tend to be commercialized by entrants, while incumbents remain trapped in sustaining
technologies and eventually fail (Christensen and Bower, 1996; Christensen, 2006).
This phenomenon has generated a stimulating debate among scholars regarding the specific
definition of a disruption (e.g., King and Baatartogtokh, 2015; Danneels, 2004; Govindarajan and
Kopalle, 2006). In his subsequent works, Christensen has responded to the debate and extended the
concept of disruptive technologies to the broader category of “disruptive innovations”, also
including products and business models (e.g., Christensen and Raynor, 2003; Christensen, Raynor,
and McDonald, 2015). An interesting application of this extended definition is the paper by Ansari
et al. (2016), in which the authors studied the challenge of entrants with imposing disruptive
technologies and business models to an ecosystem of incumbents in the TV industry.
“Disruptive technologies” and “disruptive business models” create “different kinds of
markets, pose radically different challenges for established firms, and have radically different
implications for managers” (Markides, 2006 p.19). Hence, as Markides (2006) observes, it is useful to
break down the concept of disruptive innovation into its more fine-grained components, which is
exactly what we did in our study. We distinguish between the emergence of disruptive technologies
and the arrival of entrants introducing disruptive business models to exploit the new technology.
Theoretically, we separate these two phenomena because they are likely to occur during different
moments in time and have different implications for the incumbents’ adaptation processes.

We refer to “disruptive technologies” by following the original definition by Christensen and
Bower (1996, p. 202): “technologies [...] which disrupt an established trajectory of performance
improvement, or redefine what performance means, are called disruptive technologies.” Using the
same logic, we here introduce the definition of disruptive business models as business models that
disrupt an established model or redefine what value creation and capture mean. Consistent with
prior research, both disruptive technologies and disruptive business models are likely to be
introduced primarily by entrants (Danneels, 2004; Ansari et al., 2016). Moreover, disruptive
technologies are likely to stimulate subsequent development of disruptive business models, as we
explain below.
Business Model Adaptation (BMA)
The literature on business models has begun to hone in on the main characteristics of this construct
(Wirtz et al., 2016; Zott, Amit, and Massa, 2011). There are two key dimensions to a business model:
value creation and value capture (Chesbrough and Rosenbloom, 2002; Teece, 2010; Zott and Amit,
2007). More formally, Teece (2010) defines a business model as “the design or architecture of the
value creation, delivery, and capture mechanisms” of an organization (p.172).
Scholars have also identified several subcomponents of the business model construct.
According to a recent review by Wirtz et al. (2016), the components with the most consensus are
resources (core competencies, assets, architecture), value propositions, and strategy and structure.
These subcomponents are all relevant to value creation and capture—the two dimensions guiding
our investigation. The literature has also provided evidence of the important role of business models
in firm performance (Zott and Amit, 2007; 2008), competitive advantage (Chesbrough and
Rosenbloom, 2002; Osterwalder and Pigneur, 2010; Teece, 2010), and innovation at the firm and
industry level (Chesbrough, 2006; Gambardella and McGahan, 2010).

However, disruptions may affect the efficacy of existing business models. Doz and Kosonen
(2010, p.370) argued that “strategic discontinuities and disruptions” require companies to innovate
their business models. Our research investigates the mechanisms of this transformation. BMA is a
complex and challenging process because inertial forces tend to suffocate the emerging innovations.
As documented by Tripsas and Gavetti (2002), Polaroid failed to make a transition to digital cameras
because it remained trapped in its existing “razor-blade” business model of chemical films, in which
profits were made by selling films through a structured retailing network (a consumable). An
effective commercialization of digital cameras would have required them to embrace a new
“hardware-based” business model. Similarly, Chesbrough and Rosenbloom observed, “The failure
of incumbent firms to manage effectively in the face of technological change can be understood as
the difficulty these firms have in perceiving and then enacting new business models when
technological change requires it (2002: 532)”. In a recent review on business model innovations,
Foss and Saebi (2017) argued that studying the “innovation” of a business model raises a number of
new questions including a crucial one: “What are the drivers, facilitators, and hindrances of the
innovation of a business model?” (p. 201). Schneider and Spieth (2013) call for additional research
on “the process and elements of business model innovation as well as its enablers” (p. 134).
Consistent with these important research gaps, we investigate the drivers and the process of BMA
after disruption.
We coin the term BMA (business model adaptation) because, in the case of an incumbent,
the firm is asked to adapt the business model rather than to invent it from scratch. Moreover, the
complex process of adaptation, if not well executed, can bring about incumbent failure. We refer to
BMA by using the general definition provided by Casadesus-Masanell and Zhu (2013, p.464) for
business model innovation (“the search for new logics of the firm and new ways to create and
capture value”), which in the case of BMA should be interpreted from the perspective of incumbent

firms attempting to adapt. In sum, we study how incumbents adapt their business model by finding
new ways of creating and capturing value. At a more granular level, the new ways to create and
capture value are likely also to require changes in the subcomponents of resources, structures, and
strategies of a company—as our findings reveal.
An additional specification of business models is the distinction between closed and open
models. Such a distinction is important because many companies today are transforming a
previously closed model into a more open business model. We thus interpret this transformation as
a case of BMA. Chesbrough (2006: 2-3) introduced the concept of open business models to describe
a situation when a company “uses the division of labor to create greater value by leveraging more
ideas (external ideas) and to capture greater value by using key assets, resources, or positions not
only in the company’s own business but also in other companies’ businesses.” The open business
model is the opposite of a more traditional closed business model in which incumbents
commercialize only their own internal knowledge through proprietary complementary assets (Teece,
1986), generally along a vertically integrated firm value chain.
RESEARCH SITE AND METHODS
We took a historical perspective (Van de Ven and Poole, 1990) to deconstruct the process of BMA
in an incumbent media organization. In particular, we conducted a longitudinal case study (Yin,
2003) of the Italian publisher GEDI covering the period 1997–2017. Given the scant understanding
of the relationship between disruptive innovation and BMA, an inductive and field-based approach
was particularly suited to develop a new theory (Eisenhardt, 1989; Glaser and Strauss, 1967). We
collected rich data about GEDI and its ecosystem from multiple sources (interviews, archival, and
observations), and we tracked the major events and actions undertaken by the company to adapt.
These data were particularly useful to develop our process model, given that process theorization

needs to abstract from events, activities, and choices occurring in time (Langley, 1999). An abridged
version of the new activities and projects launched by GEDI is presented in Table I.
<<Insert Table I here>>
Research Site and Data Collection
We studied GEDI and the newspaper industry for several reasons. First, digital disruption has
devalued newspapers’ business models worldwide, calling for a profound readjustment (The
Economist, 2011; Seamans and Zhu, 2014). The advertising revenues of the global newspaper
industry (offline plus online) have decreased by about 42 percent between 2005 and 2015 (The Wall
Street Journal, 2016), and the situation was similar in Italy (where GEDI operated). Between 2000
and 2012, the offline advertising revenues of Italian newspapers plummeted by 41 percent (FIEG,
2001; FIEG, 2013), and the new online ad revenues accounted for only 10–15 percent of the total ad
revenues in 2015. The number of physical copies of newspapers sold declined by 33 percent
between 2000 and 2012, but their audience and reach have grown with the internet (Audipress,
2012). Second, news publishing companies were organized through a closed or Chandlerian model
of production and commercialization (Chandler, 1993), while the web has enabled open journalism
(OECD, 2007) through new toolkits (Von Hippel and Katz, 2002), and has favored the rise of
digital platforms (Gawer and Cusumano, 2002). These changes challenged the existing publishers’
business models, which, in turn, offers us a unique opportunity for studying BMA. Third, GEDI has
been a fast adopter of digital technologies and new business models, thus representing an “extreme
case” where the adaptation process is “transparently observable” (Eisenhardt, 1989). This approach
in turn helped the company to achieve a more sustainable advantage. Indeed, in 2016 GEDI’s
revenues were 705 million euro with 11.9 million in profits, 2,488 employees, and operations in all
media segments (print, digital, radio/TV, and advertising). In addition to performing better than its
competitors Gruppo24Ore and RCS Media Group (which both reported losses over the entire
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period), GEDI was also the only Italian publisher growing during the disruption period, mainly
through alliances and acquisitions of disruptors and other newspapers. It is also important to notice
that GEDI adapted better to the internet disruption than its competitors, relatively, for other
reasons than scale advantage (e.g., RCS Media Group had a similar large scale but was selling off
parts of its businesses) or bargaining power advantage (e.g., Gruppo24Ore had an equally strong
bargaining power, being owned by the Italian Confederation of Industries, but had negative profits
in 2016 of -92.6 million euro). The main reason for this difference was that GEDI had a higher
propensity to innovate, and top management who supported experimentation, which made their
company ideal for a BMA study. Of course, mistakes were also made by the company and we
examined them to discuss the possible sources of tension and failure during an adaptation process.
We had access to all sorts of primary data at GEDI, from in-depth personal interviews to
internal and confidential archival documents (all types of reports, business plans, and financial
records), and observational data. The period of study was 1995–2017. Archival data were collected
from 2013–2017, and interviews and observational data were gathered from 2013–2015. Our
multiple data sources were constantly triangulated to improve accuracy (Jick, 1979).
We conducted 46 face-to-face interviews, 38 with GEDI’s personnel (from all functions and
hierarchical levels) and eight with informants from disruptive entrants and industry associations (see
Table A1 in the online appendix for an abridged list of our interviewees). Follow-up emails were
sent when clarification was needed. We interviewed GEDI’s president; CEOs of the corporation
and its subsidiaries; executives from plants, advertising, and the digital divisions; and journalists and
managing editors. Interviews were conducted in different company locations around Italy and in the
US and lasted on average 90–120 minutes. Each interview was taped and transcribed, and the
content was then analyzed. Through open-ended questions, we asked about the company’s print
business, the implications brought about by the internet, the opportunities and challenges that
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GEDI faced, and the practical actions and businesses launched to reinvent the company. To
mitigate concerns with retrospective biases (see Huber and Power, 1985), we triangulated and
reinterpreted what our informants said using the other rich data we had (e.g., archival data and
historical interviews conducted by others between 1995 and 2013 that appeared in the press or
online, as well as in audio-visual format). We also repeated the same questions to different
informants to validate the accuracy of responses and fully understand the phenomenon (Glaser and
Strauss, 1967). Part of the data collection and observation was done in real time between 2013–2016.
Regarding our archival data (period: 1995–2017), we consulted the company’s annual reports;
internal reports; press releases; investment banking reports; national and international books on the
company history and on media in general; specialized websites (e.g., the PEW’s yearly State of the
News Media and the Perugia’s annual International Journalism Festival); specialized periodicals and
yearbooks (e.g., Prima Comunicazione); and media coverage of GEDI. This extensive effort was
needed to understand the complex transformation in detail.
The third effort of data collection referred to switching the locus of observation to the
external environment to better contextualize GEDI’s strategic actions. To examine how the external
environment evolved, we first analyzed most of the public documentation available about the entire
Italian newspaper industry, and then visited and directly interviewed representatives from industry
associations such as the Federation of Italian Publishers and Journalists (FIEG), industry agencies
collecting audience data (e.g., Audipress and Nielsen Media Research), antitrust authorities (AGCM),
and government agencies for communication (AGCOM). We also collected data and interviews with
Italian and international industry entrants that were indicated as potential disruptors by GEDI or by
other external sources. These additional interviews allowed us to understand the model of the
disruptors, which were operating like platforms, enabling and exploiting content produced by others.
Analytic Strategy
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We constructed a chronology of historical events and gradually populated a rich timeline (see Figure
1) which includes the major strategic projects and investments by GEDI (made both offline and
online), the most significant market changes, and the entry of disruptors. We filtered and organized
this chronological data through the lens of our emerging theoretical constructs and mechanisms (see
Garud, Jain, and Kumaraswamy, 2002 for a similar approach). For each of the new projects, we tried
to understand its nature and its contribution to BMA (i.e., how it contributed to new value creation
and capture).
<<Insert Figure 1 about here>>
The analysis of our data revealed that most of GEDI’s new online projects were using an
open business model (Chesbrough, 2006; Vanhaverbeke and Chesbrough, 2014), whereas most of
GEDI’s new offline projects were using a more closed model (based on internal “professional”
production and commercialization). To assess the nature of each project, we consulted the literature
on open business models and open innovation (e.g., Chesbrough, 2006; Vanhaverbeke and
Chesbrough, 2014; von Hippel and von Krogh, 2003), which provided us with a list of attributes
typical to open business models. The main attributes of open business models are: access to external
knowledge sources, innovative role of users, support of enabling tools or platforms, intrinsic
motivations, open approach to intellectual property, and the ability to incur lower costs. We used
these attributes to qualitatively assess the degree of openness of each project (see Table I) and get an
indication of the new value creation mechanisms of the new model. We also compared successful
and unsuccessful projects to identify potential reasons of failure (e.g., clashes and conflicts between
closed and open paradigms—see Sauermann and Stephan, 2013) and how the company learned over
time (from phase 1 to phase 2 of the process).
Our analysis also required an interpretive understanding (Lincoln and Guba, 1985) of the
consequences of disruptions through additional theories, until theoretical saturation was reached
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(Glaser and Strauss, 1967). To interpret the launch of GEDI’s several online platforms (again see
Figure 1), we consulted the theory of platforms and multi-sided markets (e.g., Ansari et al., 2016;
Cennamo and Santalo, 2013; Parker and Van Alstyne, 2005), which allowed us to reveal the new
value capture mechanisms of the new business model.
In the rest of the paper, we describe the original business model of newspapers (closed and
vertically structured), how it was disrupted by the internet, and how GEDI renewed it overtime
(towards a more open and platform-based model). We focus on the generative mechanisms of the
process, considering the type of disruptive technology of this study (at the manufacturing and
distribution/sales level). We conclude by illustrating the process model of BMA, which reveals how
an incumbent can renew its value creation and capture strategies to react to both disruptive
technologies and disruptive business models.
A PROCESS MODEL OF BMA AFTER DISRUPTION
Traditional News Publishing Model
The business model of newspapers can be conceived as a two-sided market in which newspapers act
as physical platforms connecting readers and advertisers (Rochet and Tirole, 2003). Two-sided
markets are typical of industries characterized by network externalities, such as radio, TV, internet
portals, social networks, games consoles, or credit cards. Network externalities are present when
“the utility that a given user derives from the good depends upon the number of other users who are
in the same ‘network’” (Katz and Shapiro, 1985, p. 424). In the newspaper context, positive network
externalities exist because advertisers derive a utility when the number of readers increases, while
readers are attracted only by content (Parker and Van Alstyne, 2005).
Using the value creation and capture dimensions of a business model (Teece, 2010), we can
reinterpret the two-sided model of newspapers as a model in which value creation occurs by
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producing content for readers and value capture takes place by commercializing content and the
associated advertising. More specifically, publishers used their own newsrooms and journalists to
create value for readers, while they used proprietary complementary assets to capture value. Value
capture is possible when a company possesses specialized complementary assets, such as
manufacturing, distribution, and sales (Teece, 1986). Large newspaper publishers typically owned
specialized downstream assets in the form of printing presses, distribution (a portion of the
wholesale distribution network), and sales people. In other terms, publishers were vertically
integrated companies, from upstream content production (for value creation) to downstream
manufacturing and commercialization (for value capture). Hence, they employed a closed business model
(Chesbrough, 2006) because both value creation and value capture relied on internal resources and
control/ownership. GEDI was not an exception: the company employed an average of 2,000
journalists and 450 advertising sales agents through the subsidiary Manzoni Advertising, and owned
ten printing plants and part of the wholesale distribution.
The first novelty of our study derives from analyzing the effect on BMA of technological
disruptions in earlier manufacturing and distribution (Cozzolino and Rothaermel, 2018). The
internet and related digital tools represent disruptive technologies because, if we apply the definition
by Christensen and Bower (1996, p.202), these new technologies “disrupt the established trajectory
of performance improvement” and “redefine what performance means.” In fact, the established
trajectory of improvement in publishers’ prior “manufacturing and distribution” was to increase
print quality (color), speed, automation, and efficiency. Instead, the internet has redefined the
meaning of performance with new attributes, such as by-directionality, real-time wide access, and
audio-visual forms of sharing information freely. Coherent with the notion of disruptive technology,
while these new performance attributes initially appealed only to a customer niche, over the years,
they became attractive even for the historical newspaper customer base. This trend fits with the
15

other characteristic of disruptive technologies—that they initially do not attract mainstream
customers (Christensen, 1997).
Focusing on disruption of manufacturing and distribution assets, we were able to build on
the concept of external economies of scale and externalities (Marshall, 1920) to explain why
incumbents sometimes increase access to external knowledge after certain types of disruption. We
find that incumbents are more likely to experiment and adopt the new technologies early when
external economies emerge, rather than being inert and serving only their mainstream customers
(Christensen and Bower, 1996; Danneels, 2004). The role of externalities after disruptions
constitutes an important generative mechanism (Cornelissen, 2017; Garud and Kumaraswamy, 1993)
of the BMA process examined in our case.
In his 2014 annual meeting with the publishers, the president of FIEG declared, “The
reasons behind the economic problems of publishing companies go beyond the 2008 financial crisis.
The business model of newspapers needs to be reconceived.” In Figure 2 (left side), we offer a
representation of the traditional business model, which has been disrupted by the internet. The value
creation dimension (related to content production) has been challenged by the oversupply of free
information online, which has reduced customers’ willingness to pay online, while also substituting
offline consumption. The value capture dimension (related to proprietary complementary assets of
print, distribution, and sales) has been hindered by the new disruptive technologies, which publish
and diffuse information online and sell ads through algorithms. Over time, the vertically integrated
value chain of publishers has been disintegrated by a series of digital disruptors introducing new
technologies and platform-based models to orchestrate publishers’ content and ad spaces. The right
side of Figure 2 represents how GEDI transformed its business model by 2017 to respond to these
challenges. The new business model, common to other industries, is more open, employs a mixture
16

of internal and external knowledge to create value, and uses platform-based strategies to capture
value.
A Two-Phase Process Model
The process model that emerged from our study provides new insights into the nature of disruptive
innovations and how incumbents can benefit from it through BMA. It is a two-phased model (see
Figure 3). The generative mechanism of the entire process is the increasing openness of a business
model to seize external economies of scale and externalities after disruption to manufacturing and
distribution. The adaptation mechanism in phase 1 is stand-alone experimentation, which is different
from the predominant governance mechanism of phase 2 (cooperation and acquisitions).
Incumbents’ adaptation in phase 2 is driven mainly by reactions to threats (from entrants with
disruptive business models), whereas the stand-alone experimentation of phase 1 is consistent with
opportunity perception (from available new technologies).
Phase 1: Stand-Alone Experimentation after Technological Disruption (1995–2000)
Triggering event: Disruptive technologies in manufacturing and
distribution. Since 1993, the internet has made available an endless number of disruptive
technologies to produce and distribute. Early day inventions were the free content management
systems (CSMs) to write content, and the RSS feed system to distribute them, on top of the new
Transmission Control Protocol/Internet Protocol (TCP/IP). Consistent with the theory of
disruption, these technologies were introduced by entrepreneurs and new entrants (e.g., Tim
Berners-Lee and Netscape). Initially it was difficult to find appropriate business models to profit
from them. In this context, we found that GEDI engaged in a strong experimentation effort with
external knowledge sources to seize new opportunities.
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Opportunities to seize external economies. From the perspective of vertically
integrated incumbents, the new technologies represented new downstream “factors of production”.
In 1920 the economist Alfred Marshall theorized that, when new factors of production are made
available to all competitors in an industry, external economies of scale and externalities emerge (see
also Alcácer, 2006). Different from internal economies of scale, which derive from firms-specific
production processes (e.g., Ford assembly line), external economies are induced by exogenous
advancements for all firms (e.g., railroad infrastructure or the internet). Therefore, given their nature,
we expect that disruptive technologies related to the internet that challenge all incumbents’
downstream assets (Figure 2, left side) generate external economies. Incumbents can seize
opportunities for new product development, process innovation, and cost reduction by accessing
external resources through new technologies, as opposed to focusing only on their internal
production factors. These are important generative mechanisms for the entire BMA process.
Consistent with our arguments, GEDI experimented with the new digital technologies early on,
gradually adapting its model by increasingly accessing external knowledge sources, developing new
businesses and platforms to exploit externalities, and lowering its costs. In the following section, we
provide supporting evidence and further theoretical insights.
New venture experiments using external sources. In 1996, GEDI’s newspaper
La Repubblica experimented with the first real-time online coverage of Italian national elections,
concomitantly with a similar experiment by The Washington Post in 1996 for the US Presidential
elections. The positive audience engagement convinced GEDI’s top management to allocate three
journalists to create one of the first online newsroom to write for the web, repubblica.it, which
launched in 1997. The main competitor Corriere della Sera, endowed with a similar readership base
and resources (belonging to the other large publisher RCS Media Group), waited until 2001 before
18

producing dedicated content for the web, and the smaller competitors simply posted a PDF replica
of their printed paper online until 1999.
In 1998, the company experimented with the first “live chat with readers,” also supported by
“blogs and forums,” to collect citizens’ opinions regarding the national education reform. In 1999,
after investing significant resources and founding the technology subsidiary Kataweb (which
employed 100 people), GEDI introduced one of the first internet portals (kataweb.it) and offered
blogging tools, email, and voice over IP services (VoIP) to users (ahead of the launch of Blogger in
2001 and WordPress in 2003). The innovation and development deputy director recognized:
“We introduced a number of innovations largely ahead of our time. The company was the
opposite of myopic. We experimented with ‘socials’ and online videos in a time when the
internet connectivity was still very slow and the interaction with citizens was unconceivable.”
Hence, a first mechanism enacting the BMA process in phase 1 is experimentation, to benefit from
the external economies. In particular, experimentation is likely to include new external knowledge
sources (e.g., users, citizens, students) but also internal knowledge (e.g., journalists).
Stand-alone experimentation using open platforms. A second and related
mechanism of BMA in phase 1 is that the experimentation is made by stand-alone incumbents in
competition among themselves, whereas in phase 2 incumbents are more likely to increase
cooperation and acquisitions, due to the raise of business model disruptors threatening their
industry. Moreover, to better exploit the network externalities, incumbents are more likely to use
open platform strategies (Boudreau, 2010) both in phase 1 and 2, to create and capture new value.
All the digital projects launched by GEDI had these common features (see Figure 1 and 2, and
Table I).
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In 1994, GEDI started a period of experimentation that led to several digital projects, one of
which was a platform for thousands of school newspapers (Repubblica@scuola). The experimentation
effort was made independently of the other Italian incumbents, but the company accessed new
external knowledge by participating to a research consortium formed by the MIT’s Media Lab in
1994 (“News in the Future”). The digital strategist and co-founder of repubblica.it explained:
“There were three to four newspapers from Europe and the rest from the US, and we were the
only Italian publisher sending people to Boston [to MIT]. Our participation share into the
consortium was significant, at around $100,000! During that time, we learned about radical
inventions from the media guru Nicholas Negroponte and his team, and we transformed them
into real projects!”
One of the MIT prototypes was “SilverStringer,” a tool aimed to simplify online publishing for
elders, which GEDI transformed into the school platform. A former director and journalist at
GEDI explained, “In 2000 we hosted in our offices the co-inventor of SilverStringer, a Finnish MIT
Ph.D. student. Our intention was to modify their software to make it a platform that enabled
schools to create their own digital newspapers. This gave rise to a big project with Italian schools.”
The initiative was so successful that in 2004 it was acknowledged in We the Media, an international
book on open participatory journalism: “By far the biggest installation is operated by the La
Repubblica newspaper in Italy; its Kataweb online affiliate uses SilverStringer to help publish some
4,200 online school newspapers” (Gillmor, 2004, p. 143). In 2016, Repubblica@scuola was still
enabling students to produce content, the best of which was proposed every year by GEDI to its
readership.
20

In theory, the project reveals how an incumbent facing opportunities from new disruptive
technologies in distribution can engage in stand-alone experimentation to exploit external knowledge
(e.g., citizens, students), thus creating new value, and can use platform solutions to internalize the
externalities (Katz and Shapiro, 1994), thus capturing new value. The schools’ platform was only one
of a sequence of new ventures developed in phase 1 that revealed these same mechanisms
(Kataweb’s tools and repubblica.it preceded it, and the personalized news platform followed it). The
next section continues to provide further evidence of that development, as well as considering the
new problem of tensions during the BMA process.
Tensions during the BMA process. Scholars have acknowledged the conflicts existing
between different institutional logics in contexts such as academia versus commercial entities (e.g.,
Sauermann and Stephan, 2013), or open versus closed innovations (e.g., Larsen and Salter, 2014).
We took a dynamic perspective to the problem and found evidence of how similar conflict logics can
also hinder the process of BMA.
In 1995, GEDI learned about another opportunity from the MIT Media Lab: an embryo
system to receive newsfeeds by citizens, “The Fishwrap personalized news system” (Chesnais,
Mucklo, and Sheena, 1995). As with the other MIT prototypes, this embryo system also needed to
be implemented, and GEDI re-elaborated the prototype by developing a personalized news
platform similar to what Facebook became years later for news consumption (see Table I).
However, they encountered problems in transforming it to a properly functioning business. GEDI’s
multimedia strategist explained:
“In 1997 we decided to implement a newsfeed system since we foresaw that large part of the
value in information derives from local news and personalization. Technically we were assisted
by Microsoft, but the partnership was the problem! The culture at the MIT was about open
21

source, but we proceeded in the traditional way by forming a strict and costly relationship with
Microsoft. This impeded the necessary experimentation to transform the Fishwrap prototype in a
real business. [...] The dominant culture in publishing companies is too closed and the
management only allowed us to experiment in the old way […].”
The informant also explained that they later tried to open the platform to external European
publishers, but continued to fail due to the closed-model approach with Microsoft Windows 97. The
digital strategist of GEDI added:
“For a project like this you need financial resources and delegation of tasks. If they do not
recognize the benefit, everything gets easily cannibalized by a powerful and rich business like La
Repubblica.”
Another project that also failed because of similar conflicts between external and internal logics was
Reporter, a citizen journalism platform that GEDI tried to launch in 2011 (Figure 1 and Table I). The
failure of Reporter was caused by clashes between the open culture of external bloggers and the
closed model of a traditional publisher (more details later).
From a theory perspective, the failure to implement both the personalized news platform
(Fishwrap) and the citizen journalism platform (Reporter) reveals that companies can be effective in
exploring new open opportunities, but then fail to exploit/implement the new solutions internally
due to prior closed models. Hence, a fine-grained understanding of exploration and exploitation. and
the balance found between them (O’Reilly and Tushman, 2016), is important when studying BMA
after disruptions. As our evidence has revealed, a closed mindset can prevent the internal
exploitation of new open opportunities, without necessarily preventing their earlier exploration (e.g.,
22

GEDI’s high experimentation). We believe that this is possible because exploration is a searching
activity, often directed to the external (March, 1991), and hence it fits better with the effort of
opening a model, whereas exploitation is directed to the internal, and thus it often represents the
place where the external logics clash with a company’s internal culture.
Recursivity of BMA and Mixed Solution (periods: 2001–2005 and 2012–2016)
The process of BMA is not linear, and companies may need to return investment into their old
business before they fully adapt. The outcome can also be a mixture of old and new models, as our
evidence reveals. Possible reasons for recursivity and further exploitation of the old model were: (1)
companies’ initial failures to adapt; (2) the residual value in the old model; (3) and/or new
exogenous changes in the market conditions. GEDI returned investment into its offline domain
when the online market suffered severe setbacks, which especially happened in 2001–2005, but also
after 2012. In 2001, the stock market for digital activities collapsed, after the initial period of
opportunity perception (period: 1995–2001). The director of GEDI’s digital division explained:
“Kataweb tried the quotation at the Italian stock exchange, but unfortunately the market went
down two weeks before the planned quotation. We missed the opportunity to transform our
internet subsidiary [Kataweb] into a tech giant.”
The company stopped investing in new digital activities until almost 2005, and exited businesses like
VoIP and e-commerce, maintaining only its more strategic online businesses like repubblica.it and the
online newspapers/periodicals. Importantly, it reoriented its value creation and capture efforts
towards the printed business through two major investments (see Figure 1, bottom part about
internal knowledge). First, in 2002 it experimented and invested in new full-color rotary presses to
replace its ten black-and-white presses by the end of 2004. This offline technological innovation
23

allowed GEDI to create and capture new value from offline advertising, especially because
competitors continued offering only black-and-white printed ads until 2006. Second, in 2002 it also
started a new lucrative business of offline add-on products sold alongside its physical newspapers
(e.g., books, comics, encyclopedias, movies, and music), which was still continuing at the time of
publication of this article. These were two examples of BMA within the closed old business (the one
characterized by full ownership of core knowledge and complementary assets).
The company returned to invest in offline new businesses in 2012 and 2016 during phase 2
(Figure 1, bottom part about internal knowledge), to diversify and grow, due also to the difficult
online market conditions, where disruptors like Google and Facebook became dominant (Financial
Times, 2016; PEW, 2013). In 2012, GEDI entered the business of physical cultural events by
establishing several traveling festivals organized each year by its newspapers (e.g., La Repubblica
delle Idee; Festival di Limes; Trentino.live). This step was an example of offline BMA, because new
value was created during the live conversations with journalists on stage and was captured through
advertising sponsors sold by the proprietary ad sales force. In 2016, the company also acquired
another traditional publisher, ITEDI, the third largest newspaper company in Italy, which published
two historical newspapers: La Stampa and Il Secolo XIX. The incorporation provided GEDI with
additional assets and professionals, and generated a cash flow of 9.0 million euro in 2016. These
investments after 2012 reinforced the old model characterized by professional workers, specialized
complementary assets, and vertical integration to control value creation and capture.
This part of the findings has revealed the recursive and co-evolutionary nature of a BMA
process and the need for mixing the old and new models, similar to the prediction of ambidexterity
literature on exploration and exploitation (O’Reilly and Tushman, 2016).
Phase 2: Alliances and Acquisitions to Fend-off Business Model Disruptors (2006–2016)
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Triggering event: Entrants with new disruptive business model. Disruptive
technologies are different from disruptive business models, although they both tend to be developed
by entrants (Danneels, 2004; Markides, 2006). When disruptive technologies are introduced into an
industry, they often require radically different business models to be commercialized effectively
(Chesbrough and Rosenbloom, 2002; Christensen, 2006), and therefore they tend to stimulate the
subsequent development of disruptive business models. Our empirical evidence reveals a similar
sequence: in phase 1 disruptive technologies emerge, and in phase 2 entrants find and put in place
the most appropriate business models to benefit from the new technologies. Importantly, the two
types of disruptions have different effects on the process of incumbents’ adaptation.
After an initial period of internet technologies diffusion (approximately 1995–2004), from
2005 onwards, several newcomers entered the news and advertising market with disruptive business
models. Google and Facebook were gradually perceived as the major threat by GEDI and the other
publishers, but also other Italian new entrants (namely: Populis, Banzai, YouReporter, CityNews)
represented potential threats. The perception of threat from tech companies entering the traditional
media business increased over time, to the point of becoming an international concern. For instance,
in 2016, the UK newspaper The Guardian reported that “Facebook is public enemy number one for
newspapers” (The Guardian, 2016) and the Financial Times reported that Facebook and Google had
built a duopoly in the advertising market (Financial Times, 2016). In the remaining section, we will
highlight how incumbent organizations react to entrants introducing new disruptive business models
in phase 2, and more specifically how they further adapt their own business model. Before analyzing
this process, though, we first need to clarify what disruptive business models means for incumbents.
Threats of business model disruption for incumbents. In a second phase of the
disruption process, entrants disrupt incumbents’ business model by redefining the meaning of value
creation and capture. For instance, Facebook’s News Feed was seen as a disruptor because the news
25

it contains is generated by external publishers put in competition (hence, value creation through the
orchestration of external knowledge), while Facebook captures the value through advertisements
using its platform and the detailed information about users. Similarly, the content accessible via
Google Search or Google News, but also via Yahoo! News, Flipboard and other news aggregators, is
produced by publishers and/or other contributors (e.g., bloggers, citizens), rather than by these
entrants. The Italian entrants (Populis, Banzai, YouReporter, CityNews) were all using similar
models: enabling external bloggers and citizens to produce content and controlling specialized
platforms to monetize via advertisements. As anticipated above, GEDI and the other publishers
perceived these entrants as real threats, because Google alone in 2013 was capturing around 60
percent of the Italian online advertising market (previously contended by publishers).
From a theory standpoint, entrants in phase 2 introduce disruptive business models because
they effectively create and capture value in a different way (see our definition above). They create
value by orchestrating external sources of knowledge (rather than producing knowledge through
internal know-how, as incumbents were doing). They capture value by controlling specialized
platforms and customers’ data (rather than controlling specialized assets along a vertical value chain,
as in the incumbents’ prior model). These new ways of creating and capturing value are favored by
external economies and externalities of technological disruptions in manufacturing and distribution
(Marshall, 1920)—the type of disruptions considered in this paper. These theoretical arguments are
generally applicable to industries facing similar technological disruptions, such as the movie, music,
travel, and accommodation industries, in which similar disruptive business models have been
successfully implemented by entrants like Netflix, Spotify, Kayak, and Airbnb.
Alliances and acquisitions for incumbents’ BMA. Threats can represent a response
catalyst for incumbents (Huff, Huff, and Thomas, 1992; Gilbert, 2005). We found that the threat of
disruptive business models in phase 2 induces incumbents to use alliances and acquisitions to
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accelerate their BMA. After an initial period of stand-alone experimentation, GEDI started forming
alliances with disruptors (The Huffington Post and Business Insider), with other publishers to share
common knowledge against disruptors (for a video syndication platform), and to acquire a potential
disruptor (mymovie.it). In some instances, the failure of stand-alone experimentation in phase 1 (e.g.,
the personalized news platform) was overcome by the recourse to alliances and acquisitions in phase
2 to develop similar new businesses in a faster and more secure fashion. The generative mechanism
here is that alliances and acquisitions tend to offer more rapid and secure paths to BMA than stand-
alone experimentation. Experimentation is more appropriate in the initial stage of opportunities
arising, but it becomes riskier when threats become more pressing in a second stage of the process.
In the following section, we provide detailed evidence for these theoretical findings.
In 2012, GEDI formed an important joint venture with the US disruptor the Huffington
Post Media Group (HPMG) to launch huffingtonpost.it in the Italian market. The venture contributed
positively to GEDI’s overall performance because, by 2016, the revenues of the joint venture (JV)
amounted to 1.99 million euro and to profits of 0.12 million. More importantly, it represented a new
form of BMA for GEDI because The Huffington Post operated according to a disruptive business
model. Since its foundation in 2005, The Huffington Post disrupted the newspapers’ business model by
creating value in a totally different way: using thousands of unpaid bloggers and aggregating content
from external publishers like the BBC and TIME. It also changed the value capture dimension of
publishers by introducing a sophisticated advertising-based platform. The international executive
editor of The Huffington Post US told us:
“The secret of our model is ‘viral’ plus ‘journalism.’ The web for us is an open medium, and we
have interpreted that by giving voice to people. We create communities and favor conversations.
If you go on our new TV streaming service, HuffPost Live, you will find the exact same logic [...].
27

We invite interesting people to participate in a conversation, and they are happy to get a global
visibility.”
This quotation reveals how the technological disruption in manufacturing and distribution favored
the emergence of externalities (“The web for us is an open media”) and gave opportunities to create
value by massively exploiting external knowledge (“We create communities and favor
conversations”). An additional way to exploit externalities to create value was through alliances with
external knowledge providers, as the general manager for international business of HPMG told us:
“To cover complex topics, we form alliances with specific foundations and let them contribute
their own expertise. An example is the collaboration with the prestigious Berggruen Institute of
Governance to fuel our WorldPost community [news section], with quality content.”
The statements above reveal the complex functioning of disruptive business models introduced by
entrants. They also suggest how difficult it can be for an incumbent to replicate the model. While
incumbents like GEDI were trying to gradually adapt to the new external opportunities, entrants
were able to develop entirely new models based on external knowledge exploitation, gaining an
advantage. Therefore, an incumbent’s choice to form alliances with a disruptor, rather than
attempting to develop something similar alone, appears to be a faster mechanism to adapt its
business model. We asked GEDI’s CEO of the Italian Huffington Post to explain their strategic intent:
“The purpose of this alliance was threefold. First, we were interested in understanding and using
the new business model that Arianna Huffington created: a workable mix of many bottom-up
bloggers’ contributions and less top-down journalistic content. We have been exploring similar
28

‘low cost/high participation’ models by ourselves with some of our new ventures! Second, we
wanted to learn and gain access to the advanced content management platform that is behind the
HuffPost. Our newspapers could use or replicate components of that platform for managing
external contributors. Third, a partnership with a digital-native American disruptor could more
directly expose ourselves to future technological advancements.”
The quote explicitly shows that an incumbent in phase 2 can use alliances to facilitate BMA by
directly accessing disruptors’ new methods of value creation (“‘low cost/high participations’
models”) and capture (“advanced content management platform”). The finding that alliances in
phase 2 constitute valuable mechanisms for BMA was corroborated by the repetition of similar
alliances over time, and by the concomitant reduction of stand-alone experimentation (see Figure 1).
In 2013, the company allied with other Italian publishers to create a video syndication
platform, in competition with disruptors like YouTube. The head of business and market for free
products at GEDI explained:
“Our [traditional] model is unsustainable in the long run, and therefore we experiment with new
ways. A big project we developed in 2013 is a video syndication platform that allows newspapers
not belonging to our group to share their video with us, and vice versa. We use the content
sharing among different newspapers to increase our local coverage and reduce our costs.”
Like the other online ventures, this project reveals the incumbent’s intent to exploit external
economies of scale (Marshall, 1920) after the internet disruption—the main generative mechanism
across phase 1 and 2. Evidence of this intent from the quote is the “content sharing among different
29

newspapers” and the aim to “reduce our costs”. In addition, this project reveals a new attempt to
react to disruptors’ threat through an alliance among incumbents. As the GM of the digital division
of GEDI explained, the video syndication platform was an effort by publishers to cooperate among
themselves and against disruptors like Google and Facebook, whose video services threatened the
video advertising segment of traditional publishers. Finally, the syndication platform employed an
open model, mixing outside-in and inside-out aspects (Venhaverbeke and Chesbrough, 2014)
because each incumbent could insource external knowledge (outside-in) and outsource its
knowledge to others (inside-out). Other examples of alliances/consortia that GEDI formed during
phase 2 with other newspapers and against disruptors were: the Premium Publisher Network (in
2008, to aggregate publishers’ contextual ads) and Gold5 (in 2014, to aggregate publishers’ video
ads).
In 2016, GEDI formed another JV with an international disruptor in the business news
segment, Business Insider. The JV aimed to launch the Italian branch of the disruptor: businessinsider.it.
In their press release, GEDI emphasized the disruptive nature of Business Insider by describing it as
“one of the fastest growing news brands in the world” and “the most engaged news brand on social
media” (Press release, 2016). In fact, the business model of this disruptor was a mix of partial
aggregation of external news from the web and partial internal content production, and then a
sophisticated platform to capture value. This JV, together with the prior JV with The Huffington Post,
reveals that incumbents can facilitate their BMA by forming alliances with disruptors (see also Gans,
2016) who had succeeded in devising new business models. The BMA develops by incorporating
new forms of value creation and capture from the disruptor, thus avoiding the risks of stand-alone
experimentation and the difficulties of early-stage competition and conflicts.
In addition to alliances, a related mechanism to speed up and secure the BMA process in
phase 2 is the acquisition of entrants employing disruptive models. Acquisitions and alliances are
30

related governance mechanisms on a same continuum (Capron and Mitchell, 2012). The company
made several acquisitions during phase 2, but the most relevant from a BMA standpoint was the
acquisition in 2013 of 51 percent of an online open community for movies: mymovies.it. This
community was the largest platform and online database of films in Italy, created in 2000 through
the contributions of normal viewers of films, and having an installed base of three million monthly
unique users in 2013. With these features, this entrant clearly employed a disruptive business model
(based on external contributors and platforms), and the GM of the digital division of GEDI
explained explicitly how:
“Mymovies.it can be interpreted within the set of initiatives of participatory content production,
since each movie title is wrapped around by people’s comments. However, the real value is in the
‘crowd-selection’! The website offers a synthetic index, called ‘MYmonetro,’ that suggests what
movies deserve to be seen, based on the comments of hundreds of viewers.”
In the next paragraph, we discuss how the incorporation of disruptive model can be effectively
implemented to limit clashes with the old model and negative transfer problems (Finkelstein and
Haleblian, 2002).
Mixing business models to limit tensions and failures. Alliances and acquisitions
are not always successful, due for instance to negative transfer problems when there are significant
differences between acquirers and targets (Finkelstein and Haleblian, 2002). In addition to that, the
integration of different models can be difficult due to intrinsic tensions between the different logics
(Sauermann and Stephan, 2013). To understand how incumbents can circumvent similar pitfalls, we
can consider how GEDI managed the JV with a disruptor such as The Huffington Post. The Italian
venture operated under a mixed business model (half open and half closed) that limited tensions.
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First, GEDI assigned the role of executive editor of the huffingtonpost.it to a traditional journalist,
Lucia Annunziata, despite the website’s heavy reliance on blogs and aggregation. Second, it
physically located the HuffPost’s newsroom in the same building of its La Repubblica newspaper—
contrary to recommendations that radical new ventures should be separated from incumbents
(Christensen and Raynor, 2003; Gilbert, 2005). Third, it was paying the external contributors (about
1,000 bloggers) unlike the US HuffPost. The Italian venture also employed a traditional small
newsroom of four to five journalists, because only “two-thirds of our content come from external
bloggers and other websites,” the vice managing editor explained. Thanks to a mixed model, the
integration of the new venture within GEDI did not produce clashes and struggles. In theoretical
terms, we can expect that pre-adapting a highly disruptive model to an incumbents’ predominant
model allows the reduction of potential conflicts by increasing “similarity.” This approach increases
the efficacy of BMA through alliances or acquisitions because “similarity” is associated with positive
transfer and performance (Finkelstein and Haleblian, 2002).
Reduction of stand-alone experimentation in phase 2. The threat of entrants in
phase 2 and the more advanced stage of a disruption life cycle discourage incumbents’ stand-alone
experimentation, favoring faster and more secure alliances or acquisitions. Hence, alliances and
acquisitions are not only more favorable mechanisms of BMA in phase 2, but they are also likely to
substitute incumbents’ stand-alone experimentation. We found that GEDI reduced its recourse to
experimentation to only two cases in phase 2, one of which was a failure (Reporter), with only one
succeeding (ilmiolibro.it).
In 2011, GEDI launched Reporter, a citizen journalism platform based on quality videos.
People could send their investigative pieces of video journalism to GEDI, which would then assess
them and train the best filmmakers (through the Repubblica Academy). The aim was to build an
32

external community of trained reporters to rely on, another attempt at BMA. However, the
journalist and founder of Reporter said:
“Something unexpected happened. The day when reporter.repubblica.it went online, we immediately
received negative comments from bloggers. The complaints were about the amounts we offered
to pay. Following a mistake with our technology provider, it appeared that we were offering to
pay a minimum of five euro per video. We promptly rectified the mistake by modifying the
minimum price to 150 euro. However, the negative mood among bloggers and our competing
newspapers remained, and we were accused to take advantage of our contributors because the
amount was too small for a publisher like us.”
During the following years, even with the modified remuneration price for contributors, the size and
interest in Reporter remained small, and the project was ended in 2016, suggesting that the failure was
not only due to the initial technical mistake. The Italian disruptor in this market was YouReporter, a
low-end disruptor that set a standard of low-quality free contributions in video citizen journalism
and gained scale, thus disrupting GEDI’s attempt to establish Reporter1. Interestingly, while GEDI
terminated its stand-alone experimentation, the competitor RCS Media Group acquired the
disruptor YouReporter in 2014. This purchase further suggests that acquisitions and alliances can be
1
Another insight form Reporter is that external contributors (e.g., bloggers, citizens) may be unwilling to
contribute to professional entities, due to different institutional logics. This situation is opposite to the
common NIH or not-invented-here syndrome (Katz and Allen, 1982) according to which individuals within
organizations reject external innovations.
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better than incumbents’ stand-alone experimentation in a more advanced stage of a disruption life
cycle.
The other example of stand-alone experimentation in phase 2 was the launch in early 2008 of
a self-publishing book platform, ilmiolibro.it (in English, mybook). The founder of ilmiolibro.it (also
GEDI’s head of digital entertainment) explained its disruptive open model:
“The system works that people publish their books on our platform, and at the same time they
judge the quality of other authors’ books. If many readers like the book, the author can opt for
selling it directly through our platform in a digital version or can even use GEDI’s printing
presses to sell hard copies or to keep it for himself. Both possibilities weren’t available to
common people before our platform was created. In this respect, we democratized book
publishing in Italy!”
This was clearly a disruptive model compared to traditional book publishing. In the new open
model, value creation is outsourced to a crowd and value capture can happen via a combination of
online platform plus print. By 2014, ilmiolibro.it was a dominant player with over 30,000 titles
published and an online community of more than 300,000 active members. This growth is
interesting because it reveals that incumbents can introduce disruptive models through stand-alone
experimentation, although it is difficult and might require specific conditions. A first condition
might be that the domain of the disruptive business is “unrelated” to those of the traditional core
business, to limit conflicts and the pressure of real threats. For instance, GEDI traditionally
operated only in the news business (not in books), but it became the Italian leader of book
self-publishing, and, interestingly, traditional book publishers did not undertake similar initiatives (or
they did it too late). A second condition can be the exact timing. Ilmiolibro.it was launched in an
34

earlier stage of the disruption process, in 2008, when threats from disruptors were still relatively
small (compared to those after 2012 that led to alliances and acquisitions). The two conditions–(1)
relatedness to the core business and (2) degree of time advancement–might help with choosing
between stand-alone experimentation and alliances/acquisitions as possible mechanisms for BMA.
DISCUSSION AND CONTRIBUTIONS
Rich strategy literature has demonstrated that the inability to adapt a business model after
disruptions frequently leads to the demise of incumbent organizations (Christensen, 2006; Danneels,
2004; Gavetti and Tripsas, 2000). To understand how companies can adapt, we conducted a
longitudinal study of a large news media publisher responding to internet disruption. We derived a
model detailing the implications of different components of disruptive innovation and unveiling
how incumbents can react through BMA.
Our first contribution is the development of a process model (Figure 3) identifying two
distinct parts of disruptive innovations (disruptive technologies and disruptive business models) and
presenting their consequences. We find that the two parts represent the drivers of a possible
adaptation process: in fact, they emerge in different moments in time, have different implications
and induce different responses from incumbents. More specifically, disruptive technologies are likely
to precede the emergence of disruptive business models because new technologies often open new
markets and require new models to profit from them effectively (Chesbrough and Rosenbloom,
2002; Christensen, 2007; Teece, 2007). This trend was the case of our study, in which we considered
the initial availability of new internet technologies that, as in the case of other technological changes,
opened new business possibilities and favored the emergence of new ways of creating and capturing
value. Another example is the disruption of film photography by digital imaging, which changed the
business model of photography and then caused the subsequent failure of Kodak (Tripsas and
35

Gavetti, 2000). However, there are also cases in which disruptive business models do not imply the
arrival of new technologies (e.g., the insulin pen in diabetes care) or may precede a technological
disruption. For instance, Ryanair’s disruptive business model (ultra-low cost, no-frills) started to be
introduced in the early 1990s, before the commercialization of the internet (source:
www.aviationreg.ie). Subsequently, Ryanair’s new business model became even more effective when
internet technologies allowed the company to establish their first website in 2000 to further cut
costs. We do not consider these cases in detail in this research, and they might represent interesting
avenues for future research.
Our second contribution was to introduce the notion of external economies of scale
(Alcacer, 2006; Garud and Kumaraswamy, 1993; Marshall, 1920) into the study of disruptive
innovations. Marshall (1920) theorized that external economies and network externalities emerge
when radically new external factors of productions are made available to all companies (e.g., roads,
electricity, but recently also the internet). Hence, disruptions making available new manufacturing
and distributing technologies induce external economies of scale, and thus positive externalities. We
focused, indeed, on disruptive technologies in manufacturing and distribution, a currently under-
researched area (Cozzolino and Rothaermel, 2018). The internet represented such a type of change
by providing a distribution network and new digital manufacturing tools. We found that, when
external economies emerge after a disruption, incumbents have incentives to use the external
resources (such as knowledge and technologies) to: (1) gain access to larger markets; (2) reduce
costs; and (3) increase their innovation. Access to such external resources is likely to provide an
advantage, compared to the sole reliance on internal factors of productions (on internal-only
economies of scale). This difference presents the main generative mechanism (Cornelissen, 2017) of
the BMA process: incumbents increase their access to external resources–thus opening their
business model–to exploit external economies after disruptions.
36

A third contribution was to unveil the BMA process after disruption. Figure 3 illustrates that
this is a two-phased model, where the two phases are triggered by the emergence of disruptive
technologies and disruptive business models. In phase 1, the availability of external new disruptive
technologies generates external economies of scale and thus creates opportunities for incumbents to
exploit external resources. By accessing external knowledge and technologies, incumbents can create
new value at a lower cost (see also Grant and Baden-Fuller, 2004). The fact that the technological
disruption occurs at the complementary-asset level (old-line manufacturing and distribution) is a
second favorable condition for perceiving opportunities in phase 1 (because the “core” is not
directly affected). From prospect theory (Kahneman and Tversky, 1979), we know that when actors
perceive an opportunity, they tend to react creatively and are more likely to take risks. In sum,
opportunity perception is a first reason why an incumbent can respond to the arrival of disruptive
technologies with immediate and high experimentation. A second reason why experimentation is a
mechanism of adaptation in phase 1 is because, in the “fluid stage” of a new technology, product
innovation through exploration tends to be high (Utterback and Abernathy, 1975). Finally, the
benefits for each incumbent to exploit external economies and the fact of being in an initial
technology race stage (Schilling, 1999), both induce incumbents to act as “stand-alone” players in
their initial experimentation efforts. We found consistent evidence of initial “stand-alone”
experimentation in our case.
In a phase 2 of the BMA process, incumbents face new entrants pioneering novel disruptive
business models. As indicated above, new disruptive technologies might ultimately require new
business models, which typically require time to emerge. Entrants are more likely to pioneer new
disruptive models (Ansari et al., 2016; Danneels, 2004). But how do incumbents react? When the
disruption of the value creation and capture components of incumbents’ business models becomes
visible in phase 2, the potential losses cause threat perception (Kahneman and Tversky, 1979). To
37

rapidly and effectively respond to the threat in phase 2, incumbents are likely to use alliances and
acquisitions as new adaptation mechanisms, rather than phase 1’s stand-alone experimentation,
which is generally riskier and slower. In phase 2, the focal company of this study formed alliances
with disruptors (e.g., The Huffington Post, Business Insider) and acquired potential disruptors (e.g.,
mymovies.it) as well as external publishers (e.g., La Stampa newspaper). Of the sole two residual
attempts at stand-alone experimentation in phase 2, one failed. All this evidence confirms that the
stand-alone experimentation mechanism is less appropriate during phase 2.
The study also offers contributions to understanding how value creation and capture change
after disruptions in manufacturing and distribution. Prior to the disruption, value creation occurs
through internal knowledge production and value capture through proprietary specialized assets (see
Figure 2, left side). This closed model is typical of traditional vertically integrated incumbents (see
Teece, 1986) and it has also been referred as a Chandlerian model (see Chandler, 1990). After the
disruption, value creation results from a combination of both internal and external knowledge, and
value capture results from the development of platforms and the control of customers’ data (see
Figure 2, right side). Platforms are, by definition, distribution and manufacturing assets (Gawer and
Cusumano, 2013). Hence, we can expect that the emergence of external economies and externalities
not only induces companies to create value through external resources, but also to capture value by
developing platforms. In fact, network literature suggests that platforms are created to internalize
externalities (Katz and Shapiro, 1994). This phenomenon can explain why disruptive entrants
introduce models in which they create value by orchestrating third-party knowledge and then
capture value through platforms. Facebook and Google Search are two notable examples. In
addition, incumbents facing similar threats need to develop platforms because their manufacturing
and distribution technologies have been destroyed (see again Figure 2). The examined company
transformed its old model into a multi-platform business model that also relies on external
38

knowledge sources. This finding provided insights about the necessary changes to the
subcomponents of a business model (e.g., structure and competences).
Another important feature of the BMA process is that it is not linear, but rather recursive,
and can lead to mixed business models (see Figure 3 and Figure 1, combining internal and external
knowledge). Even if the generative mechanism after the examined disruption was the opening to
external economies, we did not find strong evidence of a sole directionality of innovation. We found
instead that the company sometimes needed to return to the old closed model, and in general never
abandoned the prior closed model, but continued to invest in it (e.g., acquiring professional
newspapers or diversifying offline using its old model). Conditions inducing incumbents to return to
their old model were: (1) difficulties of the new exploration effort (e.g., failures, tensions, entrants’
success); (2) residual value in the old model (see also Gilbert, 2006 and Siggelkow, 2001); and (3)
unexpected exogenous conditions (e.g., external new market setbacks). There is a potential
implication here to ambidexterity literature, because we further clarify when it is appropriate to use
“simultaneity” or “temporal sequencing” of exploration and exploitation (O’Reilly and Tushman,
2016; Raisch, Birkinshaw, Probst, and Tushman, 2009). A temporal separation is possible (although
probably not desirable) in phase 1 of the BMA process when disruptors have not emerged yet. A
simultaneity is inevitable in phase 2 of the BMA process when the more advanced process of
disruption creates threats and makes new exploration crucial.
The study also unveils the tensions during the BMA process that might hinder success
adaptation. We found that, when a company tries to open its firms’ boundaries to external
knowledge and participants (Chesbrough, 2006; Garud and Kumaraswamy, 1993), one type of
conflict that can emerge relates to differences between internal and external logics (to an extreme,
between open and closed logics). We provide evidence of strategies that a company can use to
mitigate the problem related to conflicting logics (Laursen and Salter, 2014; Sauermann and Stephan,
39

2013). When there is a tension with external participants and it is difficult to create a business with
them (through stand-alone experimentation), a possible strategy is to turn to acquire or ally with
companies that have already internalized the external participants. The alliance with The Huffington
Post is an example of a similar strategic shift that occurs between phase 1 and phase 2 (see Figure 3).
In the case of acquisitions, which can also lead to conflicts, an additional possibility is to use mixed
models by adjusting a new model to an old one, to increase similarity and avoid negative transfers
(Finkelstein and Haleblian, 2002).
Generalizability. The model developed herein generalizes well beyond the media context.
In fact, the main generative mechanism of the process (exploiting external economies after
disruptions in manufacturing and distribution) applies to multiple industries facing internet
disruption. The prediction of the model is that companies increase their access to external resources
and open their model (without abandoning their closed model) to (1) reduce costs; (2) create new
businesses and innovations; and (3) to increase size (grow their market). Consistent with our
findings, Procter & Gamble has used the external economies of the internet to increase innovation
and new product development through the crowd, opening its business model through an inside-out
effort (Vanhaverbeke and Chesbrough, 2014). Ryanair (and subsequently other airlines) has used the
external economies of the web to reduce their costs dramatically by cutting out travel agencies and
selling directly to end consumers through their websites. Google Music and Facebook have used
disruptive technologies to access content and user’s contact details from their mobile phone,
growing their installed base and exploiting external knowledge, and have also used external app
developers to increase their innovation (e.g., on Apple’s App Store). Related to the last example,
Nokia has been less capable of engaging with external developers in order to exploit the external
economies of the web, and as a result, its operative system Nokia Symbian suffered from a lack of
“apps” and was overtaken by entrants like Google Android and Apple iOS.
40

The mechanism of stand-alone experimentation observed for phase 1 is also generalizable to
other contexts. As observed, stand-alone experimentation can be justified by the opportunity
perception of gains (Kahneman and Tversky, 1979) and by the technology race (Schilling, 1999).
Between 1998 to 2001, incumbents in industries such as banks, insurance, travel, and high tech all
started experimenting to seize the early opportunities of new technologies, contributing to the
formation of the internet bubble. Also, the other mechanism of phase 2’s alliances and acquisitions
is common to several industries facing similar disruption. Indeed, especially after 2009, incumbents
in most industries (education, TV, banks, telecommunication, etc.) turned to alliances and
acquisitions in reaction to the threat of the obsolescence of their business models (see also
Cozzolino and Rothaermel, 2008). Possible examples are Paym (a proprietary mobile payment
system developed by an alliance of UK banks in 2014), Hulu (a streaming platform responding to
Netflix, owned by Walt Disney, Fox, NBC Universal and Time Warner), and Coursera and edX
(platforms formed by a consortium of universities for online education, in an increasingly contested
market).
Another generalizable prediction is that platforms are used after the examined disruption to
enable and internalize externalities. In fact, disruptive entrants using platform-based open models
are common across many sectors (e.g., Uber for taxis; Airbnb for accommodation). Platform-style
responses by incumbents are also abundant: Coursera, Hulu, and Paym are all controlled by
incumbents, and Spotify is owned by incumbent record labels.
Finally, the identified tensions in BMA are also generalizable. The innovation in Ryanair’s
business model of exploiting external pilots taken from external agencies has generated conflicts
(Independent, 2018). Facebook’s model of granting control to third-party apps (Cambridge Analytica)
has created tensions with customers’ data (Financial Times, 2018). In the remainder of the paper, we
present additional important contributions.
41

Contributions to Disruptive Innovation Literature
The lack of conceptual clarity behind the disruptive innovation concept has partially hindered the
progress of this literature (Danneels, 2004; Govindarajan and Kopalle, 2006; King and
Baatartogtokh, 2005). Markides (2006) relates this problem to the failure to distinguish between
types of disruptions, at the technology, product, and business-model level. Christensen (2006, p.43)
also acknowledged: “I made a mistake when I labeled the phenomenon as a disruptive technology;
the disruptive business model in which the technology is deployed paralyzes the incumbent leader.”
Our paper is, to our knowledge, the first empirical research that considers the two components of
disruption (disruptive technologies and disruptive business models) simultaneously and investigates
their effects on incumbents’ BMA. Our process study was well suited to unveil how these two
components are related, and how they affect incumbents. Disruptive technologies tend to come first
and do not necessarily paralyze incumbents, but rather create opportunities. Disruptive business
models tend to emerge after, when entrants find ways to commercialize previous disruptive
technologies, and they threaten incumbents’ business models. Hence, the two types of disruption
have different effects on established organizations, and only the second type can threaten
incumbents and lead to failure—if incumbents do not adapt their business model. This fine-grained
understanding of the components of disruptions and their implications can be fruitful for the
progress of disruptive innovation studies.
A second contribution to disruptive innovation literature derives from studying a specific
type of technological disruption: in manufacturing and distribution/sales. Contrary to the
innovator’s dilemma (Christensen, 1997), incumbents are likely to invest and experiment early when
disruptive technologies make new factors of production available. The studied company showed an
admirable pattern of early innovation and investment. This exception to the common inertial
prediction that incumbents do not allocate resources and efforts to disruptions (Christensen and
42

Bower, 1996, Danneels, 2004) is illuminated by considering the type of technological disruption in
this case. First, disruptive technologies in factors of production generate “external economies of
scale” (Marshall, 1920; Garud and Kumaraswamy, 1993) and incentivize incumbents to adopt the
new technologies to exploit external benefits. Hence, the advent of disruptive technologies does not
constitute an inertial force per se, as it can create opportunities and incentives to adopt superior
technologies. Second, the emergence of external economies diminishes the firm-specific advantages
of previous “internal economies of scale,” thus incentivizing incumbents to adopt the external
disruptive technologies. Third, disruptive technologies in manufacturing and distribution also permit
incumbents to deploy their upstream core knowledge through new assets (gaining new “economies
of scope”), and this is another reason to adopt and invest early. All that points to the importance of
considering the type of disruptive technology more closely, and to consider the role of “economies
of scale” and “economies of scope,” in addition to demand factors (Adner, 2002; Christensen,
1997).
A final contribution relates to how to circumvent tensions during disruptions. Ansari et al.,
(2016) offer an important theorization of how disrupting entrants mitigate conflicts with incumbents
through cooperation and continuous adjustments. We integrate this concept, taking the incumbents’
perspective and revealing that acquisitions, alliances, and a mixed business model (half-closed and
half open) can reduce conflicts and negative transfer problems (Finkelstein and Haleblian, 2002).
Contributions to Business Model Literature
An important lacuna in business model innovation literature refers to the antecedents and processes
of BMA (Foss and Saebi, 2017). We contribute here by unveiling some of the drivers, hindering
factors, and processes of BMA. The study reveals that two key drivers of incumbents’ BMA are the
arrival of disruptive technologies and disruptive business models. In terms of process, we show that
these antecedents lead to opportunity and threat perception, and induce BMA though
43

experimentation (Sosna et al., 2010) and alliances/acquisitions (Bock et al., 2012). Through these
adaptation and governance mechanisms, incumbents readapt the value creation and capture
dimensions of a business model.
A second contribution refers to studies of open business models (Chesbrough, 2006;
Vanhaverbeke and Chesbrough, 2014), as we highlighted a condition for outside-in strategies. Our
study suggests that an outside-in strategy of insourcing external knowledge is more likely when there
are external economies (Marshall, 1920). The finding also complements the inside-out open strategy
described by Garud and Kumaraswamy (1993) for Sun Microsystems, when the company made its
internal technologies available to external competitors to establish a standard. While Garud and
Kumaraswamy (1993) studied a disruptor (Sun) seizing network externalities through an inside-in
strategy, we show that incumbent can react to disruptions by seizing external economies (outside-in).
Future research might be needed to further understand these options. A related implication of our
study is that adaptation requires mixed model—e.g., opening to external knowledge while
maintaining internal knowledge production. A closed model remains fully necessary in a market
where the disruptive technology cannot be implemented (e.g., offline). In the new market with
external economies (e.g., online), a more open model is beneficial. However, even in the new
market, the quality of the internal core knowledge production and the brand of an organization may
induce incumbents to consider mixed models (e.g., the metered paywall of the New York Times and
of La Repubblica) or fully closed models (the paywall of the Wall Street Journal). Hence,
professionalism through internal core knowledge and value capture through proprietary assets
remain important (see Figure 1 and 2)2. At the same time, incumbents might need to develop
2
Organizational culture might be another factor explaining heterogeneity in the degree of openness. Both
Google and Apple opened to external developers to exploit the external economies of the internet, but Apple
opened less (Apple is a notoriously closed-culture company). Likewise, the Wall Street Journal used a more
44

proprietary ecosystems in the form of interconnected platforms to exchange external resources and
customer data to capture value (for instance, through open APIs, as in the case of GEDI; see also
Figure A1 in the online appendix). At the end of the BMA process, GEDI’s two markets of readers
and advertisers became “layers” connected by multi-platforms (see Figure 2, left and right parts for
comparison). This final point can provide additional insights for platform competition literature
(Cennamo and Santalo, 2013; Rochet and Tirole, 2003).
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52

Table I: New Ventures and Projects Launched by GEDI to Open its Business Model
New Ventures/ Degree of Openness * Outcome Representative Quotes
Projects
1 2 3 4 5 6 7 8 Tot.
Experiment with x x x x mid Success “Our local newspaper La Provincia Pavese was the first in Italy in 2011
live chats, forum, to use the crowdsourcing tool Ushahidi, a software originally created
blogs in Kenya after the 2007 political elections to geospatially report
critical events. Our newspaper is experimenting with it through the
call for readers ‘Racconta Pavia’, in which we ask to notify what
happens in the city by locating the information on a ‘crowdmap’.
Our newsroom then coordinates all citizens’ contributions.” (Project
manager and information architect)
Platform for x x x x x x x x high Success “Repubblica@scuola is under the radar of our newsroom, from which
school it has always received great support. From a pure profitability
newspapers: standpoint, it is now a cost, but we also look at the project as a
Repubblica@Scuola service and a way through which we develop new competences and
engage with a huge number of schools. Now we are working with
53

Microsoft for a plug-in tool to be inserted on our platform to allow
students to generate crowdsourced lecture notes! Our privileged
relationship with schools will offer us an edge over competitors to
launch businesses related to online education.” (General manager of
digital division)
Platform for x x x x mid Failure “Almost five years before Facebook was invented, Kataweb had
personalized already created the first social network! [...] We built a platform
news: through which users could create a profile, comment, and interact
among themselves, and see what other users valued the most—
extending
essentially it was Facebook!” (GEDI’s digital strategist)
Fishwrap
Self-publishing x x x x x x x high Success “But we did something more: we put our best authors in contact
book platform: with external publishers. When the community of ilmiolibro.it judges a
book particularly well, we connect our author with the major book
ilmiolibro.it
publisher in Italy, Feltrinelli, to sell the book through its physical
bookshops.” (Head of digital entertainment)
Participatory x x x mid Failure “People voluntarily give information when you can protect them and
journalism somehow reciprocate. You acquire the right by showing that you
54

platform: listen to them. The key is to build trust in the relationship. A real
participation is possible when you are able to establish a dialog with

Reporter
contributors.” (Project manager and information architect)
JV with The x x x x x x mid Success “The social media function is centralized as I act as the social media
Huffington Post: strategist for all external platforms—Facebook, Twitter, etc. By using
an advanced social media dashboard, I constantly monitor the traffic

huggingtonpost.it
of our pieces, also using Google to boost the traffic, and I can
maintain our Facebook page updated every two minutes with a new
post. This shows how open we are to social sharing, rather than
keeping the content to ourselves, and how much attention we give to
going viral. There is also another difference compared to a traditional
newsroom: while in an online newspaper there are graphic designers,
journalists, and assemblers of content, each executing a specialized
task, at the HuffPost each journalist has all the tools to do everything,
from writing to cutting and editing a piece together with pictures.
This also reduces our costs!” (Social media editor of huffingtonpost.it)
Acquisition of x x x x x x x high Success “Social TV is not so much about the devices and channels of video
mymovie.it content but about the idea of the internet as a platform for
55

discussion and interaction with TV programs and its cast.”
(Head of digital entertainment; quoted in L’Espresso, 2014)
Video syndication x x x x mid Failure NEW YORK, Apr. 23, 2014: “Gruppo Editoriale L’Espresso, a
platform: premier digital publishing group in Italy, is changing the way their
audience discovers digital content with a strategic partnership with

tech partner
Taboola, a leading content discovery and distribution platform.
Taboola.com
Taboola’s personalized and relevant content recommendations will
first appear on Italy’s leading online news website, Repubblica.it,
before rolling out to all other Gruppo Editoriale L’Espresso digital
properties. As part of the partnership, the companies will also join
forces to bring content discovery to the Italian marketplace working
with other national and local publishers” (Press release, Taboola.com)
* The “x” indicates where the attribute was present. The eight attributes to qualify the degree of openness of each venture were: 1=external innovation;
2=user based; 3=enabling tool or platforms; 4=intrinsic motivation; 5=lower cost; 6=collective effort; 7=distributed control; 8=intellectual property.
56

Figure 1: Timeline of New Ventures by GEDI and Major Events, 1995–2016
Phase 1 Phase 2
57

Figure 1 illustrates all the strategic projects and investments launched by GEDI between 1995 and 2016, which belong to the two phases of our
theoretical model. Moreover, Figure 1 differentiates between the projects contributing to open the business model (those within the “external
knowledge” bracket above) and those maintaining the closed model (those within the “internal knowledge” bracket below).
58

Figure 2: Old Business Model Disrupted (left) and New Business Model (right)
The old business model (on the left) was a closed model, in which value creation is derived from internal knowledge production, and value capture is
derived from possessing specialized complementary assets. The new business model (on the right) is a more-open model, in which value creation is
derived from a combination of internal and external knowledge, and value capture is derived from the development and interconnection of multiple
platforms exchanging knowledge and customers’ data.
59

Figure 3: A Simplified Process of Incumbents’ BMA after Disruption
Antecedents Moderators Mechanisms of BMA Outcome

(Drivers) (of Process)
Experimentation (Stand-Alone)
to seize external economies

Available in the Markets
Disruptive Technologies
• Experimentation with new forms of value creation and
capture to seize external economies, induced by new
Opportunity
disruptive technologies in manufacturing and distribution.
Phase 1
• Incumbents are initially more likely to experiment in

isolation for two reasons: (1) external economies
advantage all incumbents; and (2) era of technological
ferment.
• Tensions from combining internal and external knowledge
Old and closed/open logics; failure and learning for phase 2. New BM
BM (mixed,
(vertical Failure & learning with ext.
integration lead to change mechanisms knowl.
and int. and
knowl.) Alliances and Acquisitions platform)
to existing business model
Models by Entrants
Disruptive Business
Acquisitions or alliances with disruptors to incorporate

Phase 2
•
new forms of value creation and capture (related to
Threat
external economies) and limit threats; alliances with other

incumbents against common disruptive entrants.
• Alliances and acquisitions as faster and more effective
ways of BMA (compared to riskier and lengthier stand-
alone experimentation).
• Alliances and acquisitions represent new mechanisms to
circumvent tensions and failures from phase 1.
Recursivity to the old model, nonlinear process
60

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Unpacking the Disruption Process:

New Technology, Business Models, and Incumbent Adaptation

* Corresponding Author: Alessio Cozzolino.

Keywords: Disruptive technologies and innovations, Business models adaptation, Incumbents,

This article is protected by copyright. All rights reserved.

New Technology, Business Models, and Incumbent Adaptation

literature on disruption, business models, and platforms.

capture, digital platforms

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we will make relatively little money from many more readers”

incumbent firms to adapt to technological disruptions pioneered by new entrants (Christensen,

institutional tensions in managing the different organizational demands of disruptive innovations

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To address these questions, we conducted an in-depth longitudinal study of a major news

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availability of disruptive technologies offers new opportunities, favoring “incumbents’

terms of opportunities and threats, leading respectively to stand-alone experimentation and

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and Stephen, 2013).

document how incumbents can react to disruptions by transforming a product-company into a

on internal production to an organization that manages and interconnects multiple platforms,

increasing their access to external knowledge sources.

DISRUPTIONS AND BUSINESS MODELS

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technologies tend to be commercialized by entrants, while incumbents remain trapped in sustaining

concept of disruptive technologies to the broader category of “disruptive innovations”, also

technologies and business models to an ecosystem of incumbents in the TV industry.

“Disruptive technologies” and “disruptive business models” create “different kinds of

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technologies are likely to stimulate subsequent development of disruptive business models, as we

Business Model Adaptation (BMA)

value creation, delivery, and capture mechanisms” of an organization (p.172).

industry level (Chesbrough, 2006; Gambardella and McGahan, 2010).

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strategies of a company—as our findings reveal.

1986), generally along a vertically integrated firm value chain.

RESEARCH SITE AND METHODS

in an incumbent media organization. In particular, we conducted a longitudinal case study (Yin,

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<<Insert Table I here>>

Research Site and Data Collection

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needed to understand the complex transformation in detail.

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<<Insert Figure 1 about here>>

time (from phase 1 to phase 2 of the process).

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value capture mechanisms of the new business model.

technologies and disruptive business models.

A PROCESS MODEL OF BMA AFTER DISRUPTION

Traditional News Publishing Model

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capture is possible when a company possesses specialized complementary assets, such as

ten printing plants and part of the wholesale distribution.

trajectory of improvement in publishers’ prior “manufacturing and distribution” was to increase

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customers (Christensen, 1997).