TRUE OR FLASE

Required Homework Questions It is instructive to assess the elasticity of demand in the target market to gauge the potential demand curve as the Disruptor moves upmarket. Forecast taking a top down approach to the penetration rate of the target market and sanity check with a bottoms up forecast based on usage. Forecasts of Disruptions are quantitative and do not rely on hypotheses. Analysts cannot accurately predict the timeframe of a Disruption, but can easily forecast the long-term penetration rate. All Financial Analysts forecast 3 year, 5 year and 10 year outlooks. Financial Analysts are forward looking and take a broad view of competition. The success of the Disruption is that it ultimately captures a significant amount of the industry's revenues and profits.60 Source: RethinkX 61 62 This pricing umbrella at the high end of the automotive market has permitted electric vehicles (with significant government subsidies) to be successful in the US. 63 The electric vehicle represents what, in the long-run, will be a significantly lower cost automobile. 64 It will ultimately be less expensive to purchase because it is mechanically significantly simpler. 65 To date, it has been more expensive to purchase but significant tax incentives have made them somewhat more competitive. 66 It will be less expensive to operate over its life cycle because it is mechanically simpler and less expensive to fuel. 67 However, the electric vehicle is functionally the same as a traditionally powered (internal combustion engine) automobile. 68 Therefore, the electric vehicle represents a new technology that makes existing automobiles better. 69 This is similar to inventions over the decades such as fuel injection, power steering, airbags, catalytic converters, automatic transmission, etc. 70 In contrast, the introduction of mass production (the assembly line and interchangeable parts) of the Model T Ford was a disruption. 71 It dramatically dropped the cost of a automobile, permitting the average person to own a automobile. 72 Every established automobile company is developing an electric vehicle, often in consortium with other players. 73 Within several years, automobiles powered by an internal combustion engine will not be manufactured and all automobile companies will sell only electric vehicles. 74 The electric vehicle did not follow the normal path of a disruptive technology entering the market at the low-end with low price points. 75 Furthermore, electric vehicles has not attracted new customers but rather displaced sales that would have gone to internal combustion engine vehicles. 76 Almost every automobile company already has or will over the next couple of years introduced an electric vehicle. 77 78 Is the electric vehicle a disruption? 79 Test each of the criteria of a disruption. 80 81 Displaces incumbents 82 Typically led by new entrants 83 Attracts new consumers, in market segments underserved by incumbents or by opening new markets 84 Often enters at the low-end of the market with low price points 85 Introduces a new offering and/or new business model that makes solutions more accessible (more convenient, more affordable) 86 Not simply a new technology that makes existing products better 87 A process, not a product 88 Raises the value of the entire business ecosystem as the innovation penetrates the market 89 Not a guarantor of success for the 'disruptor' 90 91 The only criteria of a disruption that the electric vehicle represents is that Tesla, the company with the first mover advantage, is a new entrant. 92 Although the electric vehicle is a major change in automotive technology it does not represent a disruption. 93Imagine in the future that Apple introduces Walking Talking Robots, leveraging its existing Siri technology. 12 Below we will identify the best initial markets for Apple to sell its Walking Talking Robot. 15 Before doing so, we review the approach we discussed in Strategic Forecasting (Workbook 9) to analyze an industry. 7 Disruptors often initially target the low-end of the market with fewest barriers to entry. As you may recall: barriers to entry include: 19 natural or structural barriers : economies of scale (cost advantages); network effects; supply advantages; high infrastructure requirements (high price of entry); high research and development costs, safety/trust artificial or strategic barriers : regulation/government (licenses, accreditation); brand; switching costs (technology/infrastructure, training); predatory pricing; acquisitions (vertical or horizontal expansion, which may tie up supplies or distribution) We predict Dog Walking could be a tough market for Walking Talking Robot challenging to penetrate. Dog Walking is a fragmented market. This should seem correct intuitively as you would be hard pressed to name a company that provides dog walking services (i.e., it is fair to say there are no market leaders such as Mcdonalds in burgers or CVS in pharmacy/health retailing) As a fragmented market, with many players, the industry is unlikely to have barriers to entry from economies of scale or network effects. While this might normally mean this is an attractive market to pursue, we must also consider other possible barriers to entry. In this example, safety could present a barrier to entry. The Dog Walker is trusted with the wellbeing of a living thing and the robot could be deemed a less secure, less trustworthy option than a well vetted person. BO The Dog Walker may also be trusted with a key to the home and it is unclear whether Apple's Walking Talking Robots will be viewed as capable and trustworthy with keyed access. While safety/trust may be a barrier the Walking Talking Robot can overcome with time (through testing and reputation/brand), it may not be the easiest factor to overcome at launch. 3 Now that we have reviewed the instructions a bit, please answer the following question. Which of these potential markets do you believe it will target as the easiest market's to penetrate? 6 Market Barriers to Entry Explanation 38 No Dog Walking Medium market is fragmented, but dog walking requires trust that the walker will be responsible for the safety and care of the pet and/or safe entrance and exit from the home Cooking None Babysitting High market is fragmented, but childcare requires trust that the babysitter will be responsible (often but not always requires personal references and/or accreditation) and react as desired in an emergency Housekeeping None Carpool Duty Medium market is fragmented, but requires trust this will be safe as the carpool is tending to children Elder Care High market is fragmented, but requires trust and may also require training or accreditation (e.g., LPN, MSW) Tutoring Medium Includes major players (Chegg, Kumon, Club Z, Sylvan Learning, Huntington Learning Centers, Kaplan, etc.) but there is a sizable fragmented market of independent tutors success may require educational credentials and/ or references or association with a leading brand