Question

Piano and Teece (2007) noted that figuring out how to capture value from innovation is not just a matter for innovators, but also an important issue for public policy. its is therefore important to know how innovative companies ensure they capture value in order to make money. Discuss the three (3) factors in detail (in point format) that are involved in trying to capture value from an innovation.

Answer 1

Three factors which are involved to capture value from an innovation:

• The first factor which is value added based that is involved to capture value from innovation. In this value added based factor, technologies which come up with new ideas are very valuable, but network creates a switching barriers as the innovator that can swiftly holds the market share. So the switching barriers give innovator to a better position because clients are not agree to move to other companies even their offer is more enchanting with lowest price. Customer can not move to grab their offers. For example, there is a popular company Microsoft which has launched Microsoft Word that is added value to the office computer that’s why it became the word processing standard.

• The second factor which is alignment based that is involved to capture value from innovation. So in this factor, It always can gives the best alignment based like proper services and moderate price both for standard market. Innovator gives support to their business system which is resistant to the specific targeted market needs and possibly get the offer to the best quality in market    get the offering to the highest possible quality in test markets then finally launch their services or products.

For example, Southwest Airlines has launched their airline business service that is very well served and moderate price that is very helpful for budget conscious travelers.

• The last factor is Cost based. Innovators can maintain the price low with compare to their competitors. Then the clients or customers can attracted more. They want to get new technology based product with lowest price. If the innovators can maintain it and give the services or product with low price then innovators can make a customer base. After that customer switching barrier will be lowest.

For example many technology based and chemical based companies are using this factor for over the lowest switching barrier.