Abstract for: Why Successful Companies Fail: Innovator’s Dilemma versus Learning Propensity Model

This paper explores why successful firms unexpectedly fail when confronted by market or technological disruptions. Building on the Innovator’s Dilemma and core-rigidity frameworks, we examine how virtuous cycles of resource allocation and learning can become traps. These feedback loops ultimately delay adaptation and lead to sudden organizational collapse. Using a system dynamics model, we develop causal loop and stock-and-flow diagrams to capture how incumbents become overcommitted to existing products. We then simulate scenarios involving disruptive market shifts to analyze how reliance on established capabilities, resource dependence, and slow recognition of emerging demand collectively drive or mitigate firm decline. Base-case simulations show incumbents thriving until the product life cycle nears saturation. With disruptive innovations, simulation outcomes reveal a swift decline in market share and profitability unless proactive investments in new product lines are maintained. Sensitivity tests suggest earlier R&D allocations and autonomous divisions substantially lower the risk of collapse. Findings underscore the importance of timely resource reallocation to balance current profitability with evolving market needs. The system dynamics perspective highlights how reinforcing loops can harden into rigidities that entrap incumbents. For practitioners, ongoing market vigilance, small-scale experimentation, and learning-oriented structures offer viable strategies to escape the Innovator’s Dilemma and ensure longevity.