Strategy Chapter 7

Long tail

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

Product innovations

New or recombined knowledge embodied in new products.

Pareto principle

Roughly 80% of effects come from 20% of the causes.

Industry life cycle

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

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.

Organizational inertia

A firm's resistance to changes in the status quo.

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 area.

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 in-sourced 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.

Thing markets

A situation in which transactions are likely not to take place because they are only a few buyers and sellers who have difficulty finding each other.

Standard

An agreed upon solution about a common set of engineering features and design choices.

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, or targets new markets by using new technologies.

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 offering; targets existing markets by using existing technology.

First-move advantages

Competitive benefits that accrue to the successful innovator.

Entrepreneurs

The agents that introduce change into the competitive system. They do this not only by figuring out how to use inventions, but also by introducing new products or services, new production processes, and new forms of organization.

Innovation

The commercialization of any new product or process, or the modification and recombination of existing ones. To drive growth, innovation also needs to be useful and successfully implemented.

Process innovations

New ways to produce existing products or deliver existing services.

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 by using entrepreneurship.

Invention

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