Thursday, July 15, 2004

Innovating by scaling up

Costas Markides and Paul Geroski once more write about colonizers and consolidators in Strategy + Business (Issue 35). They now recommend large corporations to stick with what they do best in I. : operating at large scale. So instead of treating discovery as the only holy grail in I. (as many consultants are advising them apparently), they argue scaling up is actually as innovative as discovery. More importantly, it is also creating a tremendous amount of value.
Moreover, the authors also explain the skills a company needs to excel in turning niche markets into mass markets. They are:
1. Focus on the price/performance trade-off (don't focus on creating a technically superior product but compete on a reasonable quality at an attractive price to mass consumers)
2. Get a bandwagon rolling (alliance strategies, merge with a major rival or use marketing to create the illusion that a design has already become dominant)
3. Reduce consumer risk in adopting the new product
4. Build a strong mass distribution channel
5. Create complementary products (or support complementary products from other parties).
Do you agree that large corporations are wise not to invest in discovering new products themselves?

Monday, July 05, 2004

Microsoft Appeals EC Antitrust Ruling claiming it undermines innovation

Microsoft officially appealed the European Commission's historic antitrust ruling against the software giant, asking the court to throw out the decision, quash or cut the hefty fine imposed against the company and suspend a controversial penalty that would require it to ship a stripped-down version of Windows.
Microsoft said it had filed its appeal and urged the court to consider potentially harmful effects on corporate innovation and consumers. "The commission's decision ($600 million-plus fine levied against it for allegedly abusing its monopoly power) undermines the innovative efforts of successful companies, imposing significant new obligations on successful companies to license their proprietary technology to competitors, and restricts companies' abilities to add innovative improvements to their products," Microsoft EMEA Associate General Counsel Horacio Gutierrez said in a statement. "The legal standards set by the commission's decision significantly alter incentives for research and development that are important to global economic growth. Do you agree with Microsoft?