Strategy Chapter 7

product innovations, process innovations

after a standard is established in an industry, the basis of competition tends to move away from _____ and towards ________

1. it relies on a stealth attack, invading the market from the bottom up 2. incumbent firms are slow to change

2 factors that favors disruptive innovation over architectural innovation:

incremental, radical, architectural, disruptive

4 types of innovations emerge from the markets and technology framework:

discovery, development, transformation

broadly viewed, innovation describes the _______, _______, and _______ of new knowledge

both change

does the demand or supply side of the market change as the industry ages?

13.5

early adopters make up ____% of the total market potential

create, destroy

innovation can simultaneously ____ and ____ value

providers

interfaces for the platform

disruptive innovation

leverages new technologies to attack existing markets

industry structure morphs into an oligopoly with only a few large firms; process innovation reaches its maximum as firms attempt to lower cost; level of production innovation sinks to its minimum; remaining firms tend to enjoy economies of scale

maturity stage

technology, markets

one insightful way to categorize innovations is to measure their degree of newness in terms of _____ and _______

strong, efficient, inefficient

since demand is _____ during growth phase, both _____ firms and ______ firms thrive

2.5

technology enthusiasts make up _____% of the total market potential

platform

the five most valuable companies globally all run ______ business models

strategic entrepreneurship

the pursuit of innovation using tools and concepts from strategic management

social entrepreneurship

the pursuit of social goals while creating profitable business

incremental

the vast majority of innovations are _____ ones

market

whether an innovation is introduced into a new or existing market

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

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

consumers

buyers or users of the offerings

sustained competitive advantage

continued innovation can lead to a ...

technology enthusiasts

customers that enter during the introductory phase

invention

describes the transformation of an idea into a new product or process, or the modification and recombination of existing ones

existing, existing

incremental innovation targets ____ markets using ____ technology

incremental, radical

incumbents often push forward with ______ innovations, while new entrants focus on _____ innovations

R&D; product innovation at maximum, process innovation at minimum; non-price competition; buyers: technology enthusiasts; strategic objective: achieving market acceptance

introduction stage

16

laggards make up ____% of total market potential

34

late majority makes up _____% of total market potential

1. from resource control to resource orchestration 2. from internal optimization to external interactions 3. from customer value to ecosystem value

moving from the traditional pipeline business to a platform business model implies 3 important shifts in strategy focus:

product innovation

new or recombined knowledge embedded in new products

organizational inertia

resistance to changes in the status quo

competitive intensity increases and weaker firms are forced out; firms begin to cut prices and offer more services; consolidations and acquisitions occur, weaker firms exit through bankruptcy; winners often stake out a strong position as cost leaders; few may implement a blue ocean strategy

shakeout stage

accelerate

the pace of adoption rate of recent innovations continues to ____

intrapreneurs

those pursuing corporate entrepreneurship

1. begins as low-cost solution to an existing problem 2. initially, its performance is inferior to existing technology but its rate of technological improvement over time is faster than the rate of performance increases required by different market segments

to be a disruptive force, a technology needs to have the following characteristics:

continuously innovate

to sustain a competitive advantage, what must firms do?

on one hand, patents provide a temporary monopoly (competitive advantage). on the other hand, some firms find it beneficial to use trade secrets instead so they don't have to disclose information to the public

why are patents a double-edged sword?

economic incentives, organizational inertia, innovation ecosystem

why do incumbent firms focus on incremental innovation instead of radical?

innovation ecosystem

a network of suppliers, buyers, complementors, and so on

radical innovation, incremental innovation

a predictable pattern of innovation is that firms use ____ to create a temporary competitive advantage, and then try to follow up with string of _____ that sustain their initial lead

effective offense, hard-to-crack defense

a successful strategy requires both an ______ and a ________

standard

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

novel, useful, successfully implemented

an innovation needs to be ___, ____, and _____ to help firms gain and sustain a competitive advantage

radical innovation

an innovation that draws on novel methods or materials and is derived either from an entirely different knowledge base or from a recombination of the exiting knowledge base with a new stream of knowledge

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

concerns the commercialization of an invention

owner

controller of platform IP and arbiter of who may participate and in what ways

producers

creators of the platform's offerings

early majority

customers coming into the market during the shakeout stage, mainly concerned with whether adopting a new technological innovation serves a practical purpose or not

laggards

customers entering during the declining phase, will adopt a new product only if absolutely necessary

late majority

customers entering the market in the maturity stage, less confident about their ability to master new technology, tend to buy from well-established firms with strong brand image

early adopters

customers entering the marketing during the growth stage of the industry that are eager to buy early into a new technology

changes in the external environment often take industries from maturity to decline; size of market contracts further as demand falls; innovation efforts along with product and process dimensions cease

decline stage

replacements, repeat purchases

demand during the maturity stage consists of ____ or ____

S

the development of most industries follow an ______ curve

platform ecosystem

the market environment in which all players participate relative to the platform

network effects

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

entrepreneurship

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

temporary monopoly profits

the successful commercialization of a new product or service allows a firm to extract...

exit, harvest, maintain, consolidate

what are the 4 options strategic leaders have at the final stage in industry life cycle?

imagination, creativity

early adopters' demand is driven by their ______ and ______ rather than solely by the new technology

34%

early majority makes up ___% of total market potential

abstract concepts

idea is often presented in terms of ____

1. introduction 2. growth 3. shakeout 4. maturity 5. decline

what are the 5 stages of the industry life cycle?

price

____ becomes a more important competitive weapon in shakeout stage

long-tail

a business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choice

markets and technology framework

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

pipeline

a firm's value chain is described as a ____

commercializing ideas and inventions

entrepreneurs innovate by ....

patent

form of intellectual property and gives the inventor exclusive rights to benefit from commercializing a technology for specified time period (usually 20 years)

demand increases after introduction; competitive rivalry muted; standard emerges; product/process innovations made

growth stage

triple bottom line (people, planet, profits)

how do social entrepreneurs evaluate their performance?

imitate

if an innovation is successful in the marketplace, competitors will attempt to _____ it

useful, novel, non-obvious

if an invention is ____, _____, and _____ as assessed by the US Patent and Trademark office, it can be patented

winner-take-all market

markets where the market leader captures almost all of the market share and is able to extract a significant amount of the value created

architectural innovation

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

process innovation

new ways to produce existing products or deliver existing services

1. a platform is a business that enables value-creating interactions between external producers and consumers 2. the platform's overarching purpose is to consummate matches among users and facilitate the exchange of goods, services, or social currency 3. the platform provides an infrastructure for these interactions and sets governance conditions for them

platforms can be defined along 3 dimensions:

new, new

radical innovation targets ____ markets by using _____ technologies

harvest

reduce investments to a bare minimum

technology

refers to the methods and materials used to achieve a commercial objective

1. continue to innovate in order to stay ahead of the competition 2. guard against disruptive growth by protecting the low end of the market by introducing low-cost innovations to preempt stealth competitors 3. disrupt yourself rather than wait for others to disrupt you

strategic initiatives to counter the threat of disruptive innovation:

trade secrets

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

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

what are 3 advantages of the platform business model?

economies of scale, economies of experience, learning-curve effects, network effects, important IP

what are some examples of first-mover advantages?

1. initial innovations provided the necessary infrastructure for newer innovations to diffuse more rapidly 2. the emergence of new business models makes innovations more accessible

what factors explain increasingly rapid technological diffusion and adoption?

herding effect

what is frequently observed with customers in the early majority group?

innovation

what is the basis for gaining a competitive advantage?

innovation

what is the competitive weapon entrepreneurs use to exploit opportunities created by change?

idea, invention, innovation, imitation

what is the four step process captured in the four I's?

how to combine entrepreneurial actions, creating new opportunities, or exploiting existing ones with strategic actions taken in the pursuit of competitive advantage

what is the fundamental question of strategic management?

stake out a strong strategic position not easily imitated by rivlas

what is the key objective for firms during the growth phase?

bell-curve

what shape is the crossing the chasm framework?

the significant differences between the early customer groups and the later customer groups can make for a difficult transition between the different parts of industry life cycle

what was Geoffrey Moore's main contribution:

intrapreneurs

when innovating within existing companies, change agents are often called...