Why Challengers Beat Incumbents: The Role of Technological Innovation

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Innovation and Technology
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Introduction
In business, incumbents are organizations that have a leading market position while the
challengers are the new rivals that seek to gain market share. Due to radical innovations, the
incumbents are often upended and at times rendered obsolete because they experience difficulties
in addressing the challenges posed by such innovations. The reason behind their inability to
address these challenge is due to inertia, tendency to exploit current competencies, organizational
rigidity, internal culture and complacency, issues related to incentive and resource allocation
process, as well as deficiency in organizational capabilities. The challengers often beat the
incumbents due to their greater agility, the vision of the organizational leaders, quick innovation
capability, a culture of risk-taking and experimentation, and highly digitalized services and
products.
Examples of incumbents and challengers include; EasyJet has challenged mainstream
airlines such as British Airways and Ryanair which have experienced the collapse of the
Monarch and a meltdown in their IT. EasyJet has positioned itself by taking advantage of the
present market opportunities. Also, Netflix has challenged Blockbuster and rivaled Walmart due
to its quick reaction to emerging technological shifts. Blockbuster was the leading video-rental
chain and Walmart rented DVDs. Walmart backed out of DVD rentals in 2004 while
Blockbuster applied for bankruptcy in 2010. IBM PC inclusive of its clones challenged
minicomputer manufacturers such as DEC, Wang, and Apollo. Additionally, Tesla, - best known
for focusing on electric cars- has cemented its status as an icon of innovation and technology,
thus challenging organizations such as Ford and General Motors. Big organizations such as
PepsiCo, Anheuser-Busch InBev, and Wal-Mart have placed huge orders for the electric semi-
autonomous truck from Tesla, hence increasing its competitive edge. In this paper, the reasons

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why incumbents are being beaten by challengers are addressed, including an explanation of the
role of technological innovation including disruptive technologies and how these technological
innovations have impacted businesses, especially incumbents.
Why challengers beat the incumbents
Start-ups are faced with several challenges and struggles that incumbents are not worried
about. The challengers have to deal with concerns regarding cash flow, limited resources, a non-
existent reputation, and speculative information of their target demographics. Considering these
factors, it may appear that the challengers cannot out-compete the incumbents unless they have
possessed an in-demand solution that no other organization has globally. However, this is only
one side of the story (Blank, 2013, pp.65). The truth is that the challengers hold a number of
great advantages over the incumbents. The reasons why incumbents are being beaten by
challengers are as follows;
First, the challengers are agile as compared to the incumbents. Despite having a solid
business plan as well as an operations strategy, the new competitors do not have anything that
confines them to such structures. However, the incumbents have got many reasons to remain
confined to their business plan and operations strategy such as maintaining their strong asset
bases, maintaining their turnover, and meeting the stakeholders’ interests. A recent session with
IBM delivered a message that if incumbents want to survive the perilous and unexpected changes
in their respective industries, they have to reinvent themselves with startup thinking. The
phenomenon has been dubbed the name uberization, a derivative from Uber, -the ride-sharing
service that has revolutionized the chauffeur as well as the taxi industries and has threatened
their existence. Yann Girard, - an entrepreneur and investor- in a LinkedIn post, wrote that