How Industries Evolve: Principles for Achieving and Sustaining Superior Performance
An Insightful Model for Understanding Industry Change From Xerox to K-Mart to Sotheby's, great companies have failed to translate extraordinary innovation into better profitability. Why does this happen? Anita M. McGahan argues that great companies fail to profit from investments in innovation when they break their industries' rules for how change can take hold. In this book, she shows how to develop a strategy that is aligned with the rules of industry change. By understanding and operating within the rules, executives can better appreciate the tradeoffs that are unique to each company's evolutionary path-and consequently improve performance by making smarter, more profitable strategic bets. How Industries Evolve is based on extensive statistical studies of 700 global industries and more than twenty-five case studies. McGahan identifies four models of industry evolution-progressive, creative, radical, and intermediating-and shows how a company can diagnose which model most closely describes the trajectory of change in its industry. The book then explains how company strategists can use their understanding of this model to carefully coordinate choices about R D, alliances, internal venturing, leadership style, compensation, modularization, and time-to-market. By supporting executives' efforts to recognize and respond to shifts in industry structure, this book will ultimately help companies to achieve and sustain superior performance.
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The Four Trajectories of Industry Evolution
How Change Unfolds on Each Trajectory
Assessing the Nature and Stage of Evolution in an Individual Industry
Conforming to the Rules of Change Within an Industry
Creating a BusinessUnit Strategy that Exploits the Opportunities in Industry Evolution
Diversifying Across Businesses to Capitalize on Industry Evolution
achieve activities and assets activities and core advantage alliances applications software approach Architectural change arise become blockbuster drug brand capital brokerage business units buyers and suppliers challenge chapter choice co-existence commercial commitment companies compete competitive position competitors convergence core activities core assets corporate strategy costs create value Creative change decline defined depends discount retailing disruptive technology diversified divisions dominant model dustry efficiency established industry evolutionary paths evolve example firm's Foundational change growth Harvard Business School indus industries undergoing industry change industry evolution industry structure industry's core inflection points innovation Intermediating change investment investors involves Kmart landline leaders manufacturing occurs operational effectiveness opportunities organization personal computing phase profitability Progressive change projects Radical change Radical transformation relationships repositioning risk rules segment shakeout share superior performance survival sustaining position tend threat of obsolescence threatened with obsolescence tion tradeoffs traditional typewriter value creation Wal-Mart
Page 6 - Better profitability in the future depends on innovating in ways that capitalize on the company's strategy — its source of uniqueness.
Page 12 - Core activities" are recurring actions that create value both by making the industry's suppliers more willing to transact and by generating greater willingness to pay among the industry's buyers. This definition of value creation reflects ideas in Adam M Brandenburger and Harbome Stuart. "Value-Based Business Strategy," Joumal of Economics and Management Strategy 5:1 (spnng 1996): 5-24.