Chapter 10 Strategic Management

What are the free business models?

- free upsell (Freemium):Offer a free version to gain attention and widespread use; then offer a premium product with advanced features for customers willing to pay (Skype) -Free Cross Sell: Offer a free version to gain attention and widespread use; then offer other products for which customers are willing to pay.(mint.com)-free 3rd party pay: •Make the product/service free to generate a community (network externality) for which you get paid by a third party company who desires access to that community. (google, Hulu)-free bundled: Bundle the free product with non-free products and derive revenues from non-free products; can't get the one without the other. (cell phone service)

What are the three types of innovative activity?

-Invention- the act of creating or developing a new product (good or service) or process idea-Innovation- the process of creating a commercializable product from invention-Imitation- the adoption of innovation by similar firms, which often leads to standardization of the product or process and lower prices—all of this while maintaining many of the same features

What are some conflicts faced in mass customization?

-conflicts in name: Mass, Aggregation customization, one-of-a-kind-conflicts in operability: customers demands are diverse and irregular which calls for leads to high component variety, large numbers of suppliers, and high administrative complexity

Why are high end disruptions difficult for incumbents to imitate?

-radical architectural innovation: these innovations change the way products are linked together or add new components without fundamentally introducing changing the technology underlying its components (iPod, Starbucks, Fedex)- radical technological innovation: establishes a new dominant design for the product and a new set of core technologies and design concepts embodied in components that are linked together in a new product architectrure (mobile phones, PCs)

Name at least three kinds of innovative strategies to be radical

-reconfigure the value chain to eliminate activities-low end disruptive innovations-high end disruptive innovations-reconfigure the value chain to allow for mass customization -blue ocean strategy-creating new markets by targeting non-consumers-free business model

What is the difference between low-end and high-end disruptive innovations?

A low-end disruptive innovation is where a firm leverages new technologies to launch a product at the "low end"—the most pricesensitive segment of the market—and then gradually moves upmarket as it improves its technology and processes. In stark contrast to the low-end variety, high-end disruptive innovations actually outperform existing products when they're introduced, and they sell for a premium price rather than at a discount.

What is the difference between an invention and innovation?

Innovation differs from invention in that innovation refers to the use of a novel idea or method, whereas invention refers more directly to the creation of the idea or method itself.

What is the difference between incremental and radical innovation?

Most innovations are incremental. That is, they build on existing knowledge bases and provide small improvements in the current product lines. Alternatively, radical innovations usually provide significant technological breakthroughs and create new knowledge. Radical innovations are rare because of the difficulty and risk involved in developing them.

How do companies create an innovative strategy by eliminating steps in the value chain?

The most typical pattern is to eliminate a step in the path from production to customer, such as eliminating a store, which also eliminates the need for salespeople and inventory. This allows the disruptor—the firm launching the game-changing strategy—to offer lower prices for similar products and services.

How does a company create new markets with blue ocean strategy?

a company can succeed by creating new demand in an uncontested market space.

What type of innovation is more common: incremental or radical?

incremental- build on existing knowledge bases and provide small improvements in the current product lines

How do companies use mass customization to succeed in the market?

it seems to work best in markets in which customers have a variety of different needs and many want a product that is personalized to those needs. It also works best when the product can be broken into modules that offer different features or performance.

What are reconfigure value chain activities?

process innovations that typically create an efficient new business model; allow companies to create, deliver, sell, or service a product more efficiently

What are four behaviors of business innovators that help them generate ideas for innovative strategies?

questioning, observing, networking, and experimenting

What does mass customization mean?

refers to an approach of using new technologies and processes to mass produce individually customized goods or services—as we've seen Build-A-Bear Workshop do with stuffed animals and Dell do with computers.

What does it mean to target nonconsumption?

target individuals who do not currently purchase a product or service—with an offering that might induce consumption.