Are there particular types of innovation activities for which large firms are likely to outperform small firms? Are there types for which small firms are likely to outperform large firms?
In the modern competitive business world, small, medium and large-scale businesses need to develop new processes, products, strategies and paradigms so as they can remain afloat and have a competitive advantage. Innovation is defined as a continuous process of selecting, developing and commercialization of new commodities, processes, approaches and business models.
Large Corporations have the advantage of large amounts of capital and operation base; to counter competition from small-scale players they are likely to focus more on process innovation and paradigm innovation. The corporations have a large number of employees in different fields, they also have the capacity of buying and inventing technologies that lead to the low cost of production and thus sell their commodities at a low price than the small traders. When the companies develop new processes and combinations, they may keep the innovation indoors and limit its diffusions to other traders, through intellectual property rights, these corporations are able to protect their process innovations. With the large market share and operation base, the companies are able to enjoy economies of scale; with economies of scale, they sell products at lower prices. For example, Starbucks uses its large operation base to get coffee beans directly from farmers and thus outdo the competition offered by small traders. Other processes that a large corporation is likely to change fast include marketing strategies, supply chain management, financial structuring and human resourcing. With time, a large corporation can change the psychological model of how it is perceived by the public, this is through processes like rebranding, change of commodity and innovation of other forms of commodities.
Small firms enjoy a little share of the market; they have to survive and remain competitive, they are more likely to use product innovation. These corporations take advantage of the market components in that the market has a spectrum of populations whose needs are not met by the larger corporation. Small-scale traders take advantage of this and create a niche market. A niche market is a subset of the larger market that requires certain unique commodities. A niche product is a unique product or service offered to a sub-segment of the larger product market. It focuses on the needs of a micro-market within the larger group. The numbers of customers are usually not big since its potion in the larger market segment; this acts to the advantage of small traders in that they can large corporations will not be able to produce for the market effectively; the limited customers limit the production of the products by a large corporation. Niche products providers have some advantages over other players in the same industry; they enjoy the power of quasi-monopoly.
What becomes of great importance in innovation in small-scale traders is to recognise the need in the market that large corporations are not addressing, and then have strategies to focus on and address the areas addressed.
Small traders have innovated better methods of creating good customer relations, they are closer to their customers and thus they are able to devise more focused strategies like marketing since they had a better understanding of what is on the ground, the result is a competitive advantage despite their size (Mark and Ian, 2002).
Discuss the advantages and disadvantages of involving customers early in the design process and illustrate this using the frog case
Automation of business processes takes different forms, at times the approach that a company takes is influenced by internal and external factors affecting the business. Frog management strategy suggests that customers should be taken as part of an organization thus when making any decisions they need to be considered. When adopting technology to assist in numerous business processes, customers need to be involved. The following are advantages and disadvantages of involving customers:
Advantages
A business is dependent on its customers for its success; a customer is the most important thing that a business can have. However, sometimes consumers tend to act rather weirdly, they tend not to respond to the occurrence and efforts put across by a business. The most important thing that will always capture the attention of customers and retain them is how well a business is able to communicate to customers. When developing technology, customers’ needs and perceptions should be understood, they can offer some insight into information that the organization had ignored.
When the needs of customers have been incorporated, a company is able to adopt the right technology since it will consider its effect in the market. For example, if the target markets of a company are illiterate people, using internet marketing may lead to a loss of touch with the customers.
When customers are consulted before making a decision, it is a strategy for creating customer loyalty. Customers feel part of the company and thus they are more willing to trade and remain loyal to the company. Developing new technology is a change that might affect the relationship between a company and customers, to undergo change effectively, a company needs to prepare all the affected parties involving the customer prepares them for changes.
Disadvantages
Although the frog management approach advocates for the inclusion of customers in making a strategic decision, when involved or considered, they might hamper strategic moves. The major push factor to adopt technology in affirms is the level of technology adopted in an industry; the process may be hampered if the customers are not updated with the changes. They may thus discourage a company from innovating better techniques, the result is a poor business. Among the customers, some people are static to change; this can affect innovations negatively.
People have a negative perception to change if they fail to understand the net effect of the changes; when customers are consulted when making technological innovations, adoption, or invention, they are likely to discourage the process. To make them understand may take time and resources; the delay may give competitors time to adopt similar technology thus the benefits that could have been gotten from the innovation are lost. As much as there is sense and it is good to involve customers when making strategic adjustments, their influence should be limited, as long as a company is working for the mutual benefits of its goals and customers, consultation of customers should be minimal (Mark and Ian,2002).
Reference
Mark A. and Ian, D.,2002. Innovation. London: Rowman & Littlefield.