Four Trajectories of Industry Change
(McGahan)

Knowledge Center

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:

1. 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.
2. 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.
3. 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.
4. 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.

Forum Forum discussions about Trajectories of Industry Change. 🔥 Consolidation of Industry What does it mean when an industry is consolidating, not just a separate company but a whole industry?... 4   Managing Change is an Art Managing the vagaries of change can only be aimed towards minimising the deviation from the intended path of success. This is because change itself sets off competitive response that aims to neutralis... 4   Management Mega Trends In my personal point of view, the future in the business management world is very difficult to predict, but co-innovation, core competences, blue ocean strategy, mega fusions, stakeholders, and social... 4   16 comments Start a new topic about Trajectories of Industry Change Sign up for free

Courses about Trajectories of Industry Change. Beginners Course Advanced Course Course for Experts

Expert Tips Advanced insights about Trajectories of Industry Change. Here you will find professional advices by experts. Consultancy Tips Teaching Tips Practical Implementation Tips Innovation Pitfalls Avoiding Innovation Traps Harvard Professor R. Moss Kanter describes 4 common innovation mistakes and corresponding remedies (HBR Nov 2006): 1. S... Industry’s Driving Forces Organizational Change Many events can affect an industry powerfully enough to qualify as driving forces. Some are unique and specific to a par... Pitfalls and Obstacles in Product Development Strategy Product Development, Product Portfolio Management Although product development can be an important growth strategy, it is necessary to keep in mind that several factors t... How to Become a Self-tuning Enterprise: Advanced Experimenters Organizational Agility, Strategic Agility, Real Options, Emergent Strategy In an HBR article of June 2015, Reeves, Zeng and Venjara argue there's a new way to apply algorithmic principles that en... How Can Incumbents Respond to Disruptors? 5 Strategic Options in Reaction to Disruptors In recent years, the challenges to incumbent majors across industries have come mainly from low-cost competitors and fr... How to Identify the Trajectory of an Industry? Predicting Industry Change In order to identify the evolutionary trajectory of an industry, McGahan suggests a focused and systematic analysis: 1.... Classes of Innovation | Sources of Innovation Innovation, Creativity, Organizational Innovativeness, Lateral Thinking, Out of the Box Thinking, Blue Ocean Strategy TWO CLASSES OF INNOVATION Innovation can be triggered or enabled by two broad classes: KNOWLEDGE PUSH: Innovation trig... Innovating by Reconsidering Value Delivery Fundamental Innovation When innovating their business model, companies need to reconsider their value proposition from all perspectives. One of... In Which Direction Should we Grow our Portfolio? Portfolio Strategy, Innovation Strategy According to Professor Aneel G. Karnani in 'Mastering Strategy', there's no standard way to gain market value for all bu... Determining the Optimal Breadth of your Product Portfolio Product Portfolio Analysis Due to technology changes and a stiffing competition at all levels, historically companies needed to constantly check th... Why Large Firms are Having Difficulties to Deal with Disruptive Innovations Innovation Management Christensen explains why many firms, especially large firms, have trouble with adapting and thus with surviving when dea... The Role of Competitors in Strategy and Business Failures Competitive Strategy, Competitive Environment, Competitive Intelligence, Industry Analysis Gilad (2014) researched in what way and to what extent competitors do matter. Many people believe that competitors are o... How BOP Countries Can Disrupt Western Markets Disruptive Innovation, Bottom of the Pyramid, Country-level Strategy After the Second World War, Japan started to develop fast as a result of their disruptive innovation strategy. This disr...

Information Sources Various sources of information regarding Trajectories of Industry Change. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. Scenario Planning and Risk Management in Uncertain Business Enviroment Scenario Planning, Risk Management, Strategic Uncertainty Extensive and detailed presentation. Topics: - Integrated Risk Management Framework - Strategic Management Framework ... Vertical Dis-integration Industry Change By providing a theoretical framework that explains how and why vertical dis-integration happens, this inductive longitud...

Tools Useful tools regarding Trajectories of Industry Change. News Videos Presentations   Books Academic More

Compare with McGahan's Four Trajectories of Industry Change: Disruptive Innovation  |  Forget Borrow Learn  |  BCG Matrix  |  Five Forces  |  Diamond Model  |  BPR  |  McKinsey Matrix  |  Core Competence  |  Profit Pools  |  Product Life Cycle  |  ADL Matrix  |  Bass Diffusion Model  |  SWOT Analysis  |  Benchmarking  |  Positioning

Return to Management Hub: Change & Organization  |   Marketing & Sales  |   Strategy & Innovation  |  Supply Chain & Quality

More Management Methods, Models and Theory