Chp. 12 Flashcards
Innovation
the process by which ideas are transformed into new offerings, including products, services, processes, and branding concepts that will help firms grow
Why do firms add products, services, and processes to their offerings?
it creates and delivers value more effectively by satisfying customers changing needs and keeps them from getting bored with the current product or service
True or false: without new products or services the value of the firm will ultimately decline
true
How does innovation affect risk?
diversification creates a broader portfolio of products which helps diversify the risk and enhance firm value better than a single product can
What industries experience short product life cycles?
apparel, arts, books, and software
Diffusion of Innovation
the process by which the use of innovation spreads throughout a market group over time and across various categories of adopters
Pioneers (break throughs)
establish a completely new market or radically change both the rules of competition and consumer preferences in the market
First Movers
the first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead
Innovators
those buyers who want to be the first on the block to have the new product or service. risk takers and highly knowledgeable. stands in line overnight. 2.5%
Early adopters
second subgroup that begins to use a product. not as risky as innovators, purchase product after careful review, wait for the first reviews to be released do not stand in line to be first to get product. 13.5%
Early Majority
34%. few new products can be profitable if this group doesn’t adopt them. wait for bugs to be out of the product. enter the market when the # of competitors has reached its peak so they have price choice
Late Majority
34% last group. product has reached its full market potential when they buy. sales have leveled off or declined
Laggards
16%. rely on traditional products until they are no longer available may never adopt a new product or service
How can firms use the diffusion of innovation theory?
to predict which types of customers will buy their new product or service immediately after its intro as well as later as the product is more and more accepted by the market
Relative advantage
product or service is perceived to be better than subs then the diffusion will be quick
Compatibility
diffusion process may be faster or slower depending on various customer features including international culture differences
Observability
products are easily observed their benefits or uses are easily communicated to others which enhances the diffusion process
Complexity and trialability
products that are less complex and are easy to try will diffuse more quickly and lead to faster adoption than those that are not as easy to try (apple stores always have tons of products to try)
What are some ways of idea generation?
internal research and development, license tech. from research intensive firms, brainstorm, research competitors products, conduct consumer research
R&D Consortia
firms joining groups of other firms and institutions to explore new ideas or obtain solutions for developing new products
Reverse engineering
taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitors patents
Lead users
those innovative product users who modify existing products according to their own
Concept testing
the process in which a concept statement is presented to potential buyers or users to obtain their reactions
Product development/design
entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a products form and features
Beta Testing
uses potential customers, examine the prototype in a real use setting to determine its functionality performance potential problems and other issues specific to its use
