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Question

The fundamental sea change in this decade is the opening of developed economies' markets to the commoditizing influence of developing economies like India and China. In response, companies jumped to innovation. But what you really have to do to fight commoditization is create sustainable differentiation, which means your competitors cannot or will not copy you. Innovation, which creates sustainable differentiation, is what you want. What most companies do, and why you have the feeling that they're just talking about it, is they innovate but they do not achieve sustainable differentiation.
  1. Enhancing the bottom line requires a market driven approach to innovation.

  2. The issue has to do with, are you innovating for something that's core or context to your business model?

  3. Yes, they're spending a lot on research and development, but at the end of the day, they are not substantially differentiated from their competitors.

  4. Instead of concentrating on a few bold ideas that could revolutionize their companies, most firms put their resources in too many places, often creating product enhancements that don't actually

     enhance the bottom line.

  5. They don't drive a particular dimension of their business so far down the road that their competitors cannot or will not follow--and that is the gold standard


Solution

The correct option is C

Yes, they're spending a lot on research and development, but at the end of the day, they are not substantially differentiated from their competitors.


Option (b) talks about innovating something core to your business model. But this is not the main issue. Hence option (b) is eliminated. Option (c) is irrelevant. It does not address the main issue. Option (d) is out of scope. Option (e) is just a general statement. It has nothing to do with the question. Option (a) addresses the main issue perfectly and says that even though the companies are spending a lot on r&d, they are not successful because they do not have substantial differentiation. Hence option (a )is the correct answer. The last sentence states that the companies do not achieve differentiation despite innovating. The correct option takes it further emphasizing the same that is, the companies spend a lot on R&D but they do not achieve differentiation.

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