Chapter 5: Innovation and Entrepreneurship

four strategic options in the decline stage

+exit +harvest +maintain +consolidate

the four I's

+idea +invention +innovation +imitation

an invention can be patented if it is

+useful +novel +non-obvious

markets-and-technology framework

a conceptual model to categorize innovations along the market (existing/new) and technology (existing/new) dimensions

each stage of the industry life cycle is dominated by

a different customer group

absorptive capacity

a firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones

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

open innovation

a framework for R&D that proposes permeable firm boundaries to allow a firm to benefit not only from internal ideas and inventions, but also from external ones. The sharing goes both ways: some external ideas and inventions are insourced while others are spun out

architectural innovation

a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets

standard

an agreed-upon solution about a common set of engineering features and design choices

innovation process begins with

an idea

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

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

reverse innovation

an innovation that was developed for emerging economies before being introduced in developed economies (frugal innovation)

first-mover advantages

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

innovation describes the

discovery, development, and transformation of new knowledge in a four-step process

differentiation strategy

emphasizes unique features, product functionality, and reliability

exit strategy

firms are forced to exit the industry by bankruptcy or liquidation

late majority

make up 34% of the total market potential

consolidate strategy

market size shrinks in a declining industry, or through acquisitions

in the introductory stage, the level of product innovation is at a

maximum because new features increasing perceived consumer value are critical to gaining traction in the market

product innovations

new or recombined knowledge embodied in new products

process innovation

new ways to produce existing products or deliver existing services

cost leadership strategy

offer an acceptable level of value but lower prices to cusomters

after the market accepts a new product, and a standard for the new technology has emerged,

process innovation rapidly becomes more important than product innovation

organizational intertia

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

technology enthusiasts

the customer segment in the introductory stage of the industry life cycle (2.5%)

early majority

the customers coming into the market in the shakeout stage

early adopters

the customers entering the market in the growth stage (13.5%)

harvest strategy

the firm reduces investments in product support and allocates only a minimum of human and other resources

industry life cycle

the five different stages - introduction, growth, shakeout, maturity, and decline - that occur in the evolution of an industry over time

laggards

the last customer segment to come into the market, entering the declining stage of the industry life cycle(16%)

network effects

the positive effect (externality) that one user of a product or service has on the value of that product for other users

entrepreneurship

the process by which people undertake economic risk to innovate - to create new products, processes, and sometimes new organizations

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

intrapreneurship

those pursuing corporate entrepreneurships

trade secret

valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy