2304 Final
Leapfrogging
Adding something new to existing technology
Advantages and Disadvantages of Broad Differentiation Strat
Advantages: commands higher price, increased unit sales, brand loyalty Risks: over-engineering, feature-creep, price too high, easily imitated, overspending
How do you choose a strategy
Based on which best suits your company's resources and capabilities
Platform
Business that enables value-creating interactions btwn external products and consumers. Considered a business model innovation. Provides infrastructure for interactions and conditions for them
Razor-blade business model
Buy the razor once, buy blades many times after
When is innovation the highest in the industry life cycle?
Early on
Customer-Value Proposition
Established by overall strategy. Lays out approach to satisfy customer needs at price consumer is willing to pay
Incremental Innovation
Existing Market/Existing Tech
Focused Strategies
Focus on narrow niche of market
Strategic moves
How you're executing strategy
Agency business model
I sell for you and get commission
Ways to Block Attack
Introduce new features, use value chain to lower prices, discourage buyers from going to other brands, make early announcements, offer additional support, challenge quality of rivals' products
Purposes of Defensive Strategies
Lower risks of being attacked, weaken impact of attacks, dissuade challengers from attacking
Why is innovation so important?
Makes it harder for people to imitate you
Trade Secret
Most valuable. Competitive information that gives you an edge
Patents
Must be new, useful, and non-obvious
Architectural Innovation
New Market/Existing Tech
Radical Innovation
New Market/New Innovation
Disruptive Innovation
New Technology/Existing Market
Cost Leadership Strategy
Optimize value chain for lowest cost possible (either by performing activities better or cutting them out altogether)
What makes a firm harder to imitate?
Reputation, long-standing relationship w customers, unique product, patents, relationship-based customer service
Copyright
Rights creators have over literary/artistic works
Trademark
Sign distinguishing g/s of one firm from g/s of another firm. Can last indefinitely but must be renewed. Can file for intent to use.
Innovation
Successful introduction of a new product, process, or business model
Strategic Offensive Principles
Sustainable competitive advantage Applying resources where rivals can least defend themselves Employing element of surprise Capacity to make swift decisions to overwhelm rivals
Crossing the Chasm
Tech industry. A gap between visionary customers who adopt early and pragmatist customers who take a "wait and see" approach
Focused Differentiation Strategy
Think: Rolex. Focuses on really specific features for niche buyers. Often highly customized.
Best Cost (Hybrid Strat)
Think: Trader Joe's Works when product differentiation is the norm, many customers want mid-range products and are value-conscious.
Formula for Value
Value Created = Customer willingness to pay - cost (the surplus is split btwn firm and customer by the price)
Broad Differentiation Strategy
Very distinct product that's appealing to mass market. Usually higher price.
Network Effect
When value of g/s depends on number of buyers (think video game consoles)
Things to Know About Offensive Strat
element of surprise, applying resources rivals can't defend, be prepared for counter-offense, results may not be immediate
Blocking Avenues
introduce new features, use value-chain to lower prices, discourage buyers from going to other brands, make early announcements, offer additional support, challenge quality of rivals' products
Times when focused strat might make sense
large firms overlook niche, geographic reasons, may lack resources to compete in larger market, sneak into industry
Best Targets for Offensive Attack
market leaders whose competitive position is vulnerable, struggling enterprises on verge of going under, runner up firms with weaknesses, small/regional firms with limited resources
Risks of Focused Differentiation Strategy
may be outfocused, niche may grow, customers' preferences may change, lacks economies of scale
Pitfalls to Avoid in Cost Leadership
overly aggressive price cutting -> forgo profit; relying on cost advantage isn't sustainable; low cost can cause lack of features
Risks of Cost Leadership Strategy
price war, low price might not attract enough new buyers, process tech innovation could erase advantage
Value Chain Ways to Increase Differentiation
products/features, improve customer service, invest in R&D, strive for innovation, continuous quality improvement, increased marketing/brand building
Advantages of Platform Ecosystem
scale more efficiently by eliminating the middle-man, unlock new sources of value creation and supply, benefit from community feedback
Wholesale business model
traditional retail model
How to protect competitive information
train employees to refer sensitive info to one person, provide escorts to office visitors, control info presented by employees in public, use simple security procedures, have NDA's, debrief departing employees on confidential information, avoid emailing sensitive info
When there is a first mover advantage
when pioneering = loyalty, when IP protections prevent imitation, when customers face switching costs, when first mover has technical advantage, when network effects compel customers to choose first mover
When Low Cost Strategy Works Best
when price competition is vigorous, identical products are available, there are few ways to differentiate, buyers incur low switching costs, or buyers are price sensitive
When not to be first mover
when there is a learning curve, when leapfrogging is possible
Non-Competition Agreements
Contract between employees and employers, where employee agrees to not start a competing business or go work for a competitor for stated period of time.
Business Model Components
Customer-Value proposition and profit formula
4 Steps of Innovation
1. create idea 2. convert idea to invention 3. innovation 4. imitation
Offensive Strategies
adopt and improve rival's features, guerilla tactics, create own preemptive strategy, leapfrogging
Types of Innovation
architectural, incremental, radical, disruptive
Ways to be Offensive
be first to market, offer lowest cost, pursue continuous innovation, blue ocean
Forms of Defensive Strategy
block challenger, signal likelihood of strong retaliation
