Key Factors That Explain the Success of Social Networking Innovation - Assignment Example

Managing Innovation and Entrepreneurship Student’s Name: Instructor: Course Code and Name: Institution: Date of Submission: Managing Innovation and Entrepreneurship Question One: Key factors that explain the success of social networking innovation Social networking is one of the key innovations in the recent past. This involves interacting through the internet. People can share their ideas; feelings, meet new friends, post pictures, among other things. The sites usually attract many people with the leading social sites being Facebook, Twitter and Tagged. These are global, meaning that they are available anywhere in the world. They have further been translated into various national languages to accommodate all major languages. There are millions of people accessing these sites every day. The networks get their revenue from organizations that would like to have their information posted by the site for all users to see (Warner 2010, pp. 306). Organisations usually prefer these sites due to many people who will see the advertisements and know of the products that are available for offers by the respective organization. The higher the traffic a site has the more bargaining power it has towards charging more for advertising. Therefore, the administrators ensure the site has as many admirable features as possible to keep users revisiting it. The creative implementations that are incorporated include attractive colours, various socializing ways like commenting on updates or following someone, poking, liking and online games. Important entrepreneurial lessons arising from the analysis One of the key factors that explain the success of this innovation is the increase in internet use, in the world. Internet has been available to many people, with the increasing global literacy rate enhancing the use of internet devices, through which they communicate. Therefore, it can reach many people at a time, with advanced technology making it easier for thousands of users at a time. There is also observed decreasing rates that are charged by internet providers. Consequently, internet is affordable by most people. This is further enhanced by the decreasing cost of internet devices, with improvements on speed in them. Secondly, the sites accommodate people of all ages. There are restrictions on what one can do with them. These are ensured by abusive information reports that are sent to administrators who block the user. Pictures and videos that are socially unacceptable are also prohibited. This makes all people comfortable using the sites. Therefore, all ethnic groups are accommodated in the sites. As a result, they have not been restricted in any of the groups considering they are effective. The globe is becoming busier with people getting into different duties that make them occupied all day long. This has reduced the time they have for socializing whereby they can involve in meeting at a place to share ideas and meet new people. This has resulted in decreased socialization, which these sites exploit as opportunities that have come up. People can now socialise everywhere they are. Regardless of what they are doing, they can afford some time for them. In addition, it is much cheaper to socialise this way. All someone needs is a device and some little money to pay for the service. It is better than some social activities, which can be costly to involve in. There are some lessons that are observed in the analysis that can be applied to other new opportunities. To start with, originality is a quality that each new venture should have. Coming up with new ideas attracts people’s attention. At first, they visit the sites to socialise. Eventually, they find advertisements that are posted on the site and get interested, depending on what value the product would have on them. They will hence go for the product in the market. This is contrary to what other sites that have advertisement and sales as their prior function. They can be boring; with less people visiting, hence few organisations would prefer using the site for advertisement. In addition, each of the sites has distinct features that differentiate it from the others. Apart from the name, there are other characteristics associated with them. A person would find themselves more comfortable in one site more than they are in another due to personal differences. This offers each an advantage over the others. Identification of these strengths and weaknesses of other sites is essential, to know what to capitalise on as they strategise. This is a crucial entrepreneurial lesson. The innovations have considered potential threats that would affect them in the future. One of the strategies they have adopted is using a given currency as the only payment for services they render. This reduces foreign exchange rate that they can face. Moreover, the continuation of the innovations is almost certain. The sites can run indefinitely, considering they keep on changing with the users’ tastes and preferences. This is another lesson entrepreneurs should learn, to shift the features to correspond to dynamic tastes. Another important lesson is that every innovation should aim to grow and expand as one of its objectives. Users in the sites started with very few at the beginning. Eventually they increased, and the innovation was ready to absorb them. More referrals were made others who had not joined the site, due to the features the existing users saw on them. Presently, there are millions of users to these sites. Increase in market share leads to increased revenue. Therefore, the more admirable the product, the more people will go on using it and inviting more, hence increased sales. Customisation of products is another lesson other innovations should learn (Bessant & Tidd 2008, pp. 291). The sites offer options that each individual can insert their own preferred features. For instance, Twitter gives options on the text colour and background to the texts. The sites also offer security options that a person can set depending on the level of privacy they wish to have. This entices more people ranging from all diverse differences, with an aim of increasing more potential customers to the products that are advertised there. Further, the advertising organisations have choices on space and nature of the adverts. Customisation makes customers comfortable with the product, hence increased sales and better quicker market penetration. Question Two Barriers to imitation Barriers to imitation are never needed if one, as a good entrepreneur, has the ability to appropriate value from an innovation. This statement is disagreeable. Innovators should benefit maximally from their new ideas. Entrepreneurs should protect their innovations from imitations because of various factors. To start with, this reduces the number of competitors. When the product is imitated, there would be more produces of the same product hence a decreased market share. In addition, this avoids expenses on research, development and marketing. To gain a large market share among upcoming competitors, the entrepreneur uses a lot of money in marketing, which is avoided by innovation protection. Similarly, raw materials for production would not be competed for, hence the price for acquiring them will be subsidised. This is also carried out to create a corporate identity. This is achieved through a branding strategy and a trademark. The producer will be identified as the sole producer of a given product. Further, the entrepreneur gets a fairer chance in franchising, negotiating licensing or any other IP-based agreements. Organisations wishing to join in production of the same product will be of benefit to the entrepreneur due to the contracts they have to make. Protection also increases the market value of the innovation. Monopoly will increase the innovation’s demand, implying an increasing market share. Moreover, protection helps in acquiring capital and enhancing finance access. In addition, the protected innovation can access new markets. Having no competitors, enjoying a large capital base due to increased revenue, which would reflect on profits and producing a high quality product, the innovation has chances to explore new markets and diversify in other products. It will also have the ability to improve the product itself, by appropriate delivery. Types of barriers that entrepreneurs have used to protect innovations There are different types of barriers that protect innovations. One of the barriers includes patenting. Innovators exclude others from using, selling or making the invention Legal measures are taken upon anyone who is caught breaking this (Hill 2013, pp. 247). Utility patents are given to any useful process, composition of matter, or any useful improvement thereof. Design patents are given to someone who invents an original and patterned design for a manufacture article. Plant patents are awarded to people who come up with distinct asexually produced new plant variety. They are granted by respective legislation of the country. They can include some specialty like being under the patent for a given amount of time, or restrict on the use either in the public or private, personal or commercial. Copyrights protect original authorship works. These include dramatic, musical, literary, artistic and other intellectual works. These can be published or unpublished. Anyone caught going against the rights that the copyrights bestow on the owner is prosecuted. This is, therefore, one of the barriers that are set to protect intellectual property innovations. A trademark is another way to protect an innovation. This protects any symbol, design, word, combination of digits or letters that distinguishes and identifies a product in the market. This has an advantage of notifying the public on the registrant’s ownership claim of the mark, legal appreciation of ownership worldwide, and restricted rights to use the mark in or on connection with the products recorded in the registration. They are iconic in nature and are established through marketing, advertising, trade shows and other ways. It then becomes exceptionally valuable intangible asset. Designs make an article appealing and attractive. They add value to the product by increasing its marketability. The innovation is assured of an exclusive right restricting unauthorised imitation or copying of the design by any third party. It helps to ascertain fair returns on investments. Effective protection system benefits customers and the public at large by enhancing fair competition and genuine trade practices, promoting creativity and more attractive products. Other barriers include deterrence, resource immobility and causal ambiguity (Grant, 2009, Pg 220-222). Effectiveness of barrier on Forgent Network One of the innovations discussed is the Forgent Network. It is a software company. Therefore, the products it produces are intellectual. It has adopted patenting as the barrier to prevent others from imitating it. Among the products it has innovated is the JPEG image compression. The company owns the right to control usage of the innovation. The barrier has not been effective enough. There have been pirated copies all over the world produced by some other companies. The company faces the legal challenge of who came up with an idea that has been implemented. The companies involved in this imitation include cell phone makers, software designers and camera manufacturers. They have constantly made use of the product without authority from the manufacturing company. Some major companies like Google, IGM, Microsoft and Hewlett-Packard have found themselves in the fix. They have been held liable by Forgent for the uncontrolled use of an original idea that was primarily to be enjoyed by the creative company. Consequently, the barrier is not serving its purpose since the idea still leaks into the market and other companies enjoy the benefits. Necessity of the barriers The barriers are sometimes necessary to reduce the amount of competition the company is subjected to. If a company does not have competitors producing the same product, it will enjoy a wider market share. In addition, the costs of the product are solely determined by the company. Depending on how much the product is needed in society, the price can affect demand. The more basic and the product is, the more the price would be without changing demand. This optimises the returns a company gains from the innovation. However, when some imitations are introduced into the market, they would provide the similar product at a reduced cost to gain a competitive advantage. This would make the innovating company to also lower the price to correspond to the imitated product (Libecap & Thursby 2008, pp. 19). Furthermore, imitations are usually of a lower quality than the original product. When customers purchase an imitation, they would not be satisfied with it. Most will lose trust in related products, thinking they might also be imitations. This makes it hard for the original producer to market their product. Question Three Creating a new industry A new industry can be created by a different value curve. This statement can be agreed upon. A different curve is introduced by the entry of another unique product in the market. The curve analyses the value of the earlier existing products and compares these to the new innovation. Various aspects are looked upon, which include the value it has to customers and the environment the industry competes on. These are ranked in a range. The curve is defined in a given marketplace at a particular time. In the original value curve, the existing products give what customers would expect in the new product that the inventor is willing to come up with. Therefore, the inventor looks at the weaknesses of the other products and tries to produce a product which covers up for these. After the introduction of the innovation, the curve now shows the uniqueness of the new product and the competing advantage it will have over the others. If the curve does not show any advantage over the formerly ones, then it does not add any value in the market and would as well not have been invented. The more the curve is updated, the better the product would be, if its innovation puts into consideration the current trends in the industry (Martinez & Wolverton 2009, pp. 120). Therefore, this curve gives the idea of what the new product should contain; hence, providing some viability in investing in the same. Consequently, a new industry is created. Red and Blue Ocean strategy and value innovation 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. Red ocean strategy, which implies conventional logic, is much reduced when there is a new value curve that acts in favour of the customers (Mun 2009, pp.118). Competition in the existing market space is reduced due to the originality of the new product. The product would still seek to exploit on an existing market, and its chief aim would be to capture a market share. It further makes value trade off, while trying to align its activities with differentiation or reduced cost. These would be in an effort to have its product outstanding among other nearly similar quality products. Therefore, red ocean strategy is not effective in diversification of an organisation, hence not admirable in innovation. Blue ocean strategy, which implies value innovation logic, contrasts the red ocean one. For this strategy to be effective, the management has to consider the value curve that exists before they come up with a product to fit in the concerned industry. Some factors are then considered. One of the factors includes the factors that could be reduced below the industry standard. Other factors are the ones that can be eliminated in the industry. These are taken for granted by the industry, and eliminating them would not create an impact on customers. These two sets of factors do not put off customers, since they are compensated in the following other factors. Features that can be raised well above the industry standards are identified. Further, features that are not offered in the industry are created. These two sets must be very powerful so that the product is found to be unique to the admiration and satisfaction of customers. Upon implementation of these, the value curve changes correspondingly. This can be indicated as below, with the two curves before and after the new product being analysed. These are two curves, which indicate web browse speed, battery life, user experience, price and technology features as factors in the industry, give a pictorial presentation of the different ranks. They show the entry of iPad. It is competing against Tablet PCs and Netbooks. Before the entry, Tablet PC has a highest web browse speed, battery life and user experience. The price and technology feature are also higher, though the features and technology are not much recognized in the industry. Netbooks has a lower rank in all of these. When the new iPad is introduced in the curve, it has a higher web browse speed, battery life and user experience than Tablet PCs. These are some of the factors that it adds value to. However, the price is reduced. This is a cost that is charged on the customer to acquire the product, and so the product sells cheaper than all the others. Features and technology are taken by the industry for granted, and so elimination of some from the device is not expected to cause much value reduction. Therefore, iPad has gained a competitive advantage over the other two in the market, since it has admirable features. This yields to a blue ocean strategy. This creates unlimited market space for the new device. The uniqueness of the product makes the market ready for accommodating it. In addition, competition is irrelevant in this case. Competition arises when many producers make the same product in most of the qualities. The strategy also creates new demand of the product and captures it. It produces enough to satisfy the expanding market. It also breaks the value trade off. Finally, the strategy aligns the system targeting to attain differentiation and reduced cost. However, for this to be sustained for long, the innovations should be protected against potential imitation. Therefore, blue ocean strategy is more preferable than red ocean strategy (Koontz & Weihrich 1990, pp. 115). Blue ocean strategy is not subjected to various risks that competition would bring. A slight failure by a producing firm in a highly competitive industry is likely to make the firm fail. In this case, customers would quickly shift to the other closely related product from one of the competing companies. The product also finds it hard to enter into the market under red ocean strategy, given that there are some already existing producers who might have established themselves well enough. Therefore, every innovation should try to adopt the blue ocean strategy to succeed. List of References Bessant, JR & Tidd, J 2008, Innovation and entrepreneurship, J. Wiley, Chichester (England). Grant, RM 2009, Contemporary strategy analysis, John Wiley & Sons, Hoboken, NJ. Hill, CWL & Jones, GR 2013, Strategic management theory: An Integrated Approach. Houghton Mifflin College Div., Boston, Massachusetts. Koontz, H & Weihrich, H 1990, Essentials of management, McGraw-Hill, New York. Libecap, GD & Thursby, MC 2008, Technological innovation: generating economic results, Elsevier/JAI, Amsterdam. Martinez, M & Wolverton, M 2009, Innovative strategy making in higher education, Information Age Pub., Charlotte, NC. Mun, HC 2009, Global business strategy: Asian perspective, World Scientific, Hackensack, NJ. Warner, J 2010, Web sites do it yourself for dummies, Wiley, Hoboken, N.J. Read More