Rules for Bringing Innovations to Market Renaissance Strategic Consultants
Structure Nature of Networked Markets Characteristics of Networked Markets Challenges for InnovatorsFramework for entering into Network market
Nature of Market’s• Markets resist new ideas & products – Television acceptance in Mass Media – Launch of PC’s, Mobile phones• Despite the risks, companies love innovations as they drive profits, growth and Shareholder value
Markets are adverse to innovation as they crave for EQUILIBRIUM
Nature of Market’s EQUILIBRIUM…….Equilibrium is a situation where every player in the market believes that he or she is making the best possible choices & that every other player is doing the same
Nature of Market’s• Equilibrium in the market lends “Innovations – Stability to the players expectations change the – Validation to their choices Equilibrium, which – Reinforcement to their behavior is why markets• When Innovation enters the market resist them” – It upsets the players expectations and choices – Introduces uncertainty in decision making
Nature of Networked Market’s In a networked Virtual connections market, hostility to between players caninnovations becomes also affect thestronger when players adoption of products are interconnected
Nature of Networked Market’s Once enough players in a networked market decide to switch to a new product, other players motivation to do so becomes stronger
Characteristics of Network Network Effects Equilibrium Hub
Characteristics of NetworkNetwork Effects: a) Products that have large networks around them are often cheaper to use than products than products that have small network around them b) Products value to each user increases as the size of the network grows “Hence companies with superior products often can’t topple market leaders!!! “
Characteristics of NetworkEquilibrium: Networks look for Equilibrium a) Companies must choose their strategies only after systematically considering the decisions that other players will make. b) As the interconnection between players increases, the payoffs on their choices depend even more on others’ decisions.
Characteristics of NetworkNetwork Hubs a) As the network becomes bigger, the interconnections between players tend to cluster around just a few, also known as network hubs b) Power distribution within networks is mostly concentrated in the hubs because of the efficiencies that come with that concentration c) By tapping the most powerful parties in a network, innovators can reach virtually everyone in the network “Small world Phenomenon”
Challenges for Innovators They have to create a new Equilibrium where manyThey have to unravel the players have adopted the Equilibrium innovation and believe systematically they are better off because of it
Framework for entering the Networked Market Begin at the endgame Complement the power players Offer incentives Preserve flexibility
Begin at the End Game Think several steps ahead and Begin with the work back from end in mind…. the endgame wanted Innovator should implement only The endgame is those strategies plausible but that maximize itsspeculative guess chances of getting to its desired endgame
Complement the Power Players To get the desired Endgame, the innovator has to change the behaviors of many players in the market The network hubs can help propagate A few Power an innovation’s players can help this benefits because of happen their ties with many other players
Offer coordinated switching incentives• Players need to be convinced that their best choices ought to be different because choices of other participants have changed
Maintain Flexibility• Every potential endgame is based on its expectations about events that will happen or on the behavior of other players, which creates uncertainty• Flexibility is essential in the plans
Think EQUILIBRIUM!!!! Imagine the future while reasoning back, complement powerfulplayers while creating change, offer incentives – & remain flexible at all times……..
Individual BehaviorFor a student the way he solves a problem during exams he alwaysfeels it to be the right way and his friends are also using the same technique “What happens if someone tells him a new method of solving the problem…..”
Individual BehaviorThe student is comfortable with his method of solving the problem – He has validated his method – He has confidence in it “The new method would make him move away from his comfort zone and so he is not willing to accept the new method”
Challenge to the Innovator• Understanding why is he comfortable with the old method• Show him that the new method is better!!!
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