Innovation and institutional change: the transition to a sustainable ...

54 Chapter 2
often represents the product value chain in which the company is currently
established, and not the (small group of) leading edge customers they may
show some interest in the new product.
Emerging firms, on the other hand, are more willing to fully commit to and
invest in the new product for which the applications and markets are highly
uncertain. They are dedicated to find and create new markets and connect
them to the emerging different functionalities the new product contains (e.g.
for the disk-drive example (Christensen, 1997: 40), performance for
mainframe computers were measured in terms of capacity, speed and
performance, whereas for portable computers they were ruggedness, low
power consumption, and size). If an initial market has stabilised their focus
is broadened towards increasing reliability of the new product, and towards
improving the convenience of the product in order to extend the market.
According to Christensen, in the sequence of functionality to reliability to
convenience to price, the price is generally the last factor on which basis
emerging firms and their products start to compete. Christensen’s main point
is that when this stage is reached, the emerging firm has built up a value
network 10 surrounding its product, with specific linkages with suppliers and
customers and specific manufacturing and design experiences, and may
move upmarket as the new product has improved its performance to a level
similar or above the established product (based on its specific cost
structures), with some additional functionalities and even more potential for
further improvement. As these new firms and their value networks enter
main markets of incumbent firms successfully, incumbent firms are often
unable or too late to redesign their value networks to the new demands of the
market.
2.4.4 Theorising about the role of networks in systems change
The importance of networks in innovation processes has become generally
accepted. Especially when the innovation is of a complex nature, with
several technologies or components involved, co-ordination of activities of
actors working parallel on different technological aspects within networks is
one condition for a successful innovation. Complexity implies interactions
among many parts, and many interactions between the innovation and its
surroundings. “Complex technologies are those that cannot be understood in
detail by an individual expert, and cannot be precisely communicated among
experts across time and space” (Rycroft and Kash, 2002: 21). As
10 Value network is defined by Christensen (1997: 36) as “the context within which a firm
identifies and responds to customers’ needs, solves problems, procures input, reacts to
competitors, and strives for profit”.