Lecture 5 Flashcards
What is innovation a link between?
Innovation as a link between Technology & Competitive advantage.
New tech is a source of opportunity.
How is innovation developed?
Through research, data, information and knowledge.
Economies of scale are a barrier to entry because?
New entrants face high unit costs either because they enter at sub-optimal scale or they make a large scale entry that initially operates with substantial excess capacity
What is the difference between innovation and invention?
Invention is the creation of new products and processes through the development/application of newknowledge or fromnewcombinations of existingknowledge
Innovation is the initial commercialization of invention by producing and marketinganewgoodorserviceorbyusinganewmethodofproduction
What does research generate?
Knowledge
What is the link between research, data and knowledge?
Data is raw, information is processed data. You turn data into information through processing. What you learn from the information is knowledge (the insights from information).
Another way of developing knowledge is through practice and experience.
Basic knowledge → Invention → Innovation
Who are the opinion leaders?
Also called early adopters. The 68% of majority will start to buy only when you’ll reach the critical “X” point, the chasm. X = The tipping point - when a certain threshold is reached, joint forces become unstoppable.
What has happened with innovation throughout time?
The time between basic knowledge and commercial application has shortened.
How can we relate innovation to benefit and creating value?
- Value created
- The share of that value that the innovator is able to capture
Who Gets the Benefits from Innovation?
New drugs are protected by patents that confer monopoly power (and profits) on their inventors *Followers are either firms that create new products within the same drug class or suppliers of generics (who enter once the patent expires)
*Theothermainbeneficiariesarecustomers.
How to turn innovation into massive sales when you don’t have access to complementary resources?
Alliances (Ex. bioNtech with Pfizer: one has the core technology, one has complementary resources)
What does a successful follower strategy require?
A successful follower strategy requires “active waiting” which means to assemble resources and capabilities while it prepares for large-scale market entry.
What is the regime of appropriability?
conditions that influence the distribution of the value created by innovation.
What happenes in a strong regime of appropriability?
The innovator is able to capture a substantial share of that value: Pfizer’s Viagra, and Dyson’s dual-cyclone vacuum cleaner—like Searle’s NutraSweet—all generated huge profits for their owners. Proprietary technology synonymous with lack of competition.
What happenes in a weak regime of appropriability?
Other parties derive most of the value. E-book readers, and online brokerage services, are similar to personal computers: a lack of proprietary technology results in fierce price competition, and most of the value created goes to consumers.”
What four key components does the regime of appropriability comprise?
- Legal protection
- Complementary resources
- Imitability of the technology
- Lead time
What are some complementary resources?
Manufacturing, distribution, finance, customer service, brand, marketing
What does the bargaining power of owners of complementary resources depends on?
Whether complementary resources are generic or specialized.
How can you access complementary resources when you don’t have them?
Complementary resources may be accessed through alliances with other firms
Which of the following points does not contribute to the attractiveness of licensing as a means of exploiting an innovation?
a. The innovating firm possesses most of the complementary resources needed to exploit the innovation
b. The innovation is protected by strong patents
c. The potential for the innovation to enhance the performance of existing products has been clearly demonstrated
d. The innovation has potential applications in several different industries
a. The innovating firm possesses most of the complementary resources needed to exploit the innovation
Why do brands patent?
Patenting activity appears to be strategic: blocking the innovation efforts of other companies and establishing property rights in technologies that can then be used inbargainingwithother companies foraccess totheirproprietary technologies
What are followers good at?
Followers are especially effective in initiating a new product’s transition from niche market to mass market.
For example, In PCs, Apple was a pioneer, IBM a follower. Apple’s resources comprised the vision of Steve Jobs; only by pioneering could it hope to be successful.
IBM had enormous strengths in manufacturing, distribution, and reputation. It could build competitive advantage even without technological leadership.
What’s a successful follower strategy?
A successful follower strategy requires ‘active waiting’: a company needs to monitor market developments and assemble resources and capabilities while it prepares for large-scale market entry
What are some key considerations for if to lead or follow?
Can the innovation be protected by intellectual property rights or leadtime advantages?
AND
Is there potential to establish an industry standard?
- If so, advantages in leadership
How important are complementary resources?
*Followers can avoid investing in complementary resources by using better-established industry infrastructure
*Firms possessing complementary resources have the luxury of waiting
What are the two sources of uncertainty?
Technological uncertainty
Market uncertainty
What are the strategies for managing risks?
- Cooperate with lead users
- early identification of customer needs
- assistance in new product development - Limit risk exposure
- avoid capital commitments
-outsource
- use alliances to access other firms’ resources & capabilities
- keep debt & fixed cost low - Flexibility
- keep options open
- adapt quickly to new information
- learn from mistakes
What is a standard and what types can you find?
A standard is a format, an interface, or a system that allows interoperability
Public (or open) standards are those that are available to all either free or for a nominal charge.
Private (proprietary) standards are those where the technologies and designs are owned by companies or individuals.
For example Public standard: HTTPS free standard (tech standard)
