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Why Incumbents Struggle to Extract Value from New Strategic Options:: Case of the European Airline Industry

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  • Vlaar, Paul
  • De Vries, Paul
  • Willenborg, Mattijs

Abstract

Although industry transformations generally emanate from technological changes, recent examples suggest they may also be due to the introduction of new business models. Whereas many of these models contain seemingly principles and elements, and even though new entrants engage in profitable pursuits, incumbents often struggle in their attempts to extract value from them. Which factors are causing the difficulties experienced by incumbents? And, when are problems most severe? A review of the literature clarifies that incumbents face difficulties associated with cannibalization, conventional wisdom, internal and external inflexibility, and incompetence or overconfidence. The negative effects of these factors are reinforced by, among other aspects, business models consisting of many complementary elements, insufficient autonomy granted to new businesses, an absence of strong leadership or entrepreneurial alertness, and a low sense of urgency. Based on this, we develop a framework, which is illustrated with a case study of low-cost initiatives in the European airline industry, in which we compare endeavors of three incumbents (British Airways, KLM, and Lufthansa) with those of three new entrants (Ryanair, easyJet and Virgin Express). The paper contributes to the literature by shifting the attention from industry changes provoked by technological breakthroughs to transformations originating from the introduction of new business models, and by indicating why incumbents fail to extract value from these models.

Suggested Citation

  • Vlaar, Paul & De Vries, Paul & Willenborg, Mattijs, 2005. "Why Incumbents Struggle to Extract Value from New Strategic Options:: Case of the European Airline Industry," European Management Journal, Elsevier, vol. 23(2), pages 154-169, April.
  • Handle: RePEc:eee:eurman:v:23:y:2005:i:2:p:154-169
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    Citations

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    Cited by:

    1. Henderson, Isaac Levi & Tsui, Kan Wai Hong & Ngo, Thanh & Gilbey, Andrew & Avis, Mark, 2019. "Airline brand choice in a duopolistic market: The case of New Zealand," Transportation Research Part A: Policy and Practice, Elsevier, vol. 121(C), pages 147-163.
    2. Sarkar, Soumodip & Osiyevskyy, Oleksiy & Clegg, Stewart R., 2018. "Incumbent capability enhancement in response to radical innovations," European Management Journal, Elsevier, vol. 36(3), pages 353-365.
    3. Jonathan D. Bohlmann & Michael A. Stanko & Jelena Spanjol, 2024. "Incumbent inertia, innovativeness, and performance (dis)advantages: A demand-side learning perspective," AMS Review, Springer;Academy of Marketing Science, vol. 14(1), pages 122-142, June.
    4. Chaikal Nuryakin & Regi Kusumaatmadja & Natanael Waraney Gerald Massie & Alvin Ulido Lumbanraja & Sean Hambali & Devina Anindita, 2019. "The Sky in Blues: On the Recent Development of Indonesian Airlines Industry," LPEM FEBUI Working Papers 201941, LPEM, Faculty of Economics and Business, University of Indonesia, revised 2019.
    5. Jim Dewald & Frances Bowen, 2010. "Storm Clouds and Silver Linings: Responding to Disruptive Innovations Through Cognitive Resilience," Entrepreneurship Theory and Practice, , vol. 34(1), pages 197-218, January.
    6. Fasone, Vincenzo & Kofler, Lukas & Scuderi, Raffaele, 2016. "Business performance of airports: Non-aviation revenues and their determinants," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 35-45.

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