Disruptive Innovation in Digital Platforms and the Rising Power of Competitors, Consumers and Producers

The classical digital innovation theory was developed through the examination of the manufac-turing sectors and was later extended to include services. Its propositions are: 1) new technolo-gy surprises incumbents, 2) incumbents are slow to take decisions to change their production lines, acquire fundamentally new technologies and change their industrial processes; and 3) new technology is adopted by entrants while incumbents struggle to cope, eventually failing to adopt it and consequently being pushed out of their markets. In Elbanna (2017), I argue that this theo-ry has not considered the role of consumers beyond their gradual adoption of low-cost innova-tion with simpler functionality. It also portrays incumbents as stranded and stifled by their pro-duction lines, their existing technological and labour capability, and their need to attend to exist-ing customers; a view that is consistent with manufacturing but not necessary digital platforms and app-based platforms. Indeed, these assumptions do not hold well in the case of digital plat-forms. Digital platforms attend to two or more sides of the market; mainly end-consumers and producers. Digital platforms act as an intermediary between these sides where all consumers are producers are customers for the digital platform. A digital platform cannot operate without sufficient customers that attract producers and sufficient producers that attract customers. I ar-gue that the nature of this dialectical relationship and the intermediary position of digital plat-forms makes digital platforms vulnerable to both consumes and producers and hence digital platforms need to attend to all sides of their market to ensure their sustainability.