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Key Topics
Requirement:
focuses on an industry and identifies components and players in innovation ecosystem (both micro and macro), recent developments (within last 5 to 10yrs) and future prospects (recommendation).
Word Count: 1500 +/- 10% (preferable 1,600 words)
Solution
Executive Summary
The paper discusses the innovation in the smartphone industry and tries to understand the impact of various external factors on the industry. The smartphone industry grew in double digits in the past decade due to the rapid innovation. However, recent period have seen some stagnation in the innovation in the smartphone industry and the orientation of smartphone companies towards other products such smart watches. The paper sights that innovation in the smartphone industry is the only way out for the companies instead of fighting for the customers with same kind of products.
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Introduction
Smartphone industry has been the most recent and sought after industry in terms of innovation and ability to attract the customers towards the innovative products (Nam et al,2015). This paper has tried to look into the smartphone industry and discusses the level ofinnovation seen in the past one decade and the way it is moving forward in the light of various external factors such as political, economic, social and technological. Moreover, the paper tries to understand how the various market forces such as bargaining power of suppliers and buyers and others impact the innovativeness of the market. The chapters on blue ocean strategy or disruptive innovation try to gaze the industry and understand to which category smartphone industry belongs. The later chapters in this paper discuss some of the new orientation in the innovation.
Industry Development
The global smartphone industry saw exponential growth in the past one decade in terms of innovation. Since the dawn of the smartphone in January 2007 through the presentation of Steve Jobs, the industry has seen more innovative and cost effective smartphones available for the customers (Maghnati et al, 2012). The smartphone has become the most suitable and convenient method to access the myriad information available on the internet and can connect and share almost all media types with anyone around the world. Smartphone industry became the most appreciated example of innovation which is customer focused and made and developed only for the customers.
PEST Analysis
PEST Analysis considers the four external factors that have impacted the innovation of the smartphone industry. These factors are political, economic, social and technological.
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Political Factor
Laws related to data security of smartphone users and other areas such as texting and driving might have certain implication. The company are focusing on innovating products those are more secure and can protect the customer information in a better way. Moreover, hands-free options available in phones allow customers to use phone without getting distracted while driving (Nam et al, 2015). -
Economic Factor
The economic factor has major impact on the smartphone innovation. Now the products are getting cheaper and more convenient as it is gradually targeting the customers with low income level (Cecere et al, 2015). The developing countries are readily accepting the innovative products those provide all the facilities at much lower rates. -
Social Factor
The way people are using the smartphones has greatly defined the innovation in this industry. The inclination of people towards the social media has seen similar orientation in the innovation in the smartphones. Most of the smartphones now comes with pre-installed social media apps and user friendly interface to access those. -
Technological Factor
Apple being the first company to introduce the three innovative elements in the smartphone industry, namely, camera flash, and fingerprint scan technology, and battery life. Such factors revolutionised the market and various companies started to adopt and improve upon these to bring out more innovative products to compete the existing ones.
Five Forces Analysis
These are market forces which guides the level of innovation within an industry. The five forces are imperative for the smartphone industry to grow and thrive. These forces and their impact on smartphone innovation are mentioned below:
Bargaining Power of Suppliers
There are large numbers of substitute inputs and the competition among the suppliers is very high. Moreover, the critical production units are getting more similar which has pushed the orientation towards better innovation. The innovation is the only possible way to differentiate self in the market.
Bargaining Power of Buyers
There is less differentiation in one product to another and the number of buyers is high in the market. Buyers can easily switch between products thus has more power. Presence of more options and less differentiation in the products makes it necessary for the companies that they bring innovative products.
Threat of New Entrants
Entry into this industry requires high capital and strong supply chain network. Moreover, without innovative product, entry in this market is futile. The barriers to entry in this market are high. The patent issues limit the new companies to enter in the market with existing technology as competitors.
Threat of Substitute Products
The percentage of substitute products is low and buyers are less inclined towards the same. Smartphone users will face high switching costs for substitute products.
Competitive Rivalry
The competitive rivalry between the smartphone companies is intense and dependence on innovation is high as the competitors product match almost to the others. The low product differentiation and fast growth in the industry has intensified the competition.
Blue Ocean Strategy/Disruptive
In the initial phase of growth, the smartphone innovation was a complete blue ocean product and disrupted the existing phone market (by Apple). This was in 2007, however in 2013, the smartphone industry went Red Ocean and now we can see multiple companies fighting for market share. There are more features on display than before yet companies are unable to attract customers (Cecere et al, 2015). Now the few of the companies have moved towards smart-watch a blue ocean market for the time being. The innovation in the smartphone has stalled a bit and the giants such as Samsung, Sony, and Apple are unable to come up with something that can help them beat the odds.
Business Model Innovation (BMI)
Business Model Innovation states to the innovation in the business framework that can better create value to the company. It focuses on changing the rules of the game in more innovative way (Foss and Saebi, 2015). For instance, Wii by Nintendo came in the market with threeyear old processor while its competitors were using advanced processors. The difference was in the price where Wii won the market and rarely tried to compete with companies such as Microsoft and Sony. There are many innovations where the product came second. For instance, Google is not the first company who developed the search engine or it developed the sponsored ads. However, it learned the new rules and played the game more efficiently by tweaking its business framework and orienting towards most profitable elements. There are five areas in BMI, namely, customer value proposition, market segments, revenue model, growth model, and capabilities. Customer value proposition focus on solving the customer problem or focus on the benefit the customers can get through the change or innovation. Forinstance, customers did not know they need touch screen phones and internet till they received and used it. Understanding the target customers, their need and wants becomes imperative for the innovation.
Ten Types of Innovation
Larry Keeley and colleagues (Keeley, 2013) came up with the below discussed ten types of innovation those states that the companies should move beyond the product innovation and focus on what adds value.
Profit Model Innovation
This type of innovation comes when a company innovate in the pricing models. For instance, Apple’s itune business was a profit model innovation that allowed it to earn money from sellof music at 99 cents. Its online app store asks for money from the users who download those apps which one more innovative profit model.
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Cecere, G., Corrocher, N. and Battaglia, R.D., 2015. Innovation and competition in the smartphone industry: Is there a dominant design?. Telecommunications Policy, 39(3), pp.162- 175.
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Dastan, I. and Gecti, F., 2014. Relationships among utilitarian and hedonic values, brand affect and brand trust in the smartphone industry. Journal of Management Research, 6(2), p.124.
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Foss, N. and Saebi, T. (2015). Business model innovation.
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Keeley, L. (2013). Ten types of innovation. Hoboken, N.J.: Wiley.
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Maghnati, F., Ling, K.C. and Nasermoadeli, A., 2012. Exploring the relationship between
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experiential marketing and experiential value in the smartphone industry. International
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Business Research, 5(11), p.169.
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Nam, S., Nam, C. and Kim, S., 2015. The impact of patent litigation on shareholder value in
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the smartphone industry. Technological Forecasting and Social Change, 95, pp.182-190.
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Wee, A., 2016. Here comes the Top 10 smartphone sales domination of 2015. Screen.
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