Chapter 4 - Standard battles and design dominance Flashcards
1
Q
What is a dominant design?
A
- product or process that dominates a category
- 50% of market
2
Q
Why having a dominant design is important?
A
- pressure to select a dominant design
- government regulatory action, intervene when there is a societal or consumer welfare benefit to having compatible technologies [telecommunication, industries]
- market forces
- increasing returns to adoption, more valuable the more it’s adopted
- complementary product
3
Q
Why some technologies become dominant?
A
- total value offered is greater than that of other
- standalone value [product] plus network externality value [users]
- self-reinforcing process that continues to increase a technology’s dominance
- even if it’s inferior to competitors
4
Q
What are the sources of increasing returns?
A
- learning effects
- more used, more knowledge -> technology improvement
- network externalities
- increasing returns to adoption
- a user’s benefit from using a good increases as the installed base [number of users] increases
- complementary product creation
- additional goods and services that enable or enhance the value of another good
- self reinforcing cycle of installed base and availability of complementary goods [users attract developers, complements attract users]
5
Q
What are learning curves used for?
A
- model cumulative impact of learning on production costs and productivity
- function of cost-performance per unit/cumulative output
6
Q
What is Prior Learning?
A
- prior experience influences its ability to recognize and utilize new information
- knowledge base on technology or similar ones
- influences learning rates of firms
- also differ with the nature of the task and firm strategy
- investment in prior learning can accelerate future learning by building absorptive capacity
- technologies adopted earlier likely to become better developed, diffucult for others to catch up
7
Q
What is Absorptive Capacity?
A
- ability of an organization to recognize, assimilate and utilize new knowledge
- experimentation, helps build a knowledge base to identify successful technologies
- influences learning rates of firms
- also differ with the nature of the task and firm strategy
- has effects at the industry level
- more complementary technologies, more efficient originary technology
8
Q
Why are dominant designs selected?
A
- path dependency
- small historical events may have a large effect on the technology adopted
- early entrants and sponsorship by large firms may lock market
- not necessarily the dominant is the most superior
- natural monopoly and winner-take-all markets
- dominant firm has high returns and can affect the development trajectory
- catching up might be difficult, lost capital on original technology
- firms have a tendency to build on their existing knowledge base rather than build new ones
- dominant desing influences knowledge accumulation and technological discontinuity that will replace it
9
Q
Winner-take-all markets
A
- very different competitive dynamics
- technologically superior products do not always win
- requires different firm strategies for success
- there are benefits in competition (reduced cost, faster improvement) but users may get more value when one technology dominates
- when monopoly costs exceed consumers benefits, intervention may be warranted (optimal market share where they intersect)
10
Q
What determines the value of a technology?
A
- stand-alone and network externality value
- Buyer Utility Map to determine aspects valued by customers
- perceptions of value
- consumer choice is also affected by subjective information
- can be considerably different from the actual value
11
Q
Buyer utility map
A
- Chan Kim and Renee Mauborgne
- six utility levers (custmer productivity, simplicity, convenience, risk, fun and image, environmental friendliness)
- six stages of a buyers experience cycle (purchase, delivery, use, supplements, maintenance, and disposal)
- each benefit has to be considered in light of its cost
12
Q
What is mindshare?
A
- tactic used by firms, takes advantage of consumer reliance on perceptions
- heavy advertising that makes:
- installed base appear larger
- make complementary goods appear better
13
Q
What is vaporware and what is used for?
A
- it’s a product that is not yet on the market and may not even exist
- used as a tactic by firms to take advantage of consumer reliance on perceptions
- pre-advertising
14
Q
What is modularity? And a platform?
A
- modularity -> when a product can be separated and recombined
- expanding the range of compatible components
- uncoupling components that were previously integrated
- platform -> stable core that connects different units for components, complements and final users
- change their configuration, scale, or functions
- standardized interfaces to ensure compatibility
15
Q
Modularity and market
A
- in markets where products are complex or complements drive the value, modularity is competitive (provide different complements)
- modularity to create a platform ecosystem where many different firms contribute to the product system
- third-party developers
- useful when:
- diverse technological options that can be recombined
- customers have heterogeneous preferences
