Question 1

Innovation that targets new markets with existing technologies is known as disruptive innovation.

Accepted Answer

Innovation that targets new markets with existing technologies is known as architectural innovation. Disruptive innovation targets existing markets with new technologies.

Question 2

As a research scholar, Denise had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Denise can be best described as a(n)
A) entrepreneur.
B) category captain.
C) franchisor.
D) early adopter.

Accepted Answer

In the context of this scenario, Denise can be best described as an entrepreneur. Entrepreneurs are the agents who introduce change into the competitive system. They do this not only by figuring out how to use inventions, but also by introducing new products or services, new production processes, and new forms of organization. Entrepreneurs can introduce change by starting new ventures.

Question 3

Which of the following is a competitive benefit experienced by the first mover firm in an industry?
A) The first mover will be able to achieve a less steep learning curve.
B) The first mover will be able to reduce the switching costs.
C) The first mover will not have to patent its products or technology.
D) The first mover will be able to reduce costs through economies of scale.

Accepted Answer

Economies of scale refer to the decreases in cost per unit as output increases. First movers may hold important intellectual property such as critical patents. They may also be able to lock-in key suppliers as well as customers through increasing switching costs.

Question 4

When ReGen Pharmaceuticals released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of ReGen Pharmaceuticals intellectual property rights. Thus, the drug is protected by a
A) promissory bill.
B) patent.
C) franchise.
D) royalty.

Accepted Answer

In the given scenario, ReGen Pharmaceuticals' drug is protected by a patent. A patent is a form of intellectual property, and gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.

Question 5

The four-step innovation process ends with
A) idea generation.
B) invention.
C) idea testing.
D) imitation.

Accepted Answer

The innovation process ends with imitation. If an innovation is successful in the marketplace, competitors will attempt to imitate it.

Question 6

Which of the following accurately describes how Netflix used innovation to gain a competitive advantage?
A) Netflix moved from content development to upgrading its data analytics to provide faster online streaming.
B) Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.
C) Netflix moved from online streaming to online DVD rentals via the Internet.
D) Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming.

Accepted Answer

What aided Netflix to gain a competitive advantage was the application of big data analytics to its user preferences to not only predict future demand, but also to provide highly personalized viewing recommendations.

Question 7

Innovation and strategic entrepreneurship can only occur within new businesses.

Accepted Answer

The fundamental question of strategic entrepreneurship, is how to combine entrepreneurial actions, creating new opportunities or exploiting existing ones with strategic actions taken in the pursuit of competitive advantage. This can take place within new ventures such as Tesla or within established firms such as Apple. Apple's continued innovation in mobile devices is an example of strategic entrepreneurship.

Question 8

How has Apple been able to sustain its competitive advantage in the smartphone industry?
A) by reducing its network effects
B) by targeting its new products and services toward laggards
C) by driving the price for the end user to zero
D) by regularly introducing incremental improvements in its products

Accepted Answer

To sustain a competitive advantage, a firm must continuously innovate-that is, it must produce a string of successful new products or services over time. In this spirit, not only has Apple introduced incrementally improved iPhones, but also the firm has launched other innovative mobile devices such as the iPad line of products, multimedia tablet computers created with the intent to drive convergence in computing, telecommunications, and media content.

Question 9

In the United States, the time period for the right to exclude others from the use of a patented technology is ________ from the filing date of a patent application.
A) 20 years
B) 25 months
C) 15 months
D) 25 years

Accepted Answer

In the United States, the time period for the right to exclude others from the use of a patented technology is 20 years from the filing date of a patent application.

Question 10

According to the crossing-the-chasm framework, the biggest chasm between customer segments is between early adopters and the mass market made up of the early majority and the late majority.

Accepted Answer

According to the crossing-the-chasm framework, each stage of the industry life cycle is dominated by a different customer group. Different customer groups with distinctly different preferences enter the industry at each stage of the industry life cycle. Such differences between customer groups lead to a big gulf or chasm into which companies and their innovations frequently fall. The largest chasm separates the early adopters from the early and late majority that make up the mass market.

Question 11

For ideas and inventions to be innovative, they must first be commercialized.

Accepted Answer

Innovation concerns the commercialization of an invention. Innovation is the competitive weapon entrepreneurs use to exploit opportunities created by change, or to create change themselves, in order to commercialize new products, services, or business models.

Question 12

A. G. Lafley at Procter & Gamble (P&G) had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n)
A) venture capitalist.
B) category captain.
C) intrapreneur.
D) early adopter.

Accepted Answer

Innovators like A. G. Lafley at Procter & Gamble (P&G), innovating within existing firms, are referred to as intrapreneurs.

Question 13

The typical four-step innovation process begins with
A) the modification and recombination of an existing product or process.
B) the presentation of an idea as findings derived from basic research.
C) the commercialization of an invention by entrepreneurs.
D) a competitor's attempt to imitate an innovation.

Accepted Answer

The innovation process begins with an idea. The idea is often presented in terms of abstract concepts or as findings derived from basic research.

Question 14

Pipeline businesses are typically better than platform businesses at incorporating user feedback and taking advantage of network effects.

Accepted Answer

Platform businesses help facilitate exchanges between producers and consumers, and this position allows them to gather data from both sides of the interaction. In contrast, pipelines tend to be inefficient in managing the flow of information from producer to consumer. Feedback loops from consumers back to the producers allow platforms to fine-tune their offerings and to benefit from big data analytics. These feedback loops also facilitate network effects, in which improved products or services based on user feedback lead to more customers, allowing the firm to continue improving its offerings.

Question 15

Network effects always lead to a virtuous cycle in which an increasing number of customers improves the quality of a product or service, thereby attracting more customers and continuing the cycle.

Accepted Answer

Negative network effects describe the situation where more and more users exit a platform and the value that each remaining user receives from the platform declines. The social network Myspace experienced negative network effects as more and more users abandoned it for Facebook.

Question 16

Social entrepreneurs forego the pursuit of profits to achieve social and environmental goals.

Accepted Answer

Social entrepreneurship describes the pursuit of social goals while creating profitable businesses. Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution (profits, planet, and people). They use a triple-bottom-line approach to assess performance.

Question 17

Process innovation typically overtakes product innovation in importance during the shakeout stage of the industry life cycle.

Accepted Answer

As illustrated in Exhibit 7.7, the level of product innovation is at a maximum during the introductory stage because new features increasing perceived consumer value are critical to gaining traction in the market. In contrast, process innovation is at a minimum in the introductory stage because companies produce only a small number of products, often just prototypes or beta versions. During the growth stage, process innovation gains in importance while product innovation decline in importance. Finally, during the shakeout stage, when controlling costs becomes more important than increasing perceived product value, process innovation surpasses product innovation in importance.

Question 18

The pace of innovation has slowed in the 21st century.

Accepted Answer

As the adage goes, change is the only constant-and the rate of technological change has accelerated dramatically over the past hundred years. One determinant is that initial innovations such as the car, airplane, telephone, and the use of electricity provided the necessary infrastructure for newer innovations to diffuse more rapidly. Another reason is the emergence of new business models that make innovations more accessible. The speed of technology diffusion has accelerated further with the emergence of the internet, social networking sites, and viral messaging.

Question 19

The best way for a firm to keep its proprietary technologies, recipes, or formulas secret is to obtain a patent.

Accepted Answer

Because patents require full disclosure of the underlying technology and know-how so that others can use it freely once the patent protection has expired, many firms find it strategically beneficial not to patent their technology. Instead they use trade secrets, defined as valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy.

Question 20

What is an invention?
A) the transformation of an idea into a new product or process
B) a unique idea that has not been thought of before
C) the transformation of an idea into a successful product
D) a unique idea that has been patented

Accepted Answer

Invention describes the transformation of an idea into a new product or process. If an invention is useful, novel, and nonobvious, it can be patented.

Quiz 7: Business Strategy: Innovation, Entrepreneurship, and Platforms

Innovation that targets new markets with existing technologies is known as disruptive innovation.

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

The four-step innovation process ends with

Which of the following accurately describes how Netflix used innovation to gain a competitive advantage?

Innovation and strategic entrepreneurship can only occur within new businesses.

How has Apple been able to sustain its competitive advantage in the smartphone industry?

In the United States, the time period for the right to exclude others from the use of a patented technology is ________ from the filing date of a patent application.