exam 3 Flashcards
What is innovation?
The successful introduction of a new product, process, or business model
What does innovation allow firms to do in regard to competitive advantage?
Redefine the marketplace in their favor.
What is the long tail business model?
A business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices.
What are the “four I’s” in the innovation process?
Idea, Invention, Innovation, Imitation
What is an Invention?
The transformation of an idea into a new product or process, or the modification of recombination of existing ones
What is a Patent?
A form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea
What is Trade secret?
Valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy.
In the US, how long is the time period for the right to exclude others from using patented technology?
20 years
What is innovation?
the commercialization of an invention
What are first mover advantages?
Competitive benefits that accrue to the successful innovator
What are the types of first mover advantages?
Economies of scale, Learning-curve effects, network effects, critical patents
What three characteristics of an idea are necessary to be considered an innovation (See exhibit 7.3)?
Novel, useful, implemented.
What is imitation?
When competitors copy an innovation
How have competitors imitated Netflix?
By jumping on the streaming war. Prime offers complimentary streaming,
What are the four industrial revolutions?
Steam Power/Mechanization; Electricity, mass production, assembly line; Computers, Electronics, Automation; Artificial Intelligence, Cyber-physical systems.
What is a comparative advantage?
When one country has a lower opportunity cost in producing one good over another good.
What is the internet of things?
a cyber-physical system that connects everyday items such as airplanes, cars, and refrigerators to the internet
What is machine learning?
Software algorithms that improve through the use of large amounts of data and experience. Given humans’ cognitive limitations in processing large amounts of data, ML allows for insights and ideas that would elude humans.
What is an entrepreneur?
Agents who take economic risks to introduce change into the competitive system.
What is strategic entrepreneurship?
The pursuit of innovation using tools and concepts from strategic management.
What is social entrepreneurship?
The pursuit of social goals while creating a profitable business
What are examples of social entrepreneurship ventures?
Teach for American, TOMS, Better World Books, and Wikipedia
What are the five stages in the industry life cycle?
Introduction, growth, shakeout, maturity, decline
What are the characteristics of an industry in the introductory stage?
R&D, small market size, slow growth, high barriers to entry, few firms active in the market, tendency to emphasize unique product features and performance rather than price
What is the strategic objective during the introduction stage of the industry life cycle?
Achieve market acceptance and seed future growth.
What are network effects
Positive effects that one user of a product or service has on the value of that product for other users.
What are the characteristics of an industry in the growth stage?
Market acceptance, demand rises rapidly, convinced proof of concept
What is a standard?
The market’s agreement on a common set of engineering features and design choices.
What is product innovation?
new or recombined knowledge embodied in new products
What is process innovation?
ways to produce existing products or to deliver existing services.
How did the invention of the standardized shipping container transform global trade?
Save time and cost significantly, cut down on potential theft.
How does the level of product and process innovation change of the industry life cycle ?
the reverse over the course of the life cycle, crossing over during the shakeout stage before bottoming out in the decline stage.
What are the industry characteristics of the shakeout stage?
Firms begin competing for each other’s slice of the pie rather than their own piece. Weaker firms are forced out, cutthroat competition erodes profitability, the industries often consolidate as weaker competitors are acquired by larger firms or exit the industry.
Who tends to be the winners in this stage?
Firms that stake out a strong position as cost leaders.
What are the industry characteristics of the maturity stage?
Industry structure morphs into an oligopoly with only a few large firms. Demand has been largely satisfied and limited, demand mostly consists of replacements or repeat purchases. The market has reached its maximum size and growth is zero or negative going forward.
Firms that survive the shakeout stage tend to possess which two characteristics?
Larger and enjoy economies of scale.
What are the industry characteristics of the decline stage?
The size of the market contracts and demand falls rapidly, innovation efforts along product and process dimensions cease
Which four strategic options do firms have at this decline stage?
Exit, Harvest, Maintain, Consolidate
What is exit?
firms forced to exit the industry due to bankruptcy, liquidation, or divestments. Ex. US textile industry has a large number of exits due to low-cost foreign competition.
What is harvest?
the firm reduces investments in product support and allocates only a minimum of human and other resources. EX. – typewriter companies do not invest in future technology, and instead focus on maximizing cash flow from existing product line.
What is maintain?
Continuation of marketing efforts despite declining demand. EX. Phillip Morris still maintains Marlboro.
What is Consolidate?
purchasing of rivals in a shrinking market.
Each stage of the industry life cycle is dominated by which difference?
Different customer groups with distinctly different preferences
What is Geoffrey Moore’s crossing-the-chasm framework?
A model detailing how each leg of the market life cycle is dominated by a different customer group.
What are the characteristics of the 5 customer groups described in the crossing-the-chasm framework?
Technology Enthusiasts – the smallest market segment, often have an engineering mindset and pursue new technology proactively. Early Adopters – enter during the growth stage, demand is driven by their imagination and creativity rather than solely on new technology, they ask themselves What can this new product do for me or my business? Early Majority – enter market during the shakeout stage, main consideration is a strong sense of practicality, more concerned with being pragmatic and what can the new tech do for me. Late Majority – enter during maturity stage, combined with early majority they make up the “lion’s share” of market potential, this demand drives most of the industry growth and firm profitability. Laggards – enter the market during the decline stage, adopt products only if absolutely necessary, generally don’t want new tech for personal or economic reasons, are considered not worth pursuing due to this.
What causes a firm to fall into the large competitive chasm between early adopters and the early majority?
When it fails to successfully launch a mass-market version of its product.
How does the crossing-the-chasm framework apply to the mobile phone industry?
Problems in consumer adoption beyond the few tech enthusiasts was rapidly apparent, Iridium, Treo, and Blackberry fell into their own chasms due to lack of early adopters and early majority having interest. Iridium suffered from needing direct line of sight to satellites to obtain signal.
What are the different types of innovations in the markets-and-technology framework ?
New-Existing – Architectural; New-New – Radical; Existing-Existing – Incremental; Existing-New – Disruptive.
How do incremental and radical innovation differ?
Incremental innovations target existing markets using existing technology and make up the vast majority of innovation, radical draws on novel methods or materials.
What are winner-take-all markets?
Where the market leader captures nearly all of the market share.
What is an example of winner-take-all market?
Google handling 90% of all mobile search inquiries
What is organizational inertia?
Resistance to changes in the status quo; incumbent firms favor incremental innovation that reinforce the existing organizational structure and power distribution avoiding radical innovation that could disturb the existing balance of power.
What is Innovation ecosystem?
A network of suppliers, buyers, complementors, and so on. No longer make independent decisions but must consider the ramifications on other parties in their innovation ecosystem.
How do architectural and disruptive innovation differ?
Architectural – a new product which uses known components and based on existing tech reconfigured in a novel way to create new markets. Disruptive – leverage new tech to attack existing markets
What 3 strategies may counter disruptive innovation?
Continue to innovate to remain ahead of the competition, Guard against disruptive innovation by protecting the low end of the market, Disrupt yourself, rather than wait for others to disrupt you.
What is reverse innovation?
An innovation that was developed for emerging economies before being introduced in developed countries, sometimes called frugal innovation.
What is a platform business and the three dimensions that define a platform business?
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. 1- Enables value-creating interactions between external producers and consumers. 2- An overarching purpose is to consummate matches among users an facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants. 3 – Provide an infrastructure for these interactions and set governance conditions for them.
What is a platform ecosystem and its advantages?
The market environment in which all players participate is relative to the platform. 1 – Platforms scale more efficiently than pipelines by eliminating gatekeepers. 2 – Platforms unlock new sources of value creation and supply. 3 – Platforms benefit from community feedback.
