rules for bringing innovations to market
TRANSCRIPT
Rules for Bringing Innovations to Market
Renaissance Strategic Consultants
Structure
Nature of Networked Markets
Characteristics of Networked Markets
Challenges for Innovators
Framework 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
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
– Stability to the players expectations
– Validation to their choices
– Reinforcement to their behavior
• When Innovation enters the market
– It upsets the players expectations and choices
– Introduces uncertainty in decision making
“Innovations
change the
Equilibrium, which
is why markets
resist them”
Nature of Networked Market’s
In a networked
market, hostility to
innovations becomes
stronger when players
are interconnected
Virtual connections
between players can
also affect the
adoption of products
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:
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 Network
Equilibrium: 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 Network
Network 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 unravel the
Equilibrium
systematically
They have to create a new
Equilibrium where many
players have adopted the
innovation and believe
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
Begin with the end in mind….
Think several steps ahead and work back from
the endgame wanted
The endgame is plausible but
speculative guess
Innovator should implement only those strategies
that maximize its 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
A few Power players can help this
happen
The network hubs can help propagate
an innovation’s benefits because of
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 powerful
players while creating change, offer incentives – & remain flexible at
all times……..
Individual Behavior
For a student the way he solves a problem during exams he always
feels 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 Behavior
The 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!!!
THANK YOU
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