Innovation and the Industry Life Cycle
18 important questions on Innovation and the Industry Life Cycle
What is the Industry Life Cycle?
Industry Life Cycle: What is the Introduction Stage?
ØProduction of small quantities (market size is small)
ØInnovators my encounter first-mover disadvantages
ØGain market acceptance and seed future growth
Ø Network effects
What are Network Effects?
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Industry Life Cycle: What is the Growth Stage?
Ø The demand increases as a standard for the market is implemented (can be top-down or bottom-up)
ØStandard
ØPrices fall rapidly since companies get more efficient (=economies of scale)
ØProduct Innovation
ØProcess Innovation
What is a Standard?
What is Product Innovation?
Examples: Electric vehicle, Wearable computers
What is Process Innovation?
Industry Life Cycle: What is the key objective for firms during the Growth Phase?
Industry Life Cycle: What is the Shakeout Stage?
ØWeaker firms are forced out of the industry
ØFirms start to cut prices and offer more services
ØImportance of process innovation (to drive costs down)
Industry Life Cycle: What is the Maturity Stage?
ØDemand consists of replacement or repeat purchases
ØMarket has reached its maximum size
ØFirms attempt to lower costs as much as possible
Industry Life Cycle: What is the Decline Stage?
ØDemand falls rapidly
ØInnovation process on both process and product stops
ØManagers have 4 strategic options
Industry Life Cycle: What are the 4 Strategic options of managers in the Decline Stage?
Harvest (oogst) reduce investments, only allocate a min of resources
Maintain (support marketing efforts)
Consolidate (versterken) Buying rivals to have a stronger position
What is the Crossing-the-chasm Framework?
Customer Groups: Technological Enthusiasts
o Seek out new products before officially introduced on the market.
oSmallest segments (2.5%)
oOften have an engineering mind-set and pursue new technology
Customer Groups: Early Adopters
oRoughly 13.5%
o Demand is driven by their imagination and creativity rather than by technology.
oEager to buy early into a new technology/product concept
Customer Groups: Early Majority
oStrong sense of practicality
o Cost vs Benefits
oLike to observe how early users handle the new technology
Seeking review in magazines etc.
(They are aware that hypes fade away so rather wait and see how things turn out)
Customer Groups: The Late Majority
oMaking up around 34%
o Demand comes from Early and Late majority
Customer Groups: Laggards
oCustomers who only adapt new technology if absolutely necessary
oGenerally, do not want new technology
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
