Customer Reviews

How Industries Evolve: Principles for Achieving and Sustaining Superior Performance

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Prof. McGahan (BC and HBS) has written an interesting book on how industries evolve and how a business executive can identify those trends and make $ out of it.

These are the key insights from the book,

1. 4 types of industry evolution patterns - Progressive (retail), Creative (pharma), Radical (fedex) and Intermediating (financial brokers).

2. These rules can be applied across core assets or core activities.

3. Two categories of phases of changes - [Fragementation, shakeout, maturity, declining]or [Emergence, Convergenc, Co-Existence and Dominance]

4. Her prescriptive approach to apply it to the industry,

- Identify what is your industry
- Determine Evolutionary Trajectory
- Determine nature of change - architectural/foundational
- Determine phase of change
- Apply principles of competition for each type

5. 2 kinds of tradeoffs - Leading vs. Following, Repositioning vs. Sustaining.

As you can well see these perspectives are not driven from lot of data and hard stats but more conjectures and hypothesis that are not well proven. I am not sure using this approach will help you make $ of money of these trends but it can get you tenureship at the local university.

FGS

This book was written by a b-school professor based on many years of research. The framework takes a little while to absorb. We read and reread the book several times. Once we "got it," though, this really made a big difference in helping us understand how our business threatened larger firms. We made much better pricing decisions after reading it.

This is a book definitely worth reading. While the concepts can be second nature to someone who considers themselves a strategic thinker, the way Dr. McGahan defines the different types of competitive environments and they ways to achieve success within them is simple and yet insightful. Any business person should put this on their must read list.

One of the first steps I take in analyzing a company is to timeline its' industry. McGahan offers up a detailed model of the various stages and life cycles of industries. Within How Industries Evolve, McGahan identifies four models of industry evolution; progressive, creative, radical, and intermediating.

My recommendation is to read this in conjunction with Blue Ocean Strategy. Some of the concepts mesh well in that you are either leading or following at any point in time. It's also true that you must either create sustaining innovation or reposition yourself by expanding into new territory.

Seven chapters create the core of How Industries Evolve:

1) Introduction and overview
2) The four trajectories of industry evolution
3) How change unfolds on each trajectory
4) Assessing the nature and stage of evolution in an individual industry
5) Conforming to the rules of change within an industry
6) Creating a business-unit strategy that exploits the opportunities in industry evolution
7) Diversifying across businesses to capitalize on industry evolution

No matter what your business, your success depends largely in part to overall industry dynamics. More importantly, understanding how other industry players think will go a long way towards achieving a distinctive competitive advantage - and keeping it.

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Michael Davis, Editor - Byvation

"Business Success through Innovation"

The one thing that is constant is change, yet change is something to which we tend to react, and not to react well. Companies start, most fail, some have that essence of an idea that makes them become a giant in the field. Sometimes they become the instrument of change itself, as when department stores began to replace the mom and pop stores. Department stores in turn became a casualty (not quite yet perhaps) when the super specialty stores began to concentrate on prime areas of their business.

Ingrained management ideas are hard to change. And most of the time the old line organizations fade away. Once in a while these old line companies are able to re-organize their operations to become a profitable, yet distinctly different company.

In this book change is analyzed in terms of the effect that various types of change have on the existing players. Some are gradual, the base business remains the same, the core activities and core assets are stable. But some changes are radical. If you build buggy whips and Henry Ford comes along....

The best aspect of this book is that it offers a detailed model for the stages of radical and intermediating change. It deals with the emergence, convergence, co-existence and eventual dominance of one industry over another. The book explains that each of these stages may take a long time on the order of decades. This provided us with a very helpful way of thinking about what is happening in our business.

While the framework is nicely structured, I was not able to get a good picture of how to implement the idea. As a startup's founder, I find the book of little help - maybe for established incumbents it would be different.