Strategic risk positioning as sensemaking in crisis: the adoption of electronic trading at the London international financial futures and options exchange

In this paper we describe a period of strategic crisis (1997-2000) at the London International Financial Futures and Options Exchange (LIFFE) precipitated by the loss of a key benchmark product from their manual trading environment to an electronic trading platform (DTB/Eurex). Using Bower and Christensen's (1995a) notion of disruptive technology, our analysis starts by examining the response of major international financial futures exchanges and considers why the industry incumbents ignored the potential threat from electronic trading for so long. Widening our focus to examine responses from the broader financial market community to these events, we then embed LIFFE's story in the organizational literature on sensemaking. This provides the theory of disruptive technology with an analysis of the meaning-making processes surrounding it and provides evidence for an empirically grounded form of sensemaking, which we call strategic risk positioning. Our findings are of interest both to practitioners in incumbent organizations responsible for managing potential threats from new entrants and academics attempting to develop theoretical tools to provide support during strategic crises associated with new technology adoption.