MGT 320 Quiz 2

dominant design

product design that is adopted by the majority of producers, typically creating a stable architecture on which the industry can focus its efforts

increasing returns to adoption

when the rate of return from a product or process increases with the size of its installed base

• the more the tech is adopted the more valuable it becomes

why are dominant designs selected

learning effects, network externalities & government regulations

learning effects

as tech is adopted, it generates sales revenues that can be reinvested in further developing and refining tech

learning curve

cumulative output - performance increases or cost decrease with the number of units of production

absorptive capacity

the ability of an org to recognize, assimilate and utilize new knowledge

network externalities

when the value of a good to a user increases with the number of other users of the same or similar good

installed base

the number of users of a particular good

complementary goods

additional g&s that enable or enhance the value of another good

self reinforcing cycle

A technology with a large installed base attracts developers of complementary goods; a technology with a wide range of complementary goods attracts users, increasing the installed base.

government regulation

can force an industry to adopt one tech standard if compatibility benefits consumers

benefits of government regulation

the benefits of gov reg: improves compatibility between tech and makes communication easier

what leads to natural monopolies but also in a good position to shape the future of the industry

winner takes all

path dependency

When end results depend greatly on the events that took place leading up to the outcome, it is often impossible to reproduce the results that occur in a situation

tech stand along value

the value of tech provides from its own performance, functionality, and design, not from how many people use it or the complementary goods available for it

6 components of the buyer utility map

purchase, delivery, use, supplements, maintenance and disposal

Six Utility Levers

Customer productivity, simplicity, convenience, risk, fun & image and environmental friendliness

network externality value

the value of tech innovation ot users will be a function not only of its stand-alone benefits & costs but also of the value created by the size of installed base and avail of comp goods

vaporware

products that are not actually on the market and may not even exist but are advertised

modularity

the degree to which a systems components can be separated and recombined

platform ecosystem

network of different groups that interact through a shared platform and create value for one another

first movers

pioneers: first to sell in a new product or service category

early followers

early leaders: early to the market but not the first

late entrants

enter the market when or after the product begins to penetrate the mass market

first mover advantages

brand loyalty, tech leadership, preemption of scare assets, buyer switching costs

monopoly rents

additional returns a firm can make from being a monopoly by setting high prices or low costs

preemption of scarce assets

firms that enter the market early can capture scarce resources

ex: gov’t regulation patents, permits

buyer switching costs

the costs buyers face when they switch from one product, service or tech to another adter they have already adopted the original product

first mover disadvantage: incumbent inertia

tendency for the current holder to be slow to respond to changes in the industry environment due to their large size, establishes routines

first mover disadvantage; undeveloped supply & distribution channels

if the tech is new there is often not a supplier or distributor yet so they have to find one to make or make it on their own

first mover disadvantage: immature enabling tech & complements

component technology that are necessary for the performance or desirability of a given innovation

first mover disadvantage: uncertainty of customer req

first movers have an opportunity to shape customer preferences by establishing the precedent

parallel development processes

when multiple stages of the new product development process occur at the same time

customer preference & the influence of the optimal time of entry

acclimation to the technology & if the customers like it

influence and timing of entry & the improvement over previous solutions

An innovation that offers a dramatic improvement over previous generations will accrue more rapid customer acceptance

timing of entry & the innovation require enabling technologies, and the tech are sufficiently mature

If the innovation requires enabling technologies (such as long- lasting batteries for cell phones), the maturity of these technologies will influence optimal timing of entry

Timing of entry and the influence on the value of the innovation, and sufficient availability

Not all innovations require complementary goods, but for those that do (e.g., games for video consoles), availability of complements will influence customer acceptance.

timing of entry & how high is the threat of comp entry

if there are significant entry barriers, they may be less need to rush to market to build increasing returns ahead of others

timing of entry and the increasing returns to adoption

if there are, allowing comp to get a head start can be risky

timing of entry and being able to withstand early losses

The first mover bears the bulk of R&D expenses and may endure a significant period without revenues; the earlier a firm enters, the more capital resources it may need

timing of entry & the necessary resources to accelerate market acceptance

Firms with significant capital resources can invest in aggressive marketing and supplier and distributor development, increasing the rate of early adoption

timing of entry & the firm’s reputation to reduce the uncertainty of customers, suppliers, and distributors

innovations from well-respected firms may be adopted more rapidly, enabling earlier successful entry

fast cycle development process

firm has a better chance at being an early entrant, also use experience of customer to refine products

reasons for going solo: availability of capabilities

if they have all the necessary capabilities, there might not be a need to

reasons for going solo: protecting proprietary tech

firms sometimes avoid collab for fear of giving up the proprietary tech

reasons for going solo: controlling tech development & use

want total control over the product - alliances

reasons for going solo: building & renewing capabilities

development efforts are key to building and renewing their capabilities

advantages of collab: acquiring capabilities & resources quickly

a company may be able to gain rapid access to important complemnetary assets by entering into strategic alliances or licensing arrangements

advantages of collab: increasing flexibility

obtaining some of the necessary resources from a partner rather than building them in house can help a firm reduce its asset commitment

capability complementation

combining (pooling) the capabilities and other resources of partner firms

capability transfer

exchange of capabiltiies across firms in such a manner that partners can internalize the capabilities

joint ventures

type of strategic alliance that entails significant structure and commitment

licensing

contract agreement where one org or indiv (licensee) obtains the rights to use the proprietary tech (trademark) of another org or indiv (licensor)

contract manufacturing - outsourcing

when a firm hires another firm to manufacture its products

resource fit

degree to which potential partners have resources that can be effectively integrated into a strat that creates value

strategic fit

the degree to which partners have compatible objectives & styles

governance

act of process fo exerting authority and/or control

alliance contract

legally binding contract agreements to ensure aprtners are fully aware of their rights and obligations and have legal remedies

equity ownership

when each partner contributes capital and owns a specified right to a % of the proceeds from the aliiance

relational governance

self-enforcing nroms based on goodwill, trust and reputation of the partners

learning curve formula

y = ax^b

what does the y stand for in the y = ax^b

y= number of direct labor hours required to produce the xth unit

what does the a stand for in the y = ax^b

a = the number of direct labor hours req to produce the first unit

what does the x stand for in the y = ax^b

cumulative number of units produced

what does the b stand for in the y = ax^b

learning rate

advantages of collab: learning from partners

Collab with new partners can be an important way of learning