Ch. 10 Study Guide

by eliminating the steps, the disruptor is able to offer lower prices for similar products and services

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

creating new demand in an uncontested market space. blue ocean success relies swimming to empty water. offering value that is very different from anything on the market

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

questioning, observing, networking, experimenting

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

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

What are reconfigure value chain activities?

-conflicts in name: -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

What are some conflicts faces in mass customization?

incremental innovation

builds on a firm's established knowledge base and steadily improves the product or service it offers

innovation

conversion of a novel concept into a product, process, or business model that generates revenues and profits

blue ocean strategy

creating new demand in an uncontested market space

customer segment

groups of people who share similar needs and thus are likely to desire the same features in a product

high conversion rate

high percentage of free users are willing to convert to paid customers for premium features

radical innovation

innovation that draws on a different knowledge base, technologies, or methods to deliver value om a truly unique way

low-end disruption

producing a low-cost product or service for the low-end or most price-sensitive segment of the market, and then gradually moving upmarket as the product or service improves its technology and processes

third party pay strategy

providing free products to a community of product users as a method of generating revenue from a third party who pay to access those users

disruptive innovation

radical innovative strategies in which companies in the same industry find the innovation so disruptive that they can no longer do business as usual

hypercompetition

term coined by Professor Rich D'Aveni to refer to his argument that competitive intensity has increased and that periods of competitive advantage have decreased

revenue model

the approach, or pricing strategy, a company uses to get paid for the value it delivers through its business model

invention

the creation of an idea or method; a novel concept

-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 models

Name at least three kinds of innovative strategies to be radical

-free upsell (fremium): offer free version to gain attention and widespread use, then offer a premium product with advanced features for customers willing to pay -free cross sell: offer free version then offer other products for which customers are willing to pay -free 3rd party pay: make the product/service free to generate a community for which you get paid by a third party company who desires access to that community -free bundled free: bundle the free product with non-free products and derive revenues from non-free products; can't get the one without the other

What are the free business models?

invention, innovation, imitation

What are the three types of innovative activity?

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

What does it mean to target nonconsumption?

incremental innovation: building on existing knowledge bases & provide small improvements, common radical innovations: creates new knowledge and rare

What is the difference between incremental and radical innovation?

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 different between an invention and innovation?

incremental

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

radical (architectural innovation: a product's architecture reflects the way in which a set of components are integrated into a system. change the architecture of a product without fundamentally introducing changing the technology underlying its components 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 architecture

Why are high end disruptions difficult for incumbents to imitate?

innovative strategy

a strategy that introduces a fundamentally different business model than rivals

mass customization

when a company mass-produces the various modules of the product and then allows the customer to select which modules will be combined together