Podcast
Questions and Answers
What did Schumpeter coin as a process of industrial mutation?
What did Schumpeter coin as a process of industrial mutation?
- Dynamic Innovation
- Capitalistic Mutation
- Creative Destruction (correct)
- Market Revolution
According to Schumpeter, where do economic rents come from?
According to Schumpeter, where do economic rents come from?
- Stability and consistency
- Government regulations
- Market monopolies
- Changes, which lead to opportunities (correct)
What did Schumpeter consider as an essential part of capitalism?
What did Schumpeter consider as an essential part of capitalism?
- Creative Destruction (correct)
- Monopolistic Practices
- Government Intervention
- Market Stability
What did Schumpeter believe was critical to competition?
What did Schumpeter believe was critical to competition?
What is the premise of Schumpeterian Perspective?
What is the premise of Schumpeterian Perspective?
What did Schumpeter identify as a process that incessantly revolutionizes the economic structure from within?
What did Schumpeter identify as a process that incessantly revolutionizes the economic structure from within?
When starting a platform, firms should always begin with as many sides as possible to maximize the network effects. True or false?
When starting a platform, firms should always begin with as many sides as possible to maximize the network effects. True or false?
When deciding how to price each side of a two-sided platform, a firm should generally profit from (charge) the side that:
When deciding how to price each side of a two-sided platform, a firm should generally profit from (charge) the side that:
Complements in the gaming industry enhance the value of another and are associated with:
Complements in the gaming industry enhance the value of another and are associated with:
What strategy did Nintendo use to overcome the chicken and the egg problem in the gaming industry?
What strategy did Nintendo use to overcome the chicken and the egg problem in the gaming industry?
Why do companies like PlayStation announce the cost of their consoles months before release?
Why do companies like PlayStation announce the cost of their consoles months before release?
What is the primary purpose of royalties that console companies make developers pay?
What is the primary purpose of royalties that console companies make developers pay?
What type of platform strategy does eHarmony lie between in competitive scope?
What type of platform strategy does eHarmony lie between in competitive scope?
What are the solutions to the chicken and egg problem in platform strategy?
What are the solutions to the chicken and egg problem in platform strategy?
What factor weakens network effects in platform strategy?
What factor weakens network effects in platform strategy?
What occurs in the platform industry when barriers to entry are high and network effects are strong?
What occurs in the platform industry when barriers to entry are high and network effects are strong?
In what way can network effects impact willingness to pay in platform strategy?
In what way can network effects impact willingness to pay in platform strategy?
What type of market situation leads to the existence of multiple platforms in platform strategy?
What type of market situation leads to the existence of multiple platforms in platform strategy?
What marks the establishment of the dominant design in competitive lifecycles?
What marks the establishment of the dominant design in competitive lifecycles?
In which phase of the competitive lifecycle does uncertainty decrease and all innovation become process innovation?
In which phase of the competitive lifecycle does uncertainty decrease and all innovation become process innovation?
What led Disney to forward vertically integrate and launch Disney+?
What led Disney to forward vertically integrate and launch Disney+?
What is crucial in the growth and mature phases of competitive lifecycles?
What is crucial in the growth and mature phases of competitive lifecycles?
What eventually supplants incumbent technologies and starts a new competitive lifecycle?
What eventually supplants incumbent technologies and starts a new competitive lifecycle?
What led to over-entry and dropping profit margins in the growth phase of competitive lifecycles?
What led to over-entry and dropping profit margins in the growth phase of competitive lifecycles?
What type of network effects exist when the willingness to pay for a product depends on the number of other users?
What type of network effects exist when the willingness to pay for a product depends on the number of other users?
Which company dominated two s-curves, first with DVDs and then with streaming?
Which company dominated two s-curves, first with DVDs and then with streaming?
What type of platform creates value primarily by enabling interactions between users with the potential for network effects?
What type of platform creates value primarily by enabling interactions between users with the potential for network effects?
Which company was slow to respond to Netflix's disruptive technology?
Which company was slow to respond to Netflix's disruptive technology?
What type of business model includes transaction platforms and innovation platforms?
What type of business model includes transaction platforms and innovation platforms?
How did Netflix make the leap from an old technology s-curve to a new technology s-curve?
How did Netflix make the leap from an old technology s-curve to a new technology s-curve?
What did Schumpeter coin as a process of industrial mutation?
What did Schumpeter coin as a process of industrial mutation?
What is the premise of Schumpeterian Perspective?
What is the premise of Schumpeterian Perspective?
Where have we already seen Schumpeterian rents at work?
Where have we already seen Schumpeterian rents at work?
What did Schumpeter identify as an essential part of capitalism?
What did Schumpeter identify as an essential part of capitalism?
What type of companies exemplify Schumpeterian rents?
What type of companies exemplify Schumpeterian rents?
What is critical to competition according to the Schumpeterian Perspective?
What is critical to competition according to the Schumpeterian Perspective?
What type of network effects exist when the willingness to pay for a product depends on the number of other users?
What type of network effects exist when the willingness to pay for a product depends on the number of other users?
What is the primary purpose of royalties that console companies make developers pay?
What is the primary purpose of royalties that console companies make developers pay?
What type of platform strategy does eHarmony lie between in competitive scope?
What type of platform strategy does eHarmony lie between in competitive scope?
What are the solutions to the chicken and egg problem in platform strategy?
What are the solutions to the chicken and egg problem in platform strategy?
What did Schumpeter consider as an essential part of capitalism?
What did Schumpeter consider as an essential part of capitalism?
What marks the establishment of the dominant design in competitive lifecycles?
What marks the establishment of the dominant design in competitive lifecycles?
In platform strategy, what factor can lead to a weakening of network effects?
In platform strategy, what factor can lead to a weakening of network effects?
What can increase willingness to pay in platform strategy?
What can increase willingness to pay in platform strategy?
In the platform industry, what occurs when barriers to entry are high and network effects are strong?
In the platform industry, what occurs when barriers to entry are high and network effects are strong?
What is a viable strategy in the dating market if preferences are different?
What is a viable strategy in the dating market if preferences are different?
What solutions are suggested for the chicken and egg problem in platform strategy?
What solutions are suggested for the chicken and egg problem in platform strategy?
What impact can heterogeneous consumer preferences have in platform strategy?
What impact can heterogeneous consumer preferences have in platform strategy?
What is the primary focus in the emergent phase of competitive lifecycles?
What is the primary focus in the emergent phase of competitive lifecycles?
What did the invention/adoption of high-speed internet lead Disney to do?
What did the invention/adoption of high-speed internet lead Disney to do?
What marks the establishment of the dominant design in competitive lifecycles?
What marks the establishment of the dominant design in competitive lifecycles?
What characterizes the mature phase of competitive lifecycles?
What characterizes the mature phase of competitive lifecycles?
What eventually supplants incumbent technologies and starts a new competitive lifecycle?
What eventually supplants incumbent technologies and starts a new competitive lifecycle?
What factors influence incumbent firms' success in adopting new technologies?
What factors influence incumbent firms' success in adopting new technologies?
What is the primary pricing principle for a two-sided platform when deciding how to price each side?
What is the primary pricing principle for a two-sided platform when deciding how to price each side?
What is the purpose of announcing the cost of consoles months before release in the gaming industry?
What is the purpose of announcing the cost of consoles months before release in the gaming industry?
What strategy did Nintendo use to overcome the chicken and the egg problem in the gaming industry?
What strategy did Nintendo use to overcome the chicken and the egg problem in the gaming industry?
What is the sixth force in Porter's five forces model that affects the gaming industry?
What is the sixth force in Porter's five forces model that affects the gaming industry?
What type of network effect was associated with the example of the karate game in the gaming industry?
What type of network effect was associated with the example of the karate game in the gaming industry?
What should a firm generally do when deciding how to price each side of a two-sided platform?
What should a firm generally do when deciding how to price each side of a two-sided platform?
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Study Notes
Netflix vs Blockbuster: Business Strategies and Platform Fundamentals
- Netflix had high willingness to pay and lower average costs due to economies of scale
- Netflix dominated two s-curves: first with DVDs, then with streaming
- Blockbuster was slow to respond to Netflix's disruptive technology
- Netflix's original business model was enabled by the advent of DVD and later by innovation with DVD by mail
- Netflix made the leap from an old technology s-curve to a new technology s-curve by leveraging their existing subscriber base and recommendation algorithm
- A platform is a technology, product, or service that creates value primarily by enabling interactions between users with the potential for network effects
- Platforms enable interactions between two parties and can be one-sided or multi-sided
- Network effects exist when the willingness to pay for a product depends on the number of other users
- Platform business models include transaction platforms and innovation platforms
- Examples of platforms include Visa (2-sided transaction), Amazon (2-sided transaction), and Playstation (2-sided innovation)
- A grocery store is not a two-sided platform
- A two-sided network has four network effects, while a three-sided network has nine network effects
Competitive Lifecycles and Technology S-Curves
- Invention of the internet increased threat of substitutes, lowered barriers to entry, decreased competitive advantage, and eroded value proposition in various industries
- Deregulation of the European airline industry lowered barriers to entry, increased rivalry, and gave Ryanair an opportunity to thrive
- Invention/adoption of high-speed internet decreased buyer power, increased barriers to entry, and led Disney to forward vertically integrate (Disney+)
- Competitive lifecycles have three phases: Emergent, Growth, and Mature, each with distinct characteristics and challenges
- Uncertainty is high in the emergent phase, with a focus on product innovation and differentiation to find consumer preferences
- Process innovation lowers costs and is crucial in the growth and mature phases, while product innovation introduces new or significantly improved goods or services
- The annealing point marks the establishment of the dominant design, reducing uncertainty and leading to the failure of firms that adopted losing standards
- Growth phase includes shakeouts, where less efficient firms fail, and over-entry leads to dropping profit margins and firm failures
- Mature phase is absent of uncertainty, with all innovation becoming process innovation and profit margins being difficult to predict
- Disruptive innovations eventually supplant incumbent technologies, starting a new competitive lifecycle, and may appeal to fringe customers with novel attributes
- Incumbent firms often fail to adapt to new technologies due to underestimating their value, rendered resources, and capabilities, or tradeoffs between short-term and long-term gains
- Factors influencing incumbent firms' success in adopting new technologies include large capital or expertise, customer assurance, and complementary resources or capabilities.
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