Strategic Mgmt Ch 7 Business Strategy: Innovation, Entrepreneurship, and Platforms

markets-and-technology framework

A conceptual model to categorize innovations along the market (existing/new) and technology (existing/new) dimensions.

growth stage

After the initial innovation has gained some market acceptance, demand increases rapidly as first-time buyers rush to enter the market, convinced by the proof of concept demonstrated in the introductory stage. the second stage of the product life cycle when sales typically grow at an increasing rate, many competitors enter the market, large companies may start to acquire small pioneering firms, and profits are healthy- process innovation ramps up - increasing marginal returns -

crossing the chasm framework

Different customer groups with distinctly different preferences enter the industry at each stage of the industry life cycle. Each customer group responds differently to a technological innovation. This is due to differences in the psychological, demographic, and social attributes observed in each unique customer segment. Moore's main contribution is that the significant differences between the early customer groups—who enter during the introductory stage of the industry life cycle—and later customers—who enter during the growth stage—can make for a difficult transition between the different parts of the industry life cycle. Such differences between customer groups lead to a big gulf or chasm into which companies and their innovations frequently fall. Only companies that recognize these differences and are able to apply the appropriate competencies at each stage of the industry life cycle will have a chance to transition successfully from stage to stage.

4 I's

Idea, Invention, Innovation, Imitation

introductory stage

In this introductory stage, the innovator's core competency is R&D, which is necessary to creating a product category that will attract customers. This is a capital-intensive process, in which the innovator is investing in designing a unique product, trying new ideas to attract customers, and producing small quantities—all of which contribute to a high price when the product is launched. The initial market size is small, and growth is slow.. The strategic objective during the introductory stage is to achieve market acceptance and seed future growth

S Curve

Initial demand for a new product or service is often slow to take off, then accelerates, before decelerating, and eventually turning to zero, and even becoming negative as a market contracts.

decline stage of product life cycle

Sales drop, often because of environmental changes. For example, CD's declined as digital music players proliferated. At this final phase of the industry life cycle, innovation efforts along both product and process dimensions cease Companies typically follow one of four strategies: 1. Exit - Some firms are forced to exit the industry by bankruptcy or liquidation. The U.S. textile industry has experienced a large number of exits over the last few decades, mainly due to low-cost foreign competition. 2. Harvesting: the company retains the product but reduces marketing costs. The product continues to be offered, but salespeople do not allocate time in selling nor are advertising dollars spent. The purpose of harvesting is to maintain the ability to meet customer requests. Coca-Cola, for instance, still sells Tab, its first diet cola, to a small group of die-hard fans. 3. Maintain - hilip Morris, on the other hand, is following a maintain strategy with its Marlboro brand, continuing to support marketing efforts at a given level despite the fact that U.S. cigarette consumption has been declining. 4. Consolidate - Although market size shrinks in a declining industry, some firms may choose to consolidate the industry by buying rivals. This allows the consolidating firm to stake out a strong position—possibly approaching monopolistic market power, albeit in a declining industry.

growth stage competencies

The core competencies for competitive advantage in the growth stage tend to shift toward manufacturing and marketing capabilities. At the same time, the R&D emphasis tends to shift to process innovation for improved efficiency. Competitive rivalry is somewhat muted because the market is growing fast. - The key objective for firms during the growth phase is to stake out a strong strategic position not easily imitated by rivals

early adopters

The customers entering the market in the growth stage They make up roughly 13.5 percent of the total market potential. Early adopters, as the name suggests, are eager to buy early into a new technology or product concept. Unlike technology enthusiasts, however, their demand is driven by their imagination and creativity rather than by the technology per se. They recognize and appreciate the possibilities the new technology can afford them in their professional and personal lives

Entrepreneurship

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

maturity stage of product life cycle

Total industry sales slow, and marginal competitors begin to leave the market. Sales increase at a decreasing rate, and most consumers who would buy the product are either repeat purchasers of the item or have tried and abandoned it. Fewer new buyers enter the market. Marketing actions are focused on maintaining market share through product differentiation and finding new buyers. -oligopy-process innovation at highpoint-

Shakeout Stage

When growth and profitability are slowing due to strong competition; Growth has slowed; Intense competition; Increasing industry overcapacity; Decreased profitability; Increased cost cutting; Increased failures competing for market share Only strongest survive-cost leaders process innovation is important

organizational inertia

a firm's resistance to changes in the status quo - New entrants, however, do not have formal organizational structures and processes, giving them more freedom to launch an initial breakthrough.

Architectural Innovation

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

Laggards

are the last consumer segment to come into the market, entering in the declining stage of the industry life cycle. These are customers who adopt a new product only if it is absolutely necessary, such as first-time cell phone adopters in the United States today. These customers generally don't want new technology, either for personal or economic reasons. Given their reluctance to adopt new technology, they are generally not considered worth pursuing.

incremental innovation

creation of products, services, or technologies that modify existing ones

Tech Enthusiasts

customer segment in the introductory stage of the industry life cycle - smallest market -

innovation

discovery, development, and transofmation of new knowledge in a four step process captures in the four I's

radical innovation

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

biggest chasm

early adopters to early majority

late majority

entering the market in the maturity stage - ike the early majority, they are a large customer Page 239segment, making up approximately 34 percent of the total market potential. Combined, the early majority and late majority make up the lion's share of the market potential. Demand coming from just two groups—early and late majority—drives most industry growth and firm profitability. . The late majority shares all the concerns of the early majority. But there are also important differences. Although members of the early majority are confident in their ability to master the new technology, the late majority is not. They prefer to wait until standards have emerged and are firmly entrenched, so that uncertainty is much reduced. The late majority also prefers to buy from well-established firms with a strong brand image rather than from unknown new ventures.

network effects

increases in the value of a product to each user, including existing users, as the total number of users rises. If successful, network effects propel the industry to the next stage of the life cycle, the growth stage

disruptive innovation

leverages new technologies to attack existing markets. It invades an existing market from the bottom up

social entrepreneurship

pursues innovative ways to solve pressing social problems while creating profitable businesses

process innovations

result in better ways of doing things - are new ways to produce existing products or to deliver existing services. Process innovations are made possible through advances such as the internet, lean manufacturing, Six Sigma, biotechnology, nanotechnology, and so on.

product innovations

result in new or improved goods or services - are new or recombined knowledge embodied in new products—the jet airplane, electric vehicle, smartphones, and wearable computers

Innovation

the commercialization of any new product or process, or the modification and recombination of existing ones

Early Majority (34%)

the customers coming into the market in the shakeout stage - heir main consideration in deciding whether or not to adopt a new technological innovation is a strong sense of practicality. They are pragmatists and are most concerned with the question of what the new technology can do for them. Before adopting a new product or service, they weigh the benefits and costs carefully. Customers in the early majority are aware that many hyped product introductions will fade away, so they prefer to wait and see how things shake out. - enter in large numbers

Industry Life Cycle

the five different stages - introduction, growth, shakeout, maturity, and decline - that occur in the evolution of an industry over time

Idea

the idea is often presented in terms of abstract concepts or as findings derived from basic research.

strategic entrepreneurship

the pursuit of innovation using the tools and concepts available in strategic management. We can leverage innovation for competitive advantage by applying a strategic management lens to entrepreneurship. The fundamental question of strategic entrepreneurship, therefore, is how to combine entrepreneurial actions, creating new opportunities or exploiting existing ones with strategic actions taken in the pursuit of competitive advantage

Invention

the transformation of an idea into a new product or process, or the modification and recombination of existing ones. The practical application of basic knowledge in a particular area frequently results in new technology