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The Four Trajectories of Industry Change
is a model to describe how industries change by Anita M. McGahan
(Professor of Management, Boston). She first published the model 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
come by. Companies misread clues and arrive at false conclusions all the
time.
Research by McGahan suggests that industries evolve as a result of Two
Types of Threats of Obsolescence:
- A threat to the industry's core activities (the
recurring activities companies perform to attract and retain
suppliers and buyers that have historically generated profits
for the industry are threatened)
- A threat to the industry’s core assets (the durable
resources, including intangibles such as knowledge and brand
capital, that have historically made the organization efficient
at performing core activities, are failing to generate value)
Resulting out of a combination of the above two types of threats,
industries change along one of Four Trajectories of Industry Change:
- Radical (when core assets and core activities are
both threatened with obsolescence > perform a balancing act -
aggressively pursuing profits in the near term while avoiding
investments that could later prevent you from ramping down 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 > 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 > 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 >
perform a balancing act - aggressively pursuing profits in the
near term while avoiding investments that could later prevent
you from ramping down your commitments)
The trajectories of industry change are typically unfolding 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 move 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.
Compare with McGahan's Four Trajectories of Industry Change:
BCG Matrix |
Five Forces |
Diamond Model |
BPR |
GE / McKinsey Matrix |
Core Competence |
Profit Pools |
Product Life Cycle |
ADL Matrix |
Bass Diffusion
model |
SWOT Analysis |
Benchmarking |
Positioning
More management models
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