MGT 489 Strategic Management: Innovation Dynamics

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Questions and Answers

What characterizes innovation in a business context?

A novel and useful idea that is successfully implemented (correct)

A method of maintaining existing practices

An approach that limits creativity and risk-taking

A repetitive process involving standard procedures

Which of the following types of innovation is primarily focused on creating entirely new markets?

Disruptive Innovation (correct)

Incremental Innovation

Architectural Innovation

Radical Innovation

In what situation can an innovation be adopted as a standard?

When the innovation is launched in a monopolistic market

When market demand is not met by effective substitutes (correct)

When competitors can easily replicate the innovation

When no marketing strategy is employed

What is the significance of understanding different types of innovation?

To accurately evaluate their strategic implications Signup and view all the answers

What aspect of innovation does the VRIO framework primarily address?

Innovation as a driver of competitive advantage Signup and view all the answers

What is the main characteristic of incremental innovation?

It relies on the firm’s established knowledge base. Signup and view all the answers

Which of the following is an example of a radical innovation?

Air conditioner Signup and view all the answers

Disruptive innovation primarily targets which market segment?

Existing markets from the bottom up. Signup and view all the answers

What is a strategic implication of disruptive innovation?

It creates significant threats to existing firms. Signup and view all the answers

Architectural innovation is characterized by which of the following?

Reconfiguring known components for new markets. Signup and view all the answers

What is a key reason for pursuing incremental innovation?

To minimize innovation costs. Signup and view all the answers

How can firms guard against disruptive innovations?

By implementing reverse innovation strategies. Signup and view all the answers

What does the industry life cycle diagram primarily illustrate?

The stages of competition and firm survival over time. Signup and view all the answers

What is a potential advantage of being a first mover in a market?

Opportunity to monopolize the market Signup and view all the answers

Which of the following best describes the role of early followers in a market?

They can test a market niche for future developments. Signup and view all the answers

What typically characterizes a late mover's strategy?

Imitating existing products without innovation Signup and view all the answers

What can lead to a technological paradigm shift?

The introduction of radical and disruptive innovations Signup and view all the answers

What does the term 'discontinuity' refer to in the context of technological innovation?

A period when underlying technological standards change Signup and view all the answers

In predicting innovation-induced discontinuities, what limitation must companies consider?

All technologies eventually become obsolete. Signup and view all the answers

Which factor may NOT be a strategic implication for early followers?

Entering niche markets without a clear product strategy Signup and view all the answers

What is a likely characteristic of a company like Terrafugia in the context of market entry?

They act as a first mover by introducing a unique product. Signup and view all the answers

Study Notes

Innovation for Competitive Rivalry and Dynamics

MGT 489 Strategic Management course topic
Focuses on innovation's role in competitive dynamics
Explores various innovation types and their strategic implications.

Learning Objectives

Define innovation: Describe its role in competitive processes.
VRIO Framework: Innovation as a competitive advantage driver.
Innovation Types: Learn about incremental, architectural, disruptive, and radical innovation.
Discontinuities and Paradigm Shifts: Understand these dynamics.

What is Innovation?

Definition (Baregheh et al., 2009): A novel and useful idea successfully implemented.
Implications for Core Competencies: Mass production, first-to-market advantages, and difficulty imitating complex technologies.
Innovation vs. Standardization: Differences in production cost, consumer perceptions, and core competencies.
Adoptions as Standards: Market demand, lack of more effective alternatives (e.g., PC QWERTY, mobile phone GSM/CDMA).

Identifying Different Types of Innovation

Two Dimensions: Technology and market (Thursby & Thursby, 2006).
- Incremental: Builds on existing knowledge, steady product/service improvement (e.g., iPhones, drug improvements).
- Radical: Novel methods/materials, new knowledge base, or recombination (e.g., Air conditioners, mobile phones).
- Architectural: Existing parts reconfigured for new markets (e.g., flying cars, Sony Walkman).
- Disruptive: Leveraging new technologies to attack existing markets from the bottom up (e.g., CDs, USB flash, LCDs).

Strategic Implications

Incremental Innovation: The linear model of innovation, cost of innovation.
Disruptive Innovation: Allows innovators to outperform incumbents, creates threats.
Strategies for Disruptive Innovation: Reverse innovation, introducing lower cost innovations.

Innovation and its Implications for Strategy

Industry Life Cycle: Stages relating to innovation (introduction, growth, maturity, decline).
- Understanding timing of market entry (first mover, early follower, late mover).
First Mover Advantages: Premium price, entry barriers, market monopolization.
First Mover Disadvantages: Market uncertainties, high innovation costs.
Early Follower Strategy: Strategic implications (e.g. product innovation, cost-strategy approaches).
Case Study: Analysis of Apple TV vs Google Chromecast.
Specific Example (e.g., Terrafugia): Evaluating first mover or standard-setter status.

Discontinuities and Paradigm Shifts

Technological Paradigm Shifts: New technologies revolutionising industry structure and maturity stages.
Architectural, Radical, and Disruptive Innovation: Crucial elements in paradigm shifts.
Discontinuity Period: Underlying technological standard changes. Disruptions lead to paradigm shifts, where new technologies replace existing standards in an industry.
Predicting Discontinuities: Technological limitations, natural resource constraints, environmental considerations (e.g. fuel price concerns).
Strategic Implications: Discontinuities create opportunities and threats, favor new entrants through new technology, requiring technological and organizational transformation (e.g., Fuji film).

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Description

This quiz explores the critical role of innovation in competitive dynamics, covering various types of innovation and their strategic implications. It aims to enhance understanding of the VRIO framework and how innovation acts as a competitive advantage in strategic management.