Strategic Management

What 3 strategies may counter disruptive innovation?

1.Continue innovate in order to stay ahead of the competition 2. Guard against disruptive innovation by protecting the low end of the market. By introducing low cost innovations to preempt stealth competitors. 3.Disrupt yourself, rather than wait for others to disrupt you (reverse innovation)

In the US, how long is the time period for the right to exclude others from the using patented technology?

20 years from the filing date of the patent.

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 innovation?

A novel and useful idea that is successfully implemented

What is reverse innovation?

An innovation that was developed for emerging economies before being introduced in developed economies. Sometimes also called Frugal Innovation.

How did Apple leverage network effects?

Apple effectively leveraged the network effects generated by numerous complementary software applications (apps) available via iTunes to create a tightly integrated ecosystem of hardware, software, and services.

What 3 strategies may counter disruptive innovation?

Disruptive innovation: An Innovation that leverages new technologies to attack existing markets from the bottom up.

Each stage of the industry life cycle is dominated by which difference?

Each stage of the industry life cycle is dominated by a different customer group.

How does the level of product and process innovation change of the industry life cycle (Exhibit 7.7)?

Inverts

How do architectural and disruptive innovation differ?

Is a new product in which known components, based on existing technologies, are reconfigured in a novel way to create new markets.

What does innovation allow firms to do in regards to competitive advantage?

It allows firms to redefine the marketplace in their favor

What are winner-take-all markets?

Markets where the market leader captures almost all of the market share and is able to extract a significant amount of the value created.

What are the three dimensions that define a platform business?

Producers: create or make available a product or service that consumers use. Owner: of the platform controls the platform IP address and controls who may participate and in what ways. The providers: offers the interfaces for the platform, enabling its accessibility online.

What are the industry characteristics of the shakeout stage?

Rate of growth declines, firms begin to compete directly against one another for market share, weaker firms are forced out of the industry.

What type of curve illustrates the development of most industries?

S-Curve

What is a standard?

Signals the market's agreement on a common set of engineering features and design choices.

Idea

The beginning of the innovation process. Often begins as an abstract concept or findings derived from basic research. •

What are the characteristics of an industry in the growth stage?

The characteristics of an industry in the growth stage are: gained market acceptance, demand rapidly increases, and convinced by the proof of concept demonstrated in the introductory stage.

What is corporate strategy?

The decisions that senior management makes, and the goal directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.

What are network effects?

The positive effect (externality) that one user of a product or service has on the value of that product for other users.

What is entrepreneurship?

The process by which people undertake economic risk to innovate - to create new products, processes and sometimes new organizations.

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 is innovation?

The successful introduction of a new product, process or business model. It is a powerful driver in the competitive process. The commercialization of an invention.

Innovation

The successful introduction of a new product, process or business model. The commercialization of an invention.

Invention

The transformation of an idea into a new product or process, or the modification and recombination of existing ones.

Who tend to be the winners in the stakeout stage?

The winners in the ________ stage tend to be the industry cost leaders, which means their manufacturing and process engineering is used to drive down costs.

What is a trade secret?

Valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy

When does a firm 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.

What is product innovation?

a new or recombined knowledge embodied in new products

Architectural Innovation

a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets.

Disruptive Innovation

an innovation that leverages new technologies to attack existing markets from the bottom up.

Incremental Innovation

an innovation that squarely builds on an established knowledge base and steadily improves an existing product or service.

Entrepreneurial venture incentive

commercialize radical innovation is frequently the only option to enter an industry protected by high entry barriers

Jeff Bezos

founded Amazon.com

Jeni Bauer

founded Jeni's Splended Ice Creams

Reed Hastings

founded Netflix

Dr. Dre

founded/co-founded N.W.A, Death Row Records and Beats Audio.

What is the Geoffrey Moore's crossing-the-chasm framework?

framework of crossing-the-chasm is a conceptual model that shows how each stage of the industry life cycle is dominated by a different customer group.

Radical Innovation

innovation that draws on novel methods or materials, is derived either from an entirely different knowledge base of from a recombination of existing knowledge bases with a new stream of knowledge.

What are the industry characteristics of the maturity stage?

most of the demand is satisfied, industry structure morphs into an oligopoly with only a few large firms, and demand is just repeat purchases.

What is process innovation?

new ways to produce existing products or deliver existing services.

Firms that survive the maturity stage tend to possess which two characteristics?

they tend to be larger and enjoy economies of scale.

Incumbent firms incentive

use incremental innovation to extend the time it can extract profits

Imitation

when a competitor will copy a successful innovation.

What is imitation?

when a competitor will copy a successful innovation.

How have competitors imitated Netflix?

• Amazon has offered free video for existing Prime customers • Hulu offers TV shows, subsidized by advertisements • Google offers videos, also supplements by advisements'

What are the types of first mover advantages?

• Economies of scale • Experience • Learning curve effects • Network effects • Possibly IP (Intellectual property) • Lock in key suppliers

What are the five stages in the industry life cycle?

• Introduction • Growth • Shakeout • Maturity • Decline

What three characteristics of idea are necessary to be considered an innovation (See exhibit 7.3)?

• Novel • Useful • Implemented

What are examples of social entrepreneurship ventures?

• Teach for America • Toms Shoes • Better World Books • Wikipedia

What are the characteristics of an industry in the introductory stage?

• Their core competency is R&D • They are often Capital Intensive • The initial market size is small • Growth is slow • Barriers to entry are high • Features are emphasized rather than price

Elon Musk

(co)Founded Paypal, Tesla Automotive & Space-X

Which four strategic options do firms have at the decline stage?

-exit -harvest -maintain -consolidate

What is the different type of innovations in the markets-and-technology framework (Exhibit 7.11)?

1. Architectural Innovation 2. Radical Innovation 3. Incremental Innovation 4. Disruptive Innovation

For which five reasons does firms need to grow?

1. Increase Profitability 2. Lower cost 3. Increase market power 4. Reduce risk 5. Motivate management

What are the characteristics of the 5 customer groups described in the crossing-the-chasm framework?

1. Technology Enthusiasts 2. Early Adopters 3. Early Majority 4. Late Majority 5. Laggards

Which three questions do executives answer to determine their corporate strategy?

1. in what stages of the industry value chain should the company participate? 2. what range of products and services should the company offer 3. where should the company compete geographically in terms of regional, national, or international markets.

What is an entrepreneur?

An agent that introduces change into a competitive system.

How did the invention of the standardized shipping container transform global trade?

By loading goods into standardized shipping containers that can be easily moved among ships, trucks, and trains resulted in significant cost savings. It used to cost $6.00 to load a ton of cargo, now it only cost $0.16 to load a ton of cargo.

What is an example of the concept?

Can be seen in the rise of large multinational firms, such as Wal-Marts.

What is an intrapreneur?

Change agents who innovate within existing companies, pursuing corporate entrepreneurship.

What are first mover advantages?

Competitive benefits that accrue to the successful invovator.

Jimmy Wales

Founded Wikipedia.com

What are the four steps in the innovation process?

Idea Invention Innovation Imitation

What is a platform business?

a business that enables value creating interactions between external producers and consumers.

Innovation ecosystem?

a firm's embeddedness in a complex network of suppliers, buyers, and complementors, which limits their ability to make independent decisions.

What is organizational inertia?

a firm's resistance to change the status quo, which can set the stage for the firm's subsequent failure

What are the industry characteristics of the decline stage?

the size of the market contracts further as demand rapidly falls and innovation methods cease.