Dollinger index

132 ENTREPRENEURSHIP

reducing the costs of searching, transacting, monitoring, and decision making. These are

real costs to the consumer and the consumer will pay to have them reduced or eliminat-

ed. In theory, as each consumer might have a different set of costs, a new version of the

product or e-business Web site can be created for each consumer.

Novelty is created by bundling the features and benefits of the e-businesses’ products

and services. Each product or service can have an element of difference or novelty, but

even if the product or service lacks such novelty, the bundle can be novel or unique in

some way. Because every customer (in theory) will want a different bundle, this type of

customization is a value driver.

The value driver, complementarity, is a function of the bundles, but may go further.

It may refer to the complementarities of partners or technologies, and include the net-

work effects of complementarity of customers and vendors.

Last, Amit and Zott include the concept of lock-in, which is similar to previous

descriptions including brand loyalty, loyalty programs, and dominant technology.

STRATEGY AND INDUSTRY ENVIRONMENTS

Not all ventures enter the same industry. How much difference does the industry itself

make in determining strategy? The answer is, “quite a lot.” Entrepreneurs can sig-

nificantly add to the success of their strategies by understanding the industry environ-

ment they are entering. A static description of industry structure was presented in

Chapter 3. However, industry environments are static only in the short term; over a

longer period of time they evolve. This evolution is called the industry life cycle. The

industry life cycle progresses through four stages: emerging, transitional, maturing, and

declining.

The industry life-cycle progression is not the same for all industries. The length of

Contracts and subscriptions

Durable purchases

Brand-specific training

Information and databases

Specialized suppliers

Search costs

Loyalty programs

Damages for breaking the contract or ending the

subscription before it expires

Replacement of the equipment; switching cost declines

as equipment ages

Customers have to learn a new system, process or

technique; loss of productivity during training period

Data conversion costs, potential for losing data; larger

databases equal higher costs of conversion

Search of finding new supplier; new supplier may not have

precisely the same capabilities and quality of older

supplier

Aggregate of buyer and seller costs

Lost benefits from program; need to start over with another

company’s program

TABLE 4.4 Lock-In and Switching Costs for Customers

Types of lock-in Switching costs