lec 2 _chapter 9

Strategic ChoicesInnovation and Entrepreneurship EXPLORING STRATEGY

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Exploring Corporate Strategy 8e, Pearson Education 2008

9-*Learning Outcomes (1)Identify and respond to key innovation dilemmas, such as the relative emphases to place on technologies or markets, product or process innovations, and the broad business modelAnticipate key issues facing entrepreneurs as they go through the stages of growth from start-up to exit

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9-*Learning Outcomes (2)Anticipate and to some extent influence the diffusion or spread of innovationsDecide when being a first-mover or follower is most appropriate in innovation, and how respond to innovative challengers

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9-*What is Innovation?Innovation involves the conversion of new knowledge into a new product, process, or service and the putting of this new product, process, or service into use, either via the marketplace or by other processes of delivery.

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9-*1. Innovation dilemmas1.1. Technology push or market pullTechnology push: technologists/ scientists carry out research to create knowledge form the basis for new product, service, processMarket pull: goes beyond invention and sees the importance of actual use

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9-*Sole TechnologyFor what reasons is it important to be authentic in the skateboarding shoe market?If a big company like Nike or Adidas was looking to grow in this market, what would you advise it to do?

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9-*1. Innovation dilemmas1.2. Product or process innovationProduct innovation: relates to final product to be sold especially with regard to its featuresProcess innovation: relates to the way in which product is produced and distributedRelationship: the relative important change overtime

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9-*Implications of Product/Process Innovation ModelNew developing industries favour product innovationMaturing industries favour process innovationSmall new entrants have greatest opportunities in early stages of an industryLarge incumbent firms have advantage in later stages

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9-*1.3. Technological or Business Model innovationTechnological innovation: new knowledge in the form of scientific or technological advanceBusiness model bringing customers, producers and suppliers together in new ways

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9-*What is a Business Model?A business model describes the structure of product, service, and information flows and the role of participating parties.

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9-*2. Innovation diffusionDiffusion is the process by which innovations spread amongst users, varying in pace and extent.

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9-*Supply Side Determinants of Pace Diffusion Degree of improvementCompatibilityComplexityExperimentationRelationship management

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9-*Demand Side Determinants of Pace DiffusionMarket awarenessObservabilityCustomer innovativeness

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9-*he Diffusion S-Curve

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9-*Decision Points Indicated by S-CurveTiming of the tipping pointTiming of theplateauExtent ofdiffusionTiming of thetripping point

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9-*The MySpace SnowballHow should potential advertisers have interpreted the upwards blip in daily reach in late 2004 and downwards blip in early 2006?How would you forecast future demand for MySpace?

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9-*3. First-mover or followerA first-mover advantage exists where an organisation is better off than its competitors as a result of being first to market with a new product, process, or service.

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9-*First-Mover AdvantagesExperience curvebenefitsScalebenefitsPre-emption of scarceresourcesReputationBuyerswitching costs

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9-*Late-Mover AdvantagesFree-ridingLearning

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9-*4. Entrepreneurship & relationshipStages of Entrepreneurial Growth

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9-*Chapter Summary (1)Three fundamental decisions in innovation facing strategists include the relative emphasis to put on technology push or market pull, whether to focus on product or process innovation, and how far to concentrate on technological innovation or business model innovationInnovations often diffuse into the market following an S-curve modelManagers have a choice to enter first or enter later

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9-*Chapter Summary (2)Incumbents must be careful of being victim to disruptive innovationsEntrepreneurs face characteristic dilemmas as their businesses go through the entrepreneurial life cycle of start-up, growth, maturity, and exit

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9-*Case Example: Skype (1)

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9-*Case Example: Skype (2)Skypes software allows people to use the Internet to make free calls to other Skype usersSkypes costs are very low. Customers use their own computers and marketing is accomplished via word of mouthIt earns revenues on ancillary services

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9-*Case Example: Skype (3)

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9-*Case Example: Skype (4)eBay purchased SkypeThere are similarities in the business modelseBay plans to leave Skype to manage its own business

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*************Use ebay video: start at 5:50 to 6:13. This is the section on how surprised ebay was that people are selling cars on ebay. *************

lec 2 _chapter 9

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