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As companies tend to innovate faster than their customers’ needs evolv

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As companies tend to innovate faster than their customers’ needs evolv  [#permalink]

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New post 14 Oct 2018, 19:30
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As companies tend to innovate faster than their customers’ needs evolve, most organizations eventually end up producing products or services that are actually overly sophisticated, extremely expensive, and rather complicated for many customers in their market. These innovations fall under the category of sustaining innovations, innovations that simply improve existing products. Companies pursue sustaining innovations at the higher tiers of their markets because this is what has historically helped them succeed: by charging the highest prices to their most demanding and sophisticated customers at the top of the market, companies achieve the greatest profitability. However, by doing so, companies unwittingly open the door to another category of innovations - “disruptive innovations”. In contrast to sustaining innovations, disruptive innovations lie at the bottom of the market. They are made not only by harnessing new technologies but also by developing new business models and exploiting old technologies in new ways.

An innovation that is disruptive allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill. Personal computers, for instance, were disruptive innovations because they created a new mass market for computers - previously, expensive mainframe computers were sold only to big companies and research universities. Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics. Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market for new disruptive competitors to emerge.

1. Which of the following statements is supported by the information given in the passage?

A. A disruptive business is less likely to face competition in the market than a business pursuing sustaining innovations.

B. Companies following innovations that are improvements of existing products do not knowingly leave market space for disruptive businesses to emerge.

C. Most technological innovations can be considered disruptive innovations.

D. It is likely that to produce products, disruptive businesses engage more in using old technologies in new ways than using new technologies.

E. Companies typically pursuing sustaining innovations do not find disruptive products attractive since these products are typically not profitable.

2. The author’s primarily concerned with

A. differentiating between two kinds of innovations

B. explaining two kinds of innovations while focusing more on one

C. explaining how different kinds of innovations roll out different kinds of products in the market

D. describing how newer needs are created in the market even with the same old technology

E. Highlighting the difference in the profits that companies can gain from two different kinds of innovations

3. The passage supports which of the following statements about disruptive innovations?

A. They are not expensive to produce.

B. They do not add as much research value as sustaining innovations do.

C. Because they are targeted at smaller market, they never become mass scale products.

D. They make a service easier to consume for consumers who possess limited specialized knowledge in the field the innovations are made in.

E. The products under them gradually move to sustaining innovations.


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New post Updated on: 15 Oct 2018, 21:34
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+1 kudos to the posts containing answer explanations of all questions



I will provide OE after a few responses.

1. Which of the following statements is supported by the information given in the passage?


A. A disruptive business is less likely to face competition in the market than a business pursuing sustaining innovations.

Incorrect: Out of Scope

There is no information given in the passage to support any comparative analysis regarding the level of competition faced by companies pursing sustaining innovations and those pursuing disruptive ones.

B. Companies following innovations that are improvements of existing products do not knowingly leave market space for disruptive businesses to emerge.

Correct

This choice can be inferred from the following statement made in the passage:

However, by doing so, companies unwittingly open the door to “disruptive innovations” at the bottom of the market

C. Most technological innovations can be considered disruptive innovations.

Incorrect: Out of Scope

Although the author does cite the example of personal computers to explain the concept of disruptive innovations, it does not provide any basis to conclude that majority of such innovations deal with technology.

D. It is likely that to produce products, disruptive businesses engage more in using old technologies in new ways than using new technologies.

Incorrect: Inconsistent

All that the author states is that such businesses make use of both new technologies and old technologies in new ways. There is no information given to support which of the two is used more.

E. Companies typically pursuing sustaining innovations do not find disruptive products attractive since these products are typically not profitable.

Incorrect: Inconsistent

We are told that such companies do not find disruptive innovations attractive because these innovations offer “lower” gross margins and not that they are not profitable at all.

2. The author’s primarily concerned with


A. differentiating between two kinds of innovations

Incorrect: Partial Scope

The author does briefly touch on a difference between SI and DI, but the whole passage is not written from the point of view of highlighting their difference. The focus is on explaining the two kinds of innovations, particularly disruptive innovations.

B. explaining two kinds of innovations while focusing more on one

Correct

C. explaining how different kinds of innovations roll out different kinds of products in the market

Incorrect: Out of Context

Yes, the author does mention the kind of products sustaining and disruptive innovations generate, but the purpose of the passage is not to explain this point. This information is given for achieving the broader purpose of explaining the concept of disruptive innovations.

D. describing how newer needs are created in the market even with the same old technology

Incorrect: Out of Context

The author briefly touches on how disruptive innovations grant access of historically extremely expensive or overly sophisticated (skill-wise) products and services to a wide number of bottom tier customers. The author also says that such innovations also use old technologies in new ways. However, all this discussion does not form part of a broader discussion on need-creation in the market.

E. Highlighting the difference in the profits that companies can gain from two different kinds of innovations

Incorrect: Partial Scope

The mention of differences in profitability is not the highlight of the passage. Yes, the author does mention it, but it is to explain the conditions conducive to the emergence of disruptive businesses.

3. The passage supports which of the following statements about disruptive innovations?


A. They are not expensive to produce.

Incorrect: Out of Scope

There is no mention of any kind of production cost in the passage.

B. They do not add as much research value as sustaining innovations do.

Incorrect: Out of Scope

There is no mention of any kind of research value added by either of the kinds of innovations.

C. Because they are targeted at smaller market, they never become mass scale products.

Incorrect: Inconsistent

The author does state that at least initially they are targeted at smaller markets, but there is no mention of this aspect affecting their eventual scalability.

D. They make a service easier to consume for consumers who possess limited specialized knowledge in the field the innovations are made in.

Correct

In the first sentence of the second paragraph, we are told that disruptive innovations provide access to those products and services for which one historically needed a lot of money or a lot of skill, characteristics compatible with sustaining innovations. Hence, we can infer statement given in this choice.

E. The products under them gradually move to sustaining innovations.

Incorrect: Opposite

The information given in the passage supports an inference opposite to this choice, as seen in the answer explanation for choice D.
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Originally posted by workout on 14 Oct 2018, 19:34.
Last edited by workout on 15 Oct 2018, 21:34, edited 1 time in total.
Added explanations after seeing few resposnes.
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Re: As companies tend to innovate faster than their customers’ needs evolv  [#permalink]

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New post 14 Oct 2018, 20:58
1
1. Which of the following statements is supported by the information given in the passage?

Quote:
However, by doing so, companies unwittingly open the door to another category of innovations - “disruptive innovations”.

Above is an excerpt from para 1, based on this we can narrow it down to option B

B. Companies following innovations that are improvements of existing products do not knowingly leave market space for disruptive businesses to emerge.

2. The author’s primarily concerned with

Para 1 deals with explaining 2 kinds of innovation(sustaining and disruptive).
Para 2 explains disruptive in detail.
Option B is a clear winner here.

B. explaining two kinds of innovations while focusing more on one

3. The passage supports which of the following statements about disruptive innovations?

Quote:
Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.


From the bolded part in above, we can infer option D.

D. They make a service easier to consume for consumers who possess limited specialized knowledge in the field the innovations are made in.

Hope this helps!
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As companies tend to innovate faster than their customers’ needs evolv  [#permalink]

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New post Updated on: 14 Oct 2018, 21:11
2
workout wrote:
As companies tend to innovate faster than their customers’ needs evolve, most organizations eventually end up producing products or services that are actually overly sophisticated, extremely expensive, and rather complicated for many customers in their market. These innovations fall under the category of sustaining innovations, innovations that simply improve existing products. Companies pursue sustaining innovations at the higher tiers of their markets because this is what has historically helped them succeed: by charging the highest prices to their most demanding and sophisticated customers at the top of the market, companies achieve the greatest profitability. However, by doing so, companies unwittingly open the door to another category of innovations - “disruptive innovations”. In contrast to sustaining innovations, disruptive innovations lie at the bottom of the market. They are made not only by harnessing new technologies but also by developing new business models and exploiting old technologies in new ways.

An innovation that is disruptive allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill. Personal computers, for instance, were disruptive innovations because they created a new mass market for computers - previously, expensive mainframe computers were sold only to big companies and research universities. Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics. Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market for new disruptive competitors to emerge.
1. Which of the following statements is supported by the information given in the passage?

A. A disruptive business is less likely to face competition in the market than a business pursuing sustaining innovations.

B. Companies following innovations that are improvements of existing products do not knowingly leave market space for disruptive businesses to emerge.

C. Most technological innovations can be considered disruptive innovations.

D. It is likely that to produce products, disruptive businesses engage more in using old technologies in new ways than using new technologies.

E. Companies typically pursuing sustaining innovations do not find disruptive products attractive since these products are typically not profitable.

2. The author’s primarily concerned with

A. differentiating between two kinds of innovations

B. explaining two kinds of innovations while focusing more on one

C. explaining how different kinds of innovations roll out different kinds of products in the market

D. describing how newer needs are created in the market even with the same old technology

E. Highlighting the difference in the profits that companies can gain from two different kinds of innovations

3. The passage supports which of the following statements about disruptive innovations?

A. They are not expensive to produce.

B. They do not add as much research value as sustaining innovations do.

C. Because they are targeted at smaller market, they never become mass scale products.

D. They make a service easier to consume for consumers who possess limited specialized knowledge in the field the innovations are made in.

E. The products under them gradually move to sustaining innovations.



2 correct, 1 incorrect(although I disagree with the OA, would like to see OE for further discussion with @Workout on question no. 1)!
3:49 minutes!

1. Which of the following statements is supported by the information given in the passage?[/b]

A. A disruptive business is less likely to face competition in the market than a business pursuing sustaining innovations.-No where mentioned!

B. Companies following innovations that are improvements of existing products do not knowingly leave market space for disruptive businesses to emerge.-False, they leave the space more or less knowingly!Refer "Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market.."

C. Most technological innovations can be considered disruptive innovations.-Most or some, the quantification is no where mentioned!

D. It is likely that to produce products, disruptive businesses engage more in using old technologies in new ways than using new technologies.-No, was one of the examples but not the generalized truth!

E. Companies typically pursuing sustaining innovations do not find disruptive products attractive since these products are typically not profitable. - True, refer "Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market"

@workout I dont find anything wrong with choice E also! Request your take on this!
2. The author’s primarily concerned with

A. differentiating between two kinds of innovations-Author does differentiate between Sustaining and disruptive innovation but focuses more on disruptive innovation.

B. explaining two kinds of innovations while focusing more on one
-True, matches the thought process
C. explaining how different kinds of innovations roll out different kinds of products in the market-"Rolling out " is just a small portion of the passage.Partial scope.

D. describing how newer needs are created in the market even with the same old technology-Partial scope.

E. Highlighting the difference in the profits that companies can gain from two different kinds of innovations -Difference in profits is a small portion of the passage!

3. The passage supports which of the following statements about disruptive innovations?

A. They are not expensive to produce.-Cant be inferred! only profit margins are small can be inferred!

B. They do not add as much research value as sustaining innovations do.-No where mentioned.

C. Because they are targeted at smaller market, they never become mass scale products. -False in fact, one example of Personal computer is given that became a mass scale product!

D. They make a service easier to consume for consumers who possess limited specialized knowledge in the field the innovations are made in. -True, mentioned refer "An innovation that is disruptive allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill."

E. The products under them gradually move to sustaining innovations.-No where mentioned![/box_in][/box_out][/quote]
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Originally posted by honneeey on 14 Oct 2018, 21:02.
Last edited by honneeey on 14 Oct 2018, 21:11, edited 2 times in total.
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Re: As companies tend to innovate faster than their customers’ needs evolv  [#permalink]

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New post 15 Oct 2018, 00:23
I found both B and E correct for 1st question . Can someone in detail explain which one to choose.

Posted from my mobile device
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New post 15 Oct 2018, 09:51
naina0001 wrote:
I found both B and E correct for 1st question . Can someone in detail explain which one to choose.

Posted from my mobile device


It is mentioned in 1st para that companies pursuing sustaining innovations
unwittingly open the door to another category of innovations - “disruptive innovations”.
In the last line of 1st para it is mentioned that "...exploiting old technologies in new ways" is one
of the ways by which “disruptive innovations” are made.
In B the same thing is mentioned -"Companies following innovations that are improvements of existing products...(exploiting old technologies in new ways)"
and "... do not knowingly leave market space for disruptive businesses to emerge(open the door to another category of innovations)"
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Re: As companies tend to innovate faster than their customers’ needs evolv  [#permalink]

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New post 15 Oct 2018, 19:44
For Q1,
Option E States "Companies typically pursuing sustaining innovations do not find disruptive products attractive since these products are typically not profitable."

While paragraph state, "Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics."

I think the difference lies here as Lower Gross Margins do not imply Non-Profitability. Business may be Non-profitable or less profitable. So we can eliminate option 'E'
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New post 09 Nov 2018, 10:52
For Q1 B . Eliminated in first go itself as per the excerpt attached.

Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market for new disruptive competitors to emerge.


Does this not mean that the SI's knowingly let the DI's grow in lower cap markets on account of lower margins ?
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Re: As companies tend to innovate faster than their customers’ needs evolv  [#permalink]

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New post 04 Jan 2019, 15:08
workout wrote:

+1 kudos to the posts containing answer explanations of all questions



I will provide OE after a few responses.

1. Which of the following statements is supported by the information given in the passage?


A. A disruptive business is less likely to face competition in the market than a business pursuing sustaining innovations.

Incorrect: Out of Scope

There is no information given in the passage to support any comparative analysis regarding the level of competition faced by companies pursing sustaining innovations and those pursuing disruptive ones.

B. Companies following innovations that are improvements of existing products do not knowingly leave market space for disruptive businesses to emerge.

Correct

This choice can be inferred from the following statement made in the passage:

However, by doing so, companies unwittingly open the door to “disruptive innovations” at the bottom of the market

C. Most technological innovations can be considered disruptive innovations.

Incorrect: Out of Scope

Although the author does cite the example of personal computers to explain the concept of disruptive innovations, it does not provide any basis to conclude that majority of such innovations deal with technology.

D. It is likely that to produce products, disruptive businesses engage more in using old technologies in new ways than using new technologies.

Incorrect: Inconsistent

All that the author states is that such businesses make use of both new technologies and old technologies in new ways. There is no information given to support which of the two is used more.

E. Companies typically pursuing sustaining innovations do not find disruptive products attractive since these products are typically not profitable.

Incorrect: Inconsistent

We are told that such companies do not find disruptive innovations attractive because these innovations offer “lower” gross margins and not that they are not profitable at all.

2. The author’s primarily concerned with


A. differentiating between two kinds of innovations

Incorrect: Partial Scope

The author does briefly touch on a difference between SI and DI, but the whole passage is not written from the point of view of highlighting their difference. The focus is on explaining the two kinds of innovations, particularly disruptive innovations.

B. explaining two kinds of innovations while focusing more on one

Correct

C. explaining how different kinds of innovations roll out different kinds of products in the market

Incorrect: Out of Context

Yes, the author does mention the kind of products sustaining and disruptive innovations generate, but the purpose of the passage is not to explain this point. This information is given for achieving the broader purpose of explaining the concept of disruptive innovations.

D. describing how newer needs are created in the market even with the same old technology

Incorrect: Out of Context

The author briefly touches on how disruptive innovations grant access of historically extremely expensive or overly sophisticated (skill-wise) products and services to a wide number of bottom tier customers. The author also says that such innovations also use old technologies in new ways. However, all this discussion does not form part of a broader discussion on need-creation in the market.

E. Highlighting the difference in the profits that companies can gain from two different kinds of innovations

Incorrect: Partial Scope

The mention of differences in profitability is not the highlight of the passage. Yes, the author does mention it, but it is to explain the conditions conducive to the emergence of disruptive businesses.

3. The passage supports which of the following statements about disruptive innovations?


A. They are not expensive to produce.

Incorrect: Out of Scope

There is no mention of any kind of production cost in the passage.

B. They do not add as much research value as sustaining innovations do.

Incorrect: Out of Scope

There is no mention of any kind of research value added by either of the kinds of innovations.

C. Because they are targeted at smaller market, they never become mass scale products.

Incorrect: Inconsistent

The author does state that at least initially they are targeted at smaller markets, but there is no mention of this aspect affecting their eventual scalability.

D. They make a service easier to consume for consumers who possess limited specialized knowledge in the field the innovations are made in.

Correct

In the first sentence of the second paragraph, we are told that disruptive innovations provide access to those products and services for which one historically needed a lot of money or a lot of skill, characteristics compatible with sustaining innovations. Hence, we can infer statement given in this choice.

E. The products under them gradually move to sustaining innovations.

Incorrect: Opposite

The information given in the passage supports an inference opposite to this choice, as seen in the answer explanation for choice D.



However, for the 1st, B. Companies following innovations that are improvements of existing products do not knowingly leave market space for disruptive businesses to emerge.
What the inferred from the 1st para is that, unwittingly opens... I mean this is positive whereas B is negative. Where am I lost exactly?
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Re: As companies tend to innovate faster than their customers’ needs evolv  [#permalink]

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New post 29 Mar 2019, 04:06
workout
In Q1 how can we infer B as at the end of passage it is written that they don't prefer such innovation because of lower gross margin it means they leave it knowingly rather than unknowingly
Please clarify what I am missing as GMAT OA cannot be wrong
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Re: As companies tend to innovate faster than their customers’ needs evolv   [#permalink] 29 Mar 2019, 04:06
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