Innovation Flashcards
What are the advantages of being a Pioneer (first mover)?
Technological leadership: First movers have a better learning curve (more time etc), they benefit quicker from economies scale (cost-reduction through production), and they benefit from having R&D patents.
Pre-emption of scarce assets: First movers have superior information which can lead to investment in plant & equipment, preemption of geographical location, product location, and input factors (price etc).
Consumers’ advantages: First movers have the advantage that their product serves as a buyer reference. Also, they have no buyer switching costs as opposed to late movers, who must invest to attract customers away from the first movers. At last, they benefit from buyers’ uncertainty, where consumers may rationally stick with the first brand that is satisfactory.
Higher market shares & marketing mix responsiveness
What are the advantages of being a Follower?
Free riders’ benefit: The imitations costs are less than the innovation costs of first movers.
Resolution of tech and market uncertainty: Late movers have better positioning compared to first movers, benefit from a more mature market (more consumers, awareness), can emerge with a dominant design, create an advantage by focusing on change in technology, and change in consumers’ needs. Last, late movers have a lower probability of failure, mostly due to the above advantages.
Incumbent inertia: As opposed to first movers, late movers don’t suffer from being locked into a specific set of fixed assets, being reluctant to cannibalize existing product lined or become organizationally inflexible.
More market <> tech oriented: Late movers are more aware of new trends.
Why did Golder and Tellis criticize previous research about pioneers’ advantage?
Sampling bias: People only know the companies that survived.
Self-selection bias: (= only competent firm poineer)
Self-perception bias
Lack of agreement on the definition ‘pioneer’
Why should companies invest in process innovations?
Investing in process innovation with the customer in mind boosts process efficiency, can reduce costs and increase customer satisfaction. Think about self-scanning, which helps mostly the company but also can have a positive effect on the consumer.
What are breakthrough innovations?
Breakthrough innovation is when through harnessing new technology a company opens new markets or changes the way customers interact with the market/industry.
Slides: A breakthrough innovation in a large sample of leading CPG firms is associated with an average increase in firm value of 4.2 mil.
What is the strategic role of incremental innovations?
Incremental innovations, simply defined as new variations of existing products, contribute substantially to brand equity.
Economic: Increase overall firm demand, charge higher prices (Gillet).
Strategic: Deter entry, protect flagship brand, increase supply costs, etc. Wasmiddel brand.
What are different types of incremental motivations?
Extend revenue stream from radical innovations: New variations cost less R&D and can help increase revenue through targeting new segments etc.
Entering new markets where the firm already has a presence: New types of markets, segments, geographic markets.
New markets where the firm doesn’t have a presence: Small fragmented markets, complimentary markets -> Pepsico and chips.
Commanding a higher price: Improving a product -> Gillet.
Achieving and defending product leadership: New flavors etc deter the entry of competitors and protect flagship brand.
What is the theory of the ‘S’ curve?
The S-curve shows the innovation from its slow early beginnings as the technology or process is developed, to an acceleration phase (a steeper line) as it matures and, finally, to its stabilization over time (the flattening curve), with corresponding increases in performance of the item or organization using it.
What are the advantages and disadvantages of firm size on innovation?
\+ More resources \+ Economies of scale \+ Higher sales figures \+ Complementary R&D - Loss of control: inertia - Low incentives for individual employees
What are the advantages of outsourcing NPD?
No need to have a big expensive own R&D department. Specialized firms can create a product more efficiently. Use of state-of-the-art tech. Ideal for sub-parts of complex tech products (cars). New (fresh) ideas from outside the firm.
What are the disadvantages of outsourcing NPD?
Loss of control over the key firm assets. Adverse selection problem – low ability to perform. Moral hazard problem – low motivation to perform. Transfer of knowledge can be difficult.
Monitoring costs.
How do you organize outsourcing activities for NPD and when do you choose one or the other?
Minority equity participation: Tech uncertainty = high
Prior tie selection: Cultural uncertainty = high.
