Chapter 7 Flashcards
What are the 4 i’s of innovation?
Idea
Invention
Innovation
Imitation
What are the five different stages of the industry life cycle?
(introduction, growth, shakeout, maturity, and decline)
Whats the introduction stage?
In the introduction stage, an inventor tries to sell their new product/service. The initial market size is small, and growth is slow. At this point, the barriers to entry are high and only a few firms are active in the market (those who can afford a high R&D and make it their core competency).
What is the growth stage?
After the initial innovation has gained some market acceptance, demand increases rapidly as first-time buyers rush to enter the market. As the size of the market expands, standard will emerge. Standard are agreed-upon solution about a common set of engineering features and design choices. They can either emerge from the bottom up: through competition in the marketplace or be imposed from the top down by government or other standard-setting agencies.
Whats the shakeout stage?
The shakeout stage is characterized by a decrease in the rate of growth. Here, firms compete directly against one another for market share, rather than trying to capture a share of an emerging market. As the competitive intensity increases, weaker firms are forced out of the industry; only the strongest competitors survive increasing rivalry. Key success factors at this stage are the manufacturing and process engineering capabilities that can be used to drive cost down. In this stage, price becomes a more important competitive weapon.
Whats the maturity stage?
After the shakeout and when a few firms remain, the market enters its maturity stage. Here, the industry structure morphs into an oligopoly with only a few large firms, which usually benefits from economies of scale. Now, demand mainly consists of replacement or repeat purchases; the market has reached its maximum size. The decrease in the market demand increase the competition within the industry.
Whats the decline stage?
Changes in the external environment often lead industries to the decline stage. In this final stage, demand falls rapidly and the size of the market contracts further. At this final stage of the industry life cycle, mangers have four strategic option:
(1) Exit. Some firms are forces to exit the industry through bankruptcy or liquidation.
(2) Harvest. The firm reduces investments in product support and allocated only a minim of human and other resources. They do this in order to maximize cash flow from their existing product line.
(3) Maintain. In the maintain strategy, a frim continue to support marketing efforts at a given level despite the maturity stage.
(4) Consolidate. This happens when firms buy rivals to consolidate its power, possibly approaching a monopolistic power.
Whats the crossing the chasm framework?
The crossing-the-chasm framework is a conceptual model that shows how each stage of the industry life cycle is dominated by a different customer group. Each customer group responds differently to a technological innovation, due to differences in the psychological, demographic, and social attributes observed in each unique customer segment.
Whats the order of the customer groups of the chasm?
- Technology enthusiasts
- Early adopters
- The chasm
- Early majority
5 Late majority - Laggards
What are the 4 types of innovation emerge?
- Economic incentives
- Organisational inertia
- Innovation ecosystem
- Architectural innovation
Whats the difference between a pipeline and a platform business?
A pipeline business model is one in which the value chain represents a linear view of a firm’s business activities, one in which the firm’s activities start with raw materials and end with retailing and after-sales service. While, platform business refers to an enterprise that creates value by matching external producers and consumers in a way that creates value for all participants, and that depends on the infrastructure or platform that the enterprise manages
