Chapter 10- Innovation Strategies

1. cross-sell (freemium) strategy 2. third-party pay strategy 3. budding strategy

3 free business/revenue model strategies that companies use

1. introduction stage 2. growth stage 3. maturity stage 4. decline stage

4 stages of product life cycle

1. value chain reconfiguration- eliminate activities 2. value chain reconfiguration- mass customization 3. low-end disruptive innovations 4. high-end disruptive innovations 5. blue ocean strategy- new markets by targeting non-customers 6. create a platform to share assets 7. free business models

7 categories of innovative strategies

innovative strategy

a strategy that introduces a fundamentally different business model than rivals

incremental innovation

also called sustaining innovation b/c sustains a company's current product offerings and revenues

high end disruptions

are new products or service that offer either superior performance on some existing product features or offer new features customers are willing to pay for. usually only possible through innovations in technology

hypercompetition

argument that competitive intensity has increased and that periods of competitive advantage have decreased. term coined by Professor Rich D'Aveni

process innovation and operational efficiency

become highly important during maturity stage as there is increase in competitive rivalry and cost starts to become more important as a determinant of success

incremental innovation

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

creating a platform to coordinate and share private assets

category of innovative strategies that needs following to work: 1. asset value is high, but use of that asset is low. high value is combined with way to manage risk 2. ability to build scale in network itself through set of buyers and sellers using platform 3. brands and communities appeal to millennial culture

reconfiguration of value chain- mass customization

category of innovative strategies that works best when: 1. markets have customers with variety of needs 2. many customers in market want product that is personalized to their needs 3. product can be broken down into parts that offer different features or performance

value chain reconfiguration- eliminate activities

category of innovative strategies that: allows firm to offer lower prices for similar products and services. typically includes taking out a step in the path from production to customer.

create a platform to coordinate and share private assets

category of innovative strategies that: created by sharing economy through building coordination apps that help consumers coordinate and share private assets. (Uber, AirBnb). must target specific pockets of consumption

blue ocean strategy- creating new markets by targeting nonconsumers

category of innovative strategies that: creates new demand in an uncontested market space. offers value that is very different from anything on the market. target nonconsumption individuals with an offering that might induce consumptions.

value chain reconfiguration- mass customization

category of innovative strategies that: is based on concept of mass producing individually customized goods and services

low-end disruptive innovation

category of innovative strategies that: is producing a low-cost product or service for the low-end or most price-sensitive market segment, and then gradually moving upmarket as the product or service improves its technology and processes

free business/revenue models

category of innovative strategies that: offers products or services for free

high-end disruptive innovations

category of innovative strategies that: producing product or service that outperform existing products and sell of premium price to least price-sensitive buyers and moves steadily downward into mainstream markets

blue ocean strategy

creating new demand in an uncontested market space

lean manufacturing

flexible production technique that is considered a radical innovation due to minimizing inventories and waste despite being designed for rapid product changeovers

bundling strategy

free business strategy that works well when: 1. product requires ongoing maintenance or complementary goods 2. company offers a broad array of products

customer segment

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

non consumption individuals

individuals who do not currently purchase a product or service

radical innovation

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

disruptive innovation

innovative strategies based on radical innovations in which companies in the same industry find the innovation so ground-breaking that they can no longer do business as usual

bundling strategy

involves offering a free product with a paid product or service

product innovation

more important than process innovation in introduction stage and requires R&D and product development and design to be key competencies

cross-sell (freemium) strategy

offering a free basic product to gain widespread initial use, after which users are offered a non-free, premium version or are sold products not directly tied to the free product (like most apps), or offering free version for customers to use at home, but paid version with additional features to enterprise market

late majority

people who want not only a proven concept but a low price. the buyer group that is source of growth during maturity stage

high-end innovations

radical types of these usually rely on expensive technological innovations whose cost is gradually reduced as there are improvements in technology and the product is produced on a wider scale

third-party pay strategy

secret to this free business strategy is: offering a valuable service that either 1. a very large community of product users can then be segmented in a particular way for advertisers 2. a targeted community of users that comprises a customer segment

third-party pay strategy

sometimes called a two-sided market, 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

introduction stage

stage in which companies try ot get early adopters to test potential of new product. primary goal is to get reference cusomters who will seed future gowth to increase market acceptance

maturity stage

stage in which growth starts to slow as market penetration increases. late majority of buyers are the source of any growth that comes

growth stage

stage in which sales accelrate as initial innovation gains traction and increased market acceptance. early majority group of buyers cause demand to increase as thye are convince that the product concept works as demonstrated by early adopters

decline stage

stage that is often initiated by new products entering the market that causes demand to fall. leads to some companies trying to minimize competitin and consolidate the industry by buying rivals

radical innovations

strategies that draw on these often use new technologies or employ a fundamentally different business model than rivals. create, deliver and capture value through different resources and capabilities

cross-sell (freemium) strategy

strategy that requires following to be successful: 1. free precut appeals to very large product users base 2. high conversion rate, or free users willing to convert to paying customers for premium features

s-curve

term that means products will mature and decline after the growth phase. means that companies must continue to offer innovative products and services to experience continued growth

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 precut, process or business model that generates revenues and profits

invention

the creation of an idea or method; a novel concept

dominant logic

the same tactics and patterns that allow innovative strategies to enable disruptive innovation

business models

these differ on one of following 3: 1. choice of customer segments to serve and unique value (value proposition) offered by the company 2. choice of activities the company performs and the resources used to deliver value to customers 3. way a company generates revenue streams to get paid for the value it delivers

disruptive innovation

type of innovation/strategies that offer value that is attractive to incumbent's customers and are delivered through a business model that is difficult for incumbent's to imitate

early adopters

types of buyers who are willing to try out latest gadget

standard/dominant design

what is adopted during the growth stage as product gains acceptance and signals the market's agreement about a common set of engineering and design features

process innovation

what product innovation gives way to during the growth stage

mass customization

when a company mass-produces the various modules of the product and then allows the customers 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