Vocabulary

Backward compatibility (Textbook, Ch. 3): The ability of new technology to work with older systems or products, allowing users to switch without losing past investments. Example: A new gaming console that still plays older games.

Blue ocean strategy (Textbook, Ch. 3): A strategy where a company creates a new market instead of competing in an existing one, avoiding direct competition. Example: Cirque du Soleil combining circus and theater.

Bundling (Textbook, Ch. 3): Selling multiple products together at a single price to increase customer value and sales. Example: Microsoft including a web browser with Windows.

Complementary benefits (Textbook, Ch. 3): Extra value gained when products are used together, increasing overall usefulness. Example: Smartphones becoming more valuable because of apps.

Congestion effects (Textbook, Ch. 3): When too many users reduce performance or value, representing the downside of network growth. Example: A website slowing during peak traffic.

Customer acquisition costs (CAC) (Textbook, Ch. 3): The total cost of gaining a new customer through marketing and sales. Example: Spending $50 in ads to gain one customer.

Freemium (Textbook, Ch. 3): A model offering a free basic version while charging for premium features. Example: Spotify’s free tier with ads.

Incumbent (Textbook, Ch. 3): An established firm already operating in a market with advantages like brand and customers. Example: Coca‑Cola in the soda industry.

Monopoly (Textbook, Ch. 3): A market structure where one firm dominates with little or no competition. Example: A local electric utility.

Network effects (Network externalities, Metcalfe’s Law) (Textbook, Ch. 3): When a product becomes more valuable as more people use it. Example: Social media platforms gaining value as users join.

Oligopoly (Textbook, Ch. 3): A market dominated by a small number of large firms. Example: The airline industry.

Platforms (Textbook, Ch. 3): Products or services that allow others to build complementary products and form ecosystems. Example: iOS allowing third‑party apps.

Standard (Textbook, Ch. 3): A widely accepted technology or format adopted across an industry. Example: USB as a universal connector.

Subsidize adoption (Textbook, Ch. 3): Offering discounts or free access to encourage early users and build a network. Example: Free trials for new software.