Disruptive Innovation and a Multi-Sided Digital Marketplace

Introduction

In this era, digital platforms are extremely vital for organisations to survive by improving the efficiency of their products and services as well as adopting more efficient business processes and methods. Digital platforms have transformed physical-based activities into fully digital or hybrid (physical and digital) based activities. A digital marketplace is a digital platform that facilitates the exchange of goods and services between buyers and sellers. The digital marketplace has been considered a disruptive innovation. Digital marketplaces have become a disruptive innovation for traditional marketplaces because they change business processes to the extreme where people do not need to physically come to get goods or services but simply interact through the platform (Almunawar et al., 2013). It makes a big difference in how many people go to traditional markets because many customers like digital marketplaces more than traditional markets.

Disruptive innovation demands quick flexibility to succeed in a complex market, as well as a short length of time to penetrate it (Kumar & Srivastava, 2020). Many organizations, particularly those in well-established marketplaces, overlook disruptive innovations that do not fit mainstream requirements because meeting these needs and maintaining a competitive advantage already consumes the majority of a company's resources.

Disruptive innovation in its processes and technologies just requires gestation time. Consumers spend time learning about products and services. With the help of performance trajectories, Bower and Christensen (2015) explain the disruptive innovations and technologies focusing on improving the existing customer value attributes. As a result, disruptive technologies are increasingly being used and valued in new markets, implying that they have the potential to create new markets. Due to work and daily life, Netflix, for example, has millions of subscribers because it understands its customers. These customers have little spare time to sit back and watch their favourite shows and movies. As a result, they developed a video streaming service that allows individuals to catch up on their favourite shows whenever and wherever they choose. Some organisations may take a safer approach and implement the innovation only after seeing how it performs for others, but those who fail to perceive the potential will miss out on the chance to enter a new and lucrative market.

Few theoretical discussions analyse the disruptive innovation carried out by the digital marketplace, causing it to become extremely dominant. Thus, to explain the business scenario in the online marketplace, the multi-sided market theory is employed. What are the fundamentals of the digital marketplace that make it possible for it to be a disruptive innovation for traditional markets? The purpose of this paper is to evaluate the concept of disruptive innovation in the context of a digital marketplace by using content analysis from a literature review. The rest of the paper is organised as follows: The next section is the literature review, followed by a methodology. The subsequence section contains analysis and discussion, followed by the conclusion.