Session 2 Flashcards
What is The Long Tail Strategy?
Retailing strategy of selling a large number of different items which each sell in relatively small quantities, usually in addition to selling large quantities of a small number of popular items.
Example: Netflix/Amazon
What is causing the long-tail? Supply-side:
- Virtual shelf space
- Made-to-order production
- Electronic delivery
- Aggregation of consumers
What is causing the long-tail? Demand-side:
- Search tools
- Recommendation systems / web-based tools
- Customer reviews / online communities
How does the long-tail affect the industry dynamics? Supply-side:
- Increased incentive to develop new products
- Restructuring of marketing strategies
- New intermediaries and industry structures
How does the long-tail affect the industry dynamics? Demand-side:
- Changes in consumer tastes and demand patterns
- Positive feedback
- Culture changes from access to more varied source of information
A business model specifies…
…how the firm creates value (and for whom), and how it captures value (and from whom).
creates/captures value
Question to assess digital threats. To what extent is your products or services …
- Electronically specifiable and searchable?
- Ordered digitally?
- Delivered digitally?
- Augmented (or can be) with valuable information?
- Threatened by companies in other industries that have relationships with your customers – offering competitive services to yours and disrupting your business?
- At risk of being replaced with an alternative digital offering?
- Going to be delivered digital in five years?
What did Netflix do right?
- Changes in technology
- Pricing model (unlimited subscription model)
- Customer lock-in (raise switching costs)
- Recommendation system
- Serve niche interests
- Operational optimization
Why do incumbents miss/overlook disruptive innovations?
- They emphasize different product or service attributes
- They target different customer segments
- They start out as small and low-margin businesses
- They conflict with existing way of doing business
The Disruptive Innovation Model describes…
…a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.
The Disruptive Innovation Model detailed:
● Incumbents focus on improving their products for their most demanding customers;
● Entrants begin to successfully target those overlooked segments;
● Incumbents tend not to respond;
● Entrants then move upmarket, delivering the performance that mainstream customers require.
Disruption has occurred when…
mainstream customers start adopting the entrants’ offerings in volume
Disruptive Innovations, a simplier definition:
- Targeting a fringe market
- Underperforming on the attributes that mainstream customers value, but overperforming in other attributes
- High improvement potential on these attributes
Waves of Disruption
- Unbundling
- Disintermediation
- Decoupling
Drivers of decoupling (third way of disruption)
Consumer and not start-ups. They do this by their changing needs and wants, which reflects in their change of behaviour. They look at the costs and benefits and decide to disrupt by choosing a start-up as opposed to an established company.
