Business Strategy Chapter 7

Strategic entrepreneurship

Innovation using tools of strategic management for competitive advantage

What is an Invention in the innovation process?

Transformation of an idea into a new product or process, or the modification of existing ones

The Four steps of the innovation process

idea, invention, innovation, imitation

Entrepreneurs

innovate through commercialization of ideas and inventions

The stages of the industry life cycle

introduction, growth, shakeout, maturity, decline

Benefit of trade secret over patent

valuable proprietary information is not in the public domain

Early Adopters

· 13.5% of the total market potential · Eager to buy early into new tech · Their demand is driven by their imagination and creativity rather than solely by the new tech · They ask, "What can this new product do for me and my business?"

Technology Enthusiasts/Innovators

· 2.5% of total market potential · Have an engineering mind-set and pursue new tech proactively · Enjoy using beta versions of products

Traits of the Growth stage of the industry life cycle

· First-time use expands rapidly · Prices begin to fall · Diffusion of technical know-how increases threat of new entrants · Convergence on industry standards · Rapid growth means low competitive pressure · Standards of engineering and design are established

Traits of the Maturity stage of the industry life cycle

· Market has reached maximum size · Demand driven by replacements not first time adoption · Competition for market share drives down prices · Firms strive to reduce costs, build brand loyalty Consolidation

Traits of the Introduction stage of the industry life cycle

· Slow growth · High prices · Technical know-how in rare supply, source of temporary advantage

Winning over the _____ _______ is critical to commercial success of the innovation

early majority

What is imitation in the innovation process?

If an innovation is successful in the marketplace, competitors will attempt to imitate it

The Chasm

Without adequate demand from the early majority, most innovative products wither away

What is Innovation in the innovation process?

the commercialization of an invention

Network effects

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

Strategic options leaders have in the Decline stage of the industry life cycle

Exit - bankruptcy, liquidation Harvest - reinvest in product support Maintain - Continue to support marketing efforts Consolidate - Buy rivals

What is an Idea in the innovation process?

Presented in terms of abstract concepts or finding from basic research

Entrepreneurship

Process of undertaking economic risk to innovate

Laggards

· 16% of total market potential · Emerge in the declining stage of the industry lifecycle · Adopt a new product only if absolutely necessary · Don't want new technology for personal or economic reasons · Generally considered not worth pursuing

Early Majority

· 34% of total market potential · Customers that come into the market during the shakeout stage · Pragmatists · Not concerned with the question of what the new tech can do for them · Weigh benefits and costs carefully · Rely on endorsements by others

Late Majority

· 34% of total market potential · Large customer segment · Enters the market in the maturity state · Most industry growth and profitability come from Early Majority and Late Majority · Not confident in ability to master new technology

Traits of the Shakeout stage of the industry life cycle

· Decline in rate of growth · Rivalry begins to focus on capturing piece of shrinking pie · Stronger rivals survive, competitiveness shifts to cost-leadership, less efficient rivals drop out or are acquired · Increasingly zero-sum game with increasing price-based competition

Traits of the Decline stage of the industry life cycle

· Negative growth · Increased rivalry · Excess capacity, exit barriers lead to price competition