Lecture 6: Innovation II: A Market Perspective on Value Creation

Describe the value creation process

Schumpeter explains economic growth as a process of creative destruction. Explain this.

What is creative desturction

Kondratieff cycle: After every important innovation like steam engine, car, internet etc, there is prosperity, recession, depression and recovery until the next innovation.

When new innovation replaces older technolgoies and firms

What happened to firms in the past due to technological disruptions

Their lifetime decreased.

How can industrial policy help transition between technological waves

Subsidies for new innovation

Investments in education, infrastructure and research

Enforcement of property rights

Patents to incentivize people to innovate

How can state intervention and industrial clusters be good

Foster innovation due to cluster of interconnected businesses

What is rogers diffusion model

Describes how individuals vary in their willingness to adopt technologies

What are the five stages of technology adoption?

Knowledge attained

Persuasion - opinion ab tech formed

Decision ab whether it is good and useful

Implementation

Confirmation ab whether to keep using it

Speed of diffusion of innvoation

Innovation spreads quicker today than it did in the past

What is a dominant design?

What is the competition in this design spectrum like

A dominant design is a design that becomes the accepted standard

Then, innovation focuses on improving this design

When a dominant category emerges, the number of firms starts increasing. Over time, the categories decrease until a dominant design is established, which is when there are many firms. After the establishment, the number of firms decreases due to competition.

What is disruptive innovation

New firm in the market challenges other firms by serving overlooked or less demanding customers.

Disruption doesn’t have to have the most radical and top tier tech

Disruptors may first offer low performance but affordable, simple and easy to implement products. As they grow and their products improve, they can challenge the mainstream products.

Whats the issue with overdelivering customer needs?

FIrms improve products and eventually, their products can offer more performance than customers actually need.

Creates opportunity for cheaper and simpler alternatives.

Summarise the disruptive innovation theory

Criticism of the disruptive theory

Not all real world examples fit

Explain what factors affect the speed at which new technology substitutes old technology.

Ecosystem extension opportunity of old technology: How much potential the old technology still has for improvement

Ecosystem Emergence Challenge (new technology): How difficult it is to develop the infrastructure, suppliers and complementary technologies required for the new technology

What is innovation

Invention with commerzialisation into the market.