chapter 7 - wpc 470
Advantages of the Platform Business Model
1. platforms scale more efficiently than pipelines by eliminating gatekeepers 2. platforms unlock new sources of value creation and supply 3. platforms benefit from community feedback
markets-and-technology framework
A conceptual model to categorize innovations along the market (existing/new) and technology (existing/new) dimensions.
Technology Enthusiasts
A customer segment in the introductory stage of the industry life cycle. Often have an engineering mind-set and pursue new technology proactively, frequently seeking out new products before they are officially introduced to the market.
Radical Innovation
An innovation that draws on novel methods or materials, is derived either from an entirely different knowledge base or from a recombination of the existing knowledge bases with a new stream of knowledge.
reverse innovation
An innovation that was developed for emerging economies before being introduced in developed economies. Sometimes also called frugal innovation.
early majority
Customers coming into the market in the shakeout stage of the industry life cycle. Pragmatists that are mainly concerned with whether adopting a new technological innovation serves a practical purpose or not.
Laggards
Customers entering the market in the declining stage of the industry life cycle. Will adopt a new product only if absolutely necessary, generally don't want new technology, and are generally not a customer segment worth pursuing.
early adopters
Customers entering the market in the growth stage of the industry life cycle that are eager to buy early into a new technology or product concept. Their demand is driven by recognizing and appreciating the possibilities the new technology can afford them in their professional and personal lives.
late majority
Customers entering the market in the maturity stage of the industry life cycle that are less confident about their ability to master new technology. Will wait until standards have emerged and become firmly entrenched so as to ensure reduction in uncertainty. Tend to buy from well-established firms with strong brand image.
Shakeout Stage
Firms begin to compete more intensely. Weaker firms forced out The industry consolidates Only the strongest competitors survive. Biggest competitive weapon: low price
decline stage of product life cycle
Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses "Organized abandonment"
growth stage of product life cycle
Second stage during which sales/use are increasing.
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. -Examples: Soft drinks and DVD players.
innovation ecosystem
a firm's embeddedness in a complex network of suppliers, buyers, and complementors, which requires interdependent strategic decision making
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
Architectural Innovation
a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets
revolve group is a mobile platform that matches independent fashion designers with consumers who want a personalized wardrobe. Which of the following initiatives would best allow Revolve group to fine-tune its offerings to better meet the needs of its consumers?
allowing users to provide feedback to producers on the style and fit of clothing
standard
an agreed-upon solution about a common set of engineering features and design choices
Platform Business
an enterprise that creates value by matching external producers and consumers in a way that creates value for all participants, and that depends on the infrastructure or platform that the enterprise manages
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
long-tail
business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices
first-mover advantage
competitive benefits that accrue to the successful innovator
crossing the chasm framework
conceptual model that shows how each stage of the industry life cycle is dominated by a different customer group
the leading producer of cell phone backup batteries, progyny, has achieved great success because they produce high-quality battery backups that are not too expensive. even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as progyny. also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, progyny has added complementary assets, such as a carrying case. considering all of these factors, the backup battery industry is most likely in the _____ stage.
growth
Fulcrum Feet is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate? A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation
incremental innovation
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
product innovation
new or recombined knowledge embodied in new products
process innovation
new ways to produce existing products or deliver existing services
a disruptive innovation leverages _____ technologies, while architectural innovations are based on _______ technologies
new, existing
incumbent firms prefer to focus on incremental innovations which reinforce their established organizational structure and power distribution and avoid radical innovation that could disrupt their existing power distribution. this is known as
organizational inertia
organizational inertia
resistance to changes in the status quo
entrepreneurs
the agents that introduce change into the competitive system
innovation
the commercialization of any new product or process, or the modification and recombination of existing ones
Industry Life Cycle
the five different stages - introduction, growth, shakeout, maturity, and decline - that occur in the evolution of an industry over time
platform ecosystem
the market environment in which all players participate relative to the platform
network effects
the positive effect (externality) that one user of a product or service has on the value of that product for other users
strategic entrepreneurship
the pursuit of innovation using tools and concepts from strategic management
social entrepreneurship
the pursuit of social goals while creating a profitable business
invention
the transformation of an idea into a new product or process, or the modification and recombination of existing ones
trade secret
valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy
introduction stage of product life cycle
when an individual inventor or company launches a successful innovation, a new industry may emerge