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Value Proposition

Value Proposition

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Published by arfatthote

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Published by: arfatthote on Oct 04, 2011
Copyright:Attribution Non-commercial


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( Class notes)A.S.RaoSPJIMR 16/7/20061
Value creation
Prof. Rebecca Henderson of MIT portrayed Strategy as consisting of Valuecreation, Value capture and value delivery. He explained that to create value, afirm needs to :
Understand how customers needs evolve
Understand how technologies evolve
Develop world class products and services that meet customer needs
To understand the complexities involved in positioning a firm, small or big, one must lookat all the three dimensions; Technology Life Cycle (TLC), Market segment andInnovation strategy. TLC side of the cube has 3 stages- fluid, growth and maturity.Market has 3 basic segments – early adopter, early majority and late majority. Similarlyinnovation has 3 strategies- first to market, fast second and imitation with improvement.The technology life cycle (TLC) is the cycle of technology. The technology of a TLC isthe major technology like Steam engine, IC, Transistor. TLC traces technology from thestages of the first idea, to its development and commercial exploitation. It is a usefulconcept that brings out the evolutionary character of technology. The evolution isinfluenced by the determinants of technology change.
Inception point 
Basic and applied research, precede development of a technology. Science basedresearch is a quest for knowledge.
Stage 1 Technology Development 
Here research shows promises of an emerging technology. The firm evaluates thepotential benefits and continues with the development based on the followingconsiderations:1.The technology has potential commercial application(s)2.That application fits into firms strategy3.The firm has the necessary financial, technical and managerial resources topursue the lead to its logical conclusion.Sometimes the development could achieve results other than planned or the potentialholds promise in unrelated application.
Stage 2 Technology Application
The technology is ready for application. The process technology and the end productcan now be recognised by the engineers and technologists. It can be used to develop anew product or process. Here the firm incurs significant costs for developing associatedprocess and product technologies. The extent to which a technology is perceived asessential to the firms present or future activities is the main decision making variant. Thisstage is characterised by higher costs and an element of risk and uncertainty withrespect to:
Market acceptance of the product
Further development work required
Lack of knowledge of competing and substituting technologies
Actual cost of production
Value of the technology.
Stage 3 Application launch
This corresponds to the performance maximising stage of TLC. The firm will bedeveloping technology in small evolutionary steps to meet the market requirements.There are also inputs of value analysis. This is also the fluid stage with many firmsworking on the same technology and each designer assuming that his design will be theultimate winner. The technology risk is enormous and market potential unclear.Customers set a price on the technology by setting the price of the end product.Customers compare products in the market place and compare the technologies. Thetechnology becomes more easily recognised by other firm’s engineers. This stage ischaracterised by :
Other companies moving into the end product market with similar or substituteproducts. These are made with similar or competing technologies. Thus thecompetition between technologies commences.
Battles for technology market size grows
Technology becomes known in all countries with similar level of development.The widening and depth of the technology leads to the fourth stage of the TLC.
Stage 4 Application growth
This is the stage of sales maximisation. The demand takes off with the emergence of adominant design. With the technology risk reduced and market attractiveness clearer,more and more firms will join the fray as independent developers or licensees of dominant design holder. The leader tries to take advantages of network externalities asa compensation for diluting his hold on the technology. The leader tries to selltechnology to ensure it becomes industry standard. This is like market leader concentrating on increasing the overall market size. The benefits are similar,technological resources are not wasted by continually updating existing technology to

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