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The Four Trajectories of Industry Change is a model to describe how industries
change. The author of the model is Anita M. McGahan, Professor of Management
in Boston. She published the model for the first time in the HBR of October
2004.
According to McGahan you can't make intelligent investments within your
organization unless you understand how your whole industry is changing. The
need to understand change in your industry may seem obvious, but such knowledge
is not always easy to collect. Companies sometimes miss or misinterpret clues
and arrive at false conclusions often.
Why industries evolve
Research by McGahan suggests that industries evolve as a result of two
types of threats of obsolescence:
- A threat to core activities of the industry. A threat to the
recurring activities of companies, which historically generated profits
for the industry.
- A threat to the core assets of the industry. A threat to the
durable resources, including intangibles such as knowledge and brand capital,
that have historically made the organization efficient at performing core
activities.
How industries change
Resulting out of a combination of the above two types of threats, industries
change along one of Four Trajectories of Industry Change:
- Radically. When core assets and core activities are both threatened
with obsolescence. Advice:
- Perform a balancing act. Aggressively pursuing profits in the short
term while avoiding investments that could later prevent you from decreasing
your commitments, PLUS:
- Assess how quickly your core assets are depreciating. And determine
the segments in which you can protect your competitive position from those
in which your position will erode quickly.
- Progressive. When neither core assets nor core activities are
jeopardized. Advice:
- Develop a system of interrelated activities that are defensible because
of their compounding effects on profits, not because they are hard to
understand or replicate; be the biggest.
- Creative. When core assets are under threat but core activities
are stable. Advice:
- Assess how quickly your core assets are depreciating. And determine
the segments in which you can protect your competitive position from those
in which your position will erode quickly.
- Intermediating. When core activities are threatened while core
assets retain their capacity to create value. Advice:
- Perform a balancing act. Aggressively pursuing profits in the near
term while avoiding investments that could later prevent you from decreasing
your commitments.
The Trajectories of Industry Change typically unfold themselves over decades.
Fighting the industry change is almost always too costly to be worthwhile.
Rather organizations should reconfigure themselves for lower revenue growth
and develop the ability to remove activities and resources out of the business.
Systematically analyzing the business environment is not easy, but the payoff
is great: better strategic decision-making for your company.
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Forum - Trajectories of Industry Change
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Discussions about Trajectories of Industry Change.
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Managing Change is an Art
Managing the vagaries of change can only be aimed towards minimising the deviation from the intended path of success. Th (...)
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Consolidation of Industry
What does it mean when an industry is consolidating, not just a separate company but a whole industry? (...)
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Management Mega Trends
In my personal point of view, the future in the business management world is very difficult to predict, but co-innovatio (...)
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Best Practices - Trajectories of Industry Change
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Expert Tips - Trajectories of Industry Change
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Here you will find advices by experts.
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Innovation Pitfalls
Avoiding Innovation Traps (...)
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Industry’s Driving Forces
Organizational Change (...)
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Pitfalls and Obstacles in Product Development Strategy
Product Development, Product Portfolio Management (...)
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How to Become a Self-tuning Enterprise: Advanced Experimenters
Organizational Agility, Strategic Agility, Real Options, Emergent Strategy (...)
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How Can Incumbents Respond to Disruptors?
5 Strategic Options in Reaction to Disruptors (...)
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How to Identify the Trajectory of an Industry?
Predicting Industry Change (...)
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Classes of Innovation | Sources of Innovation
Innovation, Creativity, Organizational Innovativeness, Lateral Thinking, Out of the Box Thinking, Blue Ocean Strategy (...)
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Innovating by Reconsidering Value Delivery
Fundamental Innovation (...)
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In Which Direction Should we Grow our Portfolio?
Portfolio Strategy, Innovation Strategy (...)
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Determining the Optimal Breadth of your Product Portfolio
Product Portfolio Analysis (...)
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Why Large Firms are Having Difficulties to Deal with Disruptive Innovations
Innovation Management (...)
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The Role of Competitors in Strategy and Business Failures
Competitive Strategy, Competitive Environment, Competitive Intelligence, Industry Analysis (...)
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How BOP Countries Can Disrupt Western Markets
Disruptive Innovation, Bottom of the Pyramid, Country-level Strategy (...)
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Resources - Trajectories of Industry Change
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Here you find powerpoint presentations, micro-learning videos and further information sources.
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Scenario Planning and Risk Management in Uncertain Business Enviroment
Scenario Planning, Risk Management, Strategic Uncertainty (...)
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Vertical Dis-integration
Industry Change (...)
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