Lecture 6 - Industry Evolution and Strategic Change Flashcards
(33 cards)
What are the 4 stages of an industry lifecycle?
Introduction
Growth
Maturity
Decline
What is product innovation?
Experimenting with the design of the product
What is process innovation?
Experimenting with the manufacturing and distribution to get the product to market
Explain the stages of an industry lifecycle.
Introduction - product is new and exciting
Growth - everyone joins in
Maturity - everyone has it/one
Decline - out of fashion
What is important to remember about the industry lifecycle stages’ progression?
It can be nonlinear. Whilst they need to go sequentially from one stage to the one next to it, this can be forward or backwards, e.g. from growth to maturity to growth to maturity to decline.
Why can industry lifecycles be nonlinear?
Due to PESTEL factors, e.g. new technology makes a previously less interesting product more interesting again or reinvigorates its value proposition.
Typically, what does a product vs process innovation timeline look like? Why?
Product innovation comes first, then process delayed after that.
This is because process innovation can only happen after the product has been formed. It also continues longer after product innovation as manufacturing and distribution optimisation continues to be important as long as the product is important.
What happens in terms of design by the growth phase? Why?
A dominant design is settled on generally, e.g. a smartphone with a touchscreen and app store.
This is because it tends to be in the introductory phase that the various designs are explored, and those that have struck on a better design survive or are more successful whereas others with worse designs either copy them or are wiped out.
What tends to happen to manufacturing as the market moves from introduction to maturity?
Significant scaling up in size.
Moving to emerging market countries becomes more favourable as scale economies associated with mass transport become available and producing ‘at home’ becomes too expensive.
What are the 3 types of technological innovation on the supply side?
Competency enhancing vs competency destroying technological change
Architectural vs component innovation
Sustaining vs disruptive technologies
Explain competency enhancing vs competency destroying technological change.
For example, making a good electric car is not the same as making a good diesel car - different skills are required. Despite this, both are products in the same industry.
Explain architectural vs component innovation.
Structural changes that completely change how a company needs to work, e.g. again EVs shook up how the whole company needs to be structured.
Component changes are just to a specific more minor component, e.g. a revolutionary way to make the engine itself more efficient.
Explain sustaining vs disruptive technologies.
Similar to architectural vs component innovation.
Sustaining is more small scale patchwork changes to an existing product.
Disruptive is changing how it’s done fundamentally with something new, e.g. AI is a disruptive technology.
How can a cheaper and simpler product successfully enter the market?
By either:
* Creating a new market, or
* Appealing to a currently overserved and overpaying existing group
E.g. Google Drive/ecosystem appealing to people paying lots for Microsoft Office
What is demand side disruption? What are demand side disruptive products often like?
When a new product enters the market that shakes up what people are using by thinking specifically about what they are looking for.
Often cheaper and simpler, or introducing a new dimension of performance usually around a novel technology.
In what scenario does a demand side disruptor take most of the market share?
When the disruptor meets all the mainstream market needs but can do it at a lower price than the incumbent (ignoring their superfluous innovations that don’t actually meet most peoples’ needs).
Why can an incumbent lose market share to a disruptor even if they are innovating consistently?
They are innovating in the wrong way - adding features that have minimal realised added value to the customer but charging a higher cost as a result.
What are the 3 sources of inertia that make pivoting a company difficult?
- Structural inertia
- Cognitive inertia
- Social inertia
What is the paradox of resources and capabilities in terms of pivoting a company?
They simultaneously enhance and inhibit development, as they are hard to pivot from.
Core capabilities = core rigidities.
What is structural inertia (3 points)?
Elements of:
* established resources and capabilities with a significant sunk cost
* organisational routines such as meetings, activities etc.
* complementaries between existing strategy, structure and systems
prevent organisations from pivoting as they might want or need to.
What is cognitive inertia (2 points)?
The idea that firms struggle to change due to:
* conformity - they are risk averse and want to copy similar firms as opposed to taking a risk and striking out on their own
* limited search - they don’t want to rework everything if it appears to be working well enough/successfully already
What is social inertia?
The fear of change jeopardising existing social and political structures for the worse intimidating one from making the change as required.
What are the methods that can be used to manage/bring about change in the organisation’s output/orientation (on an organisational strategy level)?
- Dual strategies and organisational ambidexterity
- Combatting inertia
- Developing capabilities through product sequencing
- Dynamic capabilities
What are two ways that an organisation can implement organisational ambidexterity?
- Buy a startup/existing company
- Make internally
