E2, Ch 7: Innovation & Entrepreneurship Flashcards
innovation can both create and destroy value, and often comes in waves:
many firms dominated an early wave are often….
challenged by the next wave
ex. traditional networks —> cable providers –> streaming content
the Four I’s
Idea –>
Invention –>
Innovation –>
Imitation
the Four I’s: Idea
abstract concepts or research findings
the Four I’s: Invention
- transformation of idea into product
- modification and recombination of products
the Four I’s: Innovation
- commercialization of an invention
- a novel, useful idea that is successfully implemented
the Four I’s: Imitation
copying a successful innovation
the Industry Lifecycle stages (5)
- introduction
- growth
- shakeout
- maturity
- decline
introduction stage (3)
- a core comp. of R&D is necessary to create a product category that will attract customers (can be $$$)
- entry barriers are HIGH
- strategic objective is market acceptance and future growth (through network effects!)
growth stage (4)
- demand increases rapidly as 1st-time buyers rush to purchase
- proof of concept has successfully been demonstrated
- product/service standards emerge, leading to a:
- shift from product to process innovation
shakeout stage (4)
- growth declines
- firms compete intensely
- weaker firms are forced out and there is industry consolidation
- price is an important competitive weapon
maturity stage (4)
- only few large firms remain enjoying Economies of Scale
- process innovation has reached a maximum
- the demand is replacement or repeat purchases
- market has reached maximum size – growth is 0 or negative
decline stage (3)
- demand falls rapidly and innovation ceases
- if a breakthrough emerges, it leads to a new industry or reset of the lifecycle
- strong pressure on price
Crossing-the-Chasm Framework
shows how each stage of the industry lifecycle is dominated by a different consumer group:
tech enthusiasts
early adopters
early majority
late majority
laggards
technology enthusiasts (3)
- enter market during introductory stage; 2.5%
- proactively pursue new tech. and enjoy beta versions
- tinker with product imperfections and provide free feedback
early adopters (3)
- enter during growth stage; 13.5%
- demand is driven by imagination and creativity
- a firm must directly communicate the product’s potential to capture these customers
early majority (3)
- enter market during shakeout stage; 34%
- weigh costs and benefits carefully, relying on endorsements of others
- group is key to catching growth wave and crossing the big chasm
late majority (3)
- enter during maturity stage; 34%
- wait until standards emerge and do not like uncertainty
- represent majority of market and buy from well-established firms
laggards (3)
- enter during decline stage; 16%
- adopt new product if necessary
- demand is small and are not pursued as future customers
