Monday, October 25, 2004

Industry Change

A new article on strategic industry change can be found in the Harvard BR of October 2004. As we all know, industries change. Some industries change fast, some change slowly over time, but all of them do change eventually. Anita McGahan explains industries actually change in one of 4 ways: radical, progressive, creative or intermediating.

She argues that if your company's innovation S. is not aligned with your industry's change trajectory, your plan for achieving returns on invested capital is less likely to succeed, "Moreover, a firm's S. - its plan for achieving a return on invested capital - cannot succeed unless it is aligned with the industry's change trajectory". If you understand which path your industry is on, you can determine which strategies will make your company succeed and which ones may backfire on your company.

A further description of McGahan's innovative industry change model can be found here.

It's interesting to note that while McGahan seems to focus only on aligning your business strategy to industry changes, Chan Kim and Renée Mauborgne in another article in this same HBR issue advise to try to create a new uncontested market space yourself, which they call a blue ocean strategy.