Product innovation at a grand scale has been the primary mechanism usi

Question

Product innovation at a grand scale has been the primary mechanism using which companies come to dominate a sector and garner more than 70 percent of a sector’s profit, gaining monopoly over that sector. Over the last few years, Business Model Innovation has shown to deliver similar results as well. However, a research by Harvard Business concluded that of all the S&P 500 companies, fewer than 5 percent have the management structure and scale that is required to successfully pull off Business Model Innovation. Hence, for the near future, most of the companies that dominate a sector and garner a lion’s share of its profits will be those that demonstrate impeccable product innovation capability.

A major flaw in author’s reasoning above is that
(A) It discounts the profitability potential of any company that garners less than 70 percent of a sector’s profit but may be more profitable than a virtual monopoly in another sector.
(B) It does not take into account whether the stock market is able to account for disproportionate earning potential of a virtual monopoly in its stock price.
(C) Information about the proportion of companies that have the potential to engage in impeccable Product Innovation is not compared with those that have the potential to engage in Business Model Innovation.
(D) Does not take into account companies that can be candidates for both Product and Business Model Innovation.
(E) Does not define Impeccable Product Innovation precisely.

arora1 · Answer

How to differentiate and determine the correct choice between C and D?
My take was D, but OA OA is C

egmat

TarPhi · Answer

The argument only talks about 5% of S&P companies having the potential for BMI. What if only 2% of these companies had the potential for PI?

The argument would fall through.

fireflyejd1 · Answer

Product innovation at a grand scale has been the primary mechanism using which companies come to dominate a sector and garner more than 70 percent of a sector’s profit, gaining monopoly over that sector. Over the last few years, Business Model Innovation has shown to deliver similar results as well. However, a research by Harvard Business concluded that of all the S&P 500 companies, fewer than 5 percent have the management structure and scale that is required to successfully pull off Business Model Innovation. Hence, for the near future, most of the companies that dominate a sector and garner a lion’s share of its profits will be those that demonstrate impeccable product innovation capability.

Conclusion: Product innovaion will be more successful than business model innovation.
Why? Because Harvard says that fewer companies can pull off Business Model Innovation.

A major flaw in author’s reasoning above is that
(A) It discounts the profitability potential of any company that garners less than 70 percent of a sector’s profit but may be more profitable than a virtual monopoly in another sector.  Out of scope. We are not discussing profitability potential explicitly. We are concered with the success potential of each strategy type 
(B) It does not take into account whether the stock market is able to account for disproportionate earning potential of a virtual monopoly in its stock price.  We are not discussing stock market performance explicitly. We are concered with the success potential of each strategy type 
(C) Information about the proportion of companies that have the potential to engage in impeccable Product Innovation is not compared with those that have the potential to engage in Business Model Innovation.  We know that most businesses are not capable of conducting Business Model Innovation. But we do not know anything about businesses which are capable of of conducting Product Innovation! Need information on both alternatives to derive a judgement 
(D) Does not take into account companies that can be candidates for both Product and Business Model Innovation.  We want to know which of these strategies will be more successful and can be executed by most people. If a handful of company can execute both strategies, but rest of the companies cannot, we cannot make any conclusion about business model innovation being better or worse than product innovation. 
(E) Does not define Impeccable Product Innovation precisely.  We do not need the detailed definition of the term. We only want to know if it is more successfull or less successful than the other strategy in question

TarPhi · Answer

The question is asking us which model is better - BMI or PI.

Harvard says only 5% can pull off BMI so the conclusion is stating PI is better.

(C) Information about the proportion of companies that have the potential to engage in impeccable Product Innovation is not compared with those that have the potential to engage in Business Model Innovation.

This statement clearly tells us that the number or proportion of companies that can pull of PI successfully hasn't been stated. Hence how can we come up with a blanket conclusion?

VerbalBot · Answer

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Product innovation at a grand scale has been the primary mechanism usi

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