Chapter 10 - Innovative Strategies

Disruptive Innovation

Radical innovative strategies in which companies in the same industry find the innovation so disruptive that they can no longer do business as usual.

Mass Customization

When a company mass-produces the various modules of the product and then allows the customer to select which modules will be combined together.

High Conversion Rate

When a high percentage of free users are willing to convert to paid customers for premium features.

Business Models

_______________ _______________ typically differ on one of three dimensions: 1. The choice of customer segments to serve and the unique value (value proposition) offered by the company. (Value Proposition) 2. The choice of activities the company performs and the resources used to deliver value to customers. (Operations Strategy) 3. The way a company generates revenue streams to get paid for the value it delivers. (Pricing Strategy)

Innovative Strategies

_______________________ ______________________ come from: Questioning Observing Networking Experimenting

Industry Life Cycle (S-Curve)

- Introduction Stage - Growth Stage - Maturity Stage - Decline Stage

Categories of Innovative Strategies

- Reconfiguring the Value Chain to Eliminate Activities (Disintermediation) - Low-End Disruptive Innovations - High-End/Top-Down Disruptive Innovations - Reconfiguring the value chain to allow for Mass Customization - Blue Ocean Strategy - Creating New Markets by Targeting Nonconsumers - Create a Platform to Coordinate and Share Private Assets - Free Business / Revenue Models - Hypercompetition: The Accelerating Pace of Innovation

Innovative Strategy

A strategy that introduces a fundamentally different business model than rivals.

Hypercompetition

A term coined by Profesor Rich D'Aveni to refer to his argument that competitive intensity has increased and that periods of competitive advantage have decreased.

Blue Ocean Strategy

Creating new demand in an uncontested market space.

Customer Segment

Groups of people who share similar needs and thus are likely to desire the same features in a product.

Radical Innovation

Innovation that draws on a different knowledge base, technologies, or methods to deliver value in a truly unique way.

Incremental Innovation

Building on a firm's established knowledge base to create minor improvements to the product or service a firm offers.

Low-End Disruption

Producing a low-cost product or service for the low-end or most price-sensitive segment of the market, and then gradually moving upmarket as the product or service improves its technology and processes.

Third-Party Pay Strategy

Providing free products to a community of product users as a method of generating revenue from a third party that pays to access those users.

Revenue Models

Strategy 1: Cross-Sell Strategy (Freemium) Strategy 2: Third-Party Pay Strategy Strategy 3: Bundling Strategy

Revenue Model

The approach, or pricing strategy, a company uses to get paid for the value it delivers through its business model.

Innovation

The conversion of a novel concept (an invention) into a product, process, or business model that generates revenues and profits.

Invention

The creation of an idea or method; a novel concept.