Using Innovations - Essay Example

Question 2 “Barriers to imitation are never needed if you are a good entrepreneur have the ability to appropriate value from an innovation.” Required: Do you agree or disagree with this statement. Using innovations that you have studied this semester (same as the first question file) discuss the different types of barriers that entrepreneurs have used to protect their innovations. Select one of these innovations and the barriers that have been used to protect it and discuss how effective these barriers have been in preventing imitation of these innovations. Are barriers sometimes necessary? Innovation has become a business (Hargadon, 2003). So it makes sense there are different types of barriers that entrepreneurs have used to protect their innovations. If these are not that effective, then entrepreneurs must have stopped using them for years. According to Porter’s five forces model, there are potential entrants that are able to play as relevant industry competitors. These new entrants are also capable of forming innovation and even imitation. China for instance is known for its low-cost products that at some point similar to existing offerings, which makes imitation not that impossible to take place. Thus, it would make sense that in order to prevent others from imitating a product; barriers to potential entrants should be made. According to Porter, barriers to entry includes economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of scale and government policy. We have been immersed mostly in the concepts of economies of scale and product differentiation so I would like to focus on these two as important barriers to innovation, as based on Porter’s five forces model. The economies of scale would force the entrant to face two undesirable options: come in at large scale and risk strong reaction from existing firms; choose small scale and accept cost disadvantage. In either of these choices, a new entrant needs to take the risk of losing his chance to successfully penetrate into the market. The other potential barrier to new entrant is product differentiation. Firms that already have brand identification and customer loyalties are hard to beat. Therefore, firms should therefore increase advertising, customer service, product differences and be the first into the industry in order to prevent potential entrants. Product differentiation therefore could at some point be highly associated with economies of learning, production techniques, production design and more, just to be able to create one-of-a-kind product that could bring competitive advantage and prevent entrants to imitate created innovative products. There are different types of innovations and these include technology-based innovation, services based innovation, logistic based innovation and marketing based innovation. I would like to choose technology based innovation, which specifically concerns about product performance and manufacturing process. In the age of tough competition, and today’s advancement of technology, many products are increasingly advanced in order to attract new customers and provide the appropriate market needs (Moore, 1999). Some of these products are created in order to create demand. Smartphones for instance are created that for others they might find it a luxury to have one, but for some the said offerings are capable of meeting their needs. As many products like this continue to surge in number in the market, product performance has become tantamount to maintaining competitive edge. Although there are many other similar products to choose from, their manufacturers try to emphasize product performance in order to differentiate their offerings from other manufactured offerings. In addition, there is also corresponding emphasis on the actual manufacturing process involved. For some, the associated manufacturing process would remain a secret as it concerns about cost reduction, as another potential source of competitive advantage. Some manufacturers however flaunt the actual manufacturing process in order to create a significant appeal for their product offerings. They are trying to create specific identify for their product that at some point would become the primary criterion of customer’s decision prior to actual purchase. Technology-based innovation might potentially use economies of scale and product differentiation as elemental barriers to protect it. For example, since technology based innovation concerns about product performance and manufacturing process, in order to protect it and eliminate the chance of others to pursue the same strategy, product differentiation would be necessary. At this point, the manufacturer should always emphasize something unique about the technology being used or formed in order to create significant appeal among potential and target markets. This can be done through unique advertisement strategy, achieving customer loyalty or brand loyalty, and more. Product differentiation just ensures that the product a customer is using is unique and there is something in it that could not be found from other offerings. This significantly would reduce the odds of imitating an innovation. Other potential barrier that could be used is the economies of scale, by which a leading manufacturer should pose the kind of risk to potential entrants allowing them not to pursue due to associated odds of losing the chance to penetrate in the market because of high associated cost disadvantage. Imitation cannot be hindered at some point because based on the Red Ocean strategy, there is always an opportunity for each competitor to compete in an existing market space (Moore, 1999). Furthermore, based on the Blue Ocean strategy, key players have this choice to create demand and find for another potential market niche. I would like to disagree with the statement “Barriers to imitation are never needed if you are a good entrepreneur have the ability to appropriate value from an innovation.” One of my reasons that compels me to disagree is the thought that the innovation itself can be further enhanced or improved and these are potential moves that are supposed to be hindered in order to prevent products from coming out the market with the same capacity. However, this seems to be too good to be true, that is why product differentiation has become potential means of creating a highly attractive product that would address customers’ needs as they also find it unique. Innovation after all is not just about invention, but turning opportunity into productivity. Product differentiation and even economies of scale as barriers to entrants are not just potential sources of competitive advantage, but actually could pave the way for productivity, if appropriately used. In addition, exploiting new opportunities are essential (Amit and Zott, 2012), so barriers to imitations are necessary. Question 3 “The answer to the question, ‘How can we create a new industry?’ is to create a different value curve.” Do you agree or disagree with this statement? Discuss how Red and Blue Ocean strategy emerges and value innovation occurs when an organisation is able to develop a new value curve that is different from the one traditionally used in the industry in which it competes. Justify your answer by using concepts, models and case illustrations covered in the course. Let us find out whether it is appropriate to rely on creating a different value curve in order to create a new industry. When an enterprise develops a new value curve that is different from the one traditionally used in the industry in which it competes, it is crucial to discuss in detail how might be the Red and Blue Ocean strategy and value innovation come to be realized. The Red Ocean strategy for instance tries to make it a point for an organization to compete in existing market space, so beating a competition is another remarkable element prior to its success (Kim and Mauborgne, 2005). Porter’s five forces model could justify this, as it tries to explain the kind and even level of competition that might exist in an industry. For example, if a new entrant would introduce a new value curve, this would become a potential threat to the existing competition as it might be considered another form of substitute based on Porter’s five forces model. So the market will definitely try to make ways and means in order to compete using the same value curve provided its potential in the industry is quite promising. At this point, the key players will be able to identify specific factors in competition and they would be able to assess their level in each factor in order to maximize their chance to compete. For instance, one of the factors in the competition might be the “customer support” so if this is what the customers value the most in the market, based on the Red Ocean strategy, each key player might find it a good opportunity to also exploit existing demand, which makes it possible to create a new industry, as there is always a point of beating the competition. The existence of new value curve will make it a point for key players to innovate possibilities, but they might find it a good idea to beat the competition, by competing in existing market space. If there is a great demand for a certain market segment, based on the Red Ocean strategy, a new set value curve will be applied in it as the way others are doing, as at some point it would become a remarkable substitute at first, creating an opportunity and force to ignite competition. Porter’s Fiver Forces Model shows a market-oriented approach that could be one powerful basis of innovation. Innovation of a new value curve is therefore a good thing to be applied as it could substantially justify this model, creating a substantial competition that would create rivalry among existing firms, providing a chance to create an industry. This new value curve will still create the same industry, but would be something new as the level of beating competition may possibly turn out into another new level. Products and services in the actual setting need to be defined compared and positioned (Moore, 1999). The value curve, as a useful tool could help managers and marketers do all these tasks. Innovation and value creation are associated with each other. As a result, innovation is not a linear process, but rather a complex one, as in general detail, it involves understanding customer needs, production and product design and services, which are altogether interconnected in a loop. Along the process of innovation, value creation is generated or at some point, some enterprise may try to think of creating a value and one of the ways to guarantee its achievement may be through innovation. Innovation and value creation could therefore work each other in order to guarantee addressing the actual customer needs and value. At some point, actual expert performance may be the key (Baron and Henry, 2010). A new value curve when applied therefore helps emphasize more about value innovation, which at some point would emphasize beating competition is not something that could optimize profitable growth. Unlike the Red Ocean strategy, value innovation tries to seek uncontested market space. From this perspective, a new defined value curve would help ensure optimizing potential in an uncontested market space. For this reason, the mere thought why marketers would have to look for a market niche that is unexplored, because there must be substantial opportunities to be made and offered in it, which later would be revolutionized into forming an industry provided there would be vast opportunity in it. The Blue Ocean strategy therefore has a framework from the value innovation concept. Unlike the Red Ocean strategy, the Blue Ocean strategy creates uncontested market space, makes competition irrelevant unlike Porter’s five forces model, creates and captures new demand, breaks the value or cost trade off, and pursues differentiation and low cost (Kim and Mauborgne, 2005). The introduction of new value curve for instance, will definitely enhance the exploration of new strategies in order to break free from competition and create a new demand. The case of Apple Incorporated as a market leader in its industry is about trying to break free from competition as it looks forward to find for the best differentiation and low-cost strategy. As for me, creation of a new value curve is a way to create a new industry as this would lead to competition based on the Red Ocean strategy and as supported by Porter’s five forces model. Furthermore, having the framework of value innovation concept, the Blue Ocean strategy remarkably searches for new opportunities which in the long run would become a significant source of competition especially in the inclusion of new value curve. The Blue Ocean strategy will help revolutionize a certain market into diversified areas of opportunities. In the presence of new value curve, this would become more feasible as various demands will be addressed. This would lead to a probable creation of specific industries. Question 4 Select a key “innovation issue” that you believe an entrepreneurial organization needs to address to be a commercial success. Discuss the impact or effect of this issue on the innovation process. Using at least three articles or readings studied this semester, outline possible strategies that can be used to manage the issue identified. Innovation is something like turning opportunity into new ideas, which brings forward a certain company to its competitive advantage (Tidd et al., 2005). I would like to choose “competitive advantage” as an “innovation issue” that I believe an entrepreneurial organization needs to address to be a commercial success. In the age of tough competition, most if not all, companies would want to increase market share and optimize their competitive advantage in order to guarantee continuation of their operation and maximum profit achievement. Apple Incorporated for instance, is highly known for its innovative move, which strongly influences and inspires other companies especially in its industry to do the same. Apple is known for its highly differentiated offerings which at some point, a sophisticated customer could tell that the said company is really good at creating a need for its product and service offerings. Achieving competitive advantage in the case of Apple is about creating new innovative products that would turn out very much differentiated offerings in order to stimulate mostly unconscious needs of the market. In this case, Apple could be indeed good at creating needs and even coping with change. Uncertainty of the future is one of the most essential factors that at certain level could try to hinder the point whether innovation would be helpful and necessary (Tidd et al., 2005). However, for many years until now, Apple has become so consistent in coping with change, making it a market leader in its industry. Its powerful weapon or tool in dealing with change is its innovation strategy, which indeed tries to maximize opportunity into new ideas, leading to competitive advantage. Now it is important to understand the impact of competitive advantage on the innovation process. Innovation and invention are not the same as the latter is just the primary step to obtain the former and this could be justified by the better mousetrap idea, which specifies that the success of created new products or ideas can be attributed to “project management, market development, financial management, organizational behavior” and more (Tidd et al., 2005). To guarantee the success of innovation as a potential source of competitive advantage, there is actual implementation involved and this should have saturated concern on turning potential ideas as something remarkably new and introducing them in the internal and external market. This is the essence of “implementing” as a significant component of the innovation process. Within it there is a need to acquire knowledge, execute the project, launch the innovation, sustain adoption, and modify it, by which within this cycle an enterprise has ample opportunity to learn more (Tidd et al., 2005). In general detail, an enterprise can both implement innovation, learn from it and the cycle goes on. Generally, there are two types of competitive advantage innovation could contribute to: cost advantage and differentiation advantage. There is cost advantage if a lower cost is obtained on a certain product that is normally offered in the market. In this case, this cost advantage will lead to competitive advantage as the enterprise will be able to reduce actual product price. Thus, with the same products in the market, those with potentially low price are able to generate more customers. Some enterprises in order to obtain lower cost for their offerings have learned the importance of cost reduction within the value chain or at the actual process of product creation cycle. For instance, the open innovation is said to reduce costs of R&D by still ensuring future success (Chesbrough and Garman, 2009). This strategic move allows maximization of opportunity especially in tough economic times in which the only way to ensure ideas, people and intellectual property to flow within and outside of the organization which at some point could guarantee substantial opportunity for ensuring company’s future growth. Thus, on the basis of ensuring cost advantage, the achievement of competitive advantage seeks to optimize the right innovation approach that is necessary to be applied and that would be able to guarantee future company’s growth. In this case, the implementation process of innovation needs to be optimized to make sure everything will turn out fine and leads to the achievement of lower costs prior to cost advantage acquisition. On the other hand, differentiation advantage is another form of competitive advantage because this is the point in which an enterprise could achieve price premium from a unique product. The key in this type of competitive advantage is to create a new product that is something new and could guarantee maximizing opportunity. To generate this competitive advantage, some companies try to invest more in market research for product development (Trott, 1998). It is important for them to find out customers’ views or actual needs in order to formulate products that are unique, but still would be able to address the prevailing market needs. In other words, the achievement of competitive advantage leads to maximizing the opportunity for the actual innovation to be performed. The implementation of market research as an essential strategic move justifies this point. Competitive advantage therefore seeks to create meaningful activities within the actual innovation process that could be tantamount to turning opportunity into new ideas. The goal of this competitive advantage is to never waste time allocating the best opportunities and transformed them into new ideas in the actual innovation process. In doing this, an enterprise could guarantee achievement of competitive advantage especially from differentiated offerings, enabling them to set premium price. Just in the case of Apple, its highly differentiated offerings leads to its competitive advantage as there is a reasonable basis to set premium price. Competitive advantage therefore triggers innovation to be fully implemented and learned as it is going to be the associated final output. References Baron, R. A., and Henry, R. A. (2010). How entrepreneurs acquire the capacity to excel: insights from research on expert experience. Strategic Entrepreneurship Journal. 4(82), 49-65. Amit, R., and Zott, C. (2012). Creating value through business model innovation. MIT Sloan Management Review. 53(3), 41-49. Chesbrough, H. W., and Garman, A. R. (2009). How Open Innovation Can Help You Cope in Lean Times. Harvard Business Review. Hargadon, A. (2003). How breakthrough happen: the surprising truth about how companies innovate. Boston, Mass: Harvard Business School Press. Kim, W. C., and Maugborgne. (2005). Blue Ocean Strategy: From Theory to Practice. Berkeley: University of California. Moore, G. A. (1999). Crossing the chasm: marketing and selling high-tech products to mainstream customers (Rev. ed.). New York: Harper Business. Tidd, J., Bessant, J. R., and Pavitt, K. (2005). Managing innovation: integrating technological, market and organizational change (3rd ed.). Hoboken: Wiley. Trott, P. (1998). Innovation management and new product development. London: Financial Times Pitman. Read More