Handout 4

Question 1

Types of Innovation

Answer 1

• Process Innovation
• Product/Service Innovation
• Disruptive Innovation

Question 2

a change in how a product or service is manufactured, created, or distributed to achieve greater efficiencies.

Answer 2

Process Innovation

Question 3

are creating new ideas that do not alter established business models.

Answer 3

Product/Service Innovation

Question 4

introduces a new value proposition.

Answer 4

Disruptive Innovation

Question 5

It either creates new markets or reshapes existing markets

Answer 5

Disruptive Innovation

Question 6

two (2) types of disruptive innovations:

Answer 6

Low-end
New-market

Question 7

It is any situation in which an industry is shaken up, and previously successful incumbents
stumble.

Answer 7

Disruptive Innovation

Question 8

occur when existing products and services are “too good” and hence overpriced relative to the value existing customers can use.

Answer 8

Low-end disruptive innovations

Question 9

can occur when characteristics of existing products limit the number of potential consumers or force consumption to take place in inconvenient, centralized settings.

Answer 9

New-market disruptive innovations

Question 10

EXAMPLE: Netflix offers technologically integrated access to all types of video entertainment. Its initial service was not appealing to Blockbuster’s (an American-based provider of home movie and video game rentals)mainstream customers, who wanted instant gratification when choosing movies. As Netflix’s quality improved, so did its appeal to Blockbuster’s customers, who eventually peeled off in high enough numbers to force the incumbent business into bankruptcy in 2010.

Answer 10

Low-end disruptive innovations

Question 11

EXAMPLE: Skypeis a low-cost telecommunication service that allows customers to call and message on the same interface more conveniently and for a fraction of the price of traditional telecommunication services.

Answer 11

New-market disruptive innovations

Question 12

describes inventions that make products and services more accessible, affordable, and available to a larger population.

Answer 12

Disruptive innovation

Question 13

rely on their years of experience and test results to interpret patients’ symptoms, make diagnoses, and prescribe treatment

Answer 13

“solution shop” business model

Question 14

follow standardized
protocols to diagnose and treat a small but increasing number of disorders

Answer 14

“process” business model

Question 15

four (4) points to identify disruptive innovation:

Answer 15

• Disruption is a process
• Disrupters often build business models that are very different from those of incumbents
• Some disruptive innovations succeed; some don’t.
• The mantra “disrupt or be disrupted” can misguide people.

Question 16

The term “disruptive innovation” is misleading when it refers to a product or service at one fixed point rather than to the evolution of that product or service over time.

Answer 16

Disruption is a process.

Question 17

General practitioners operating out of their offices often rely on their years of experience and test results to interpret patients’ symptoms, make diagnoses, and prescribe treatment. It is called a “solution shop” business model. In contrast, several convenience care clinics are taking a disruptive path by using the “process” business model: They follow standardized protocols to diagnose and treat a small but increasing number of disorders.

Answer 17

Disrupters often build business models that are very different from those of incumbents.

Question 18

A third common mistake is to focus on the results achieved – to claim that a company is disruptive by its success. But success is not built into the definition of disruption: Not every disruptive path leads to a triumph, and not every triumphant newcomer follows a disruptive way.

Answer 18

Some disruptive innovations succeed; some don’t.

Question 19

Incumbent companies need to respond to the disruption if it occurs, but they should not overreact by dismantling a still-profitable business. Instead, they should continue strengthening relationships with core customers by investing in sustaining innovations.

Answer 19

The mantra “disrupt or be
disrupted” can misguide people.