Question

If a new alternative fuel was found in the auto industry, what are two ways existing car manufacturers might respond to this disruptive innovation?

Answer 1

In the face of disruptive innovation, a firm essentially has two choices. Hey, can either create a co-option strategy or following a Bayesian strategy. What we mean by that, in simple terms is that in order to survive, a company needs to be able to utilize the opportunity in the market by either adopting it straightaway, having to change their business structure, which is risky, or they can essentially acquire or work with a company that either brought in the innovation or is working to achieve it. Using a Bayesian strategy, the car industry can make use of a number of different product and approaches centered around the idea of the new fuel, incorporating it, providing other products and assets making use of the technology in order to stay in the required level when it comes to adopting a change. A company can’t simply adopt a new structure and they don't stagnate away from it. Rather, the best two ways to this problem which provide the solution are:

1. Sport or co-opt innovation.

2. A Bayesian strategy which makes use of the data to recognize a disruptive change before it has become salient and therefore make it easier for the company to create smaller changes to their products to bring out the best possible execution of adoption process.