8 Industry Evolution and
No company ever stops changing . . . Each new generation must meet changes—in the automotive market, in the general administration of the enterprise, and in the involvement of the corporation in a changing world. The work of creating goes on. —ALFRED P. SLOAN JR., PRESIDENT OF GENERAL
MOTORS 1923–37, CHAIRMAN 1937–56
It is not the strongest of the species that survive, nor the most intelligent, but the one that is most responsive to change.
You keep same-ing when you ought to be changing.
—LEE HAZLEWOOD, THESE BOOTS ARE MADE FOR WALKING,
RECORDED BY NANCY SINATRA, 1966
O U T L I N E
◆ Introduction and Objectives
◆ The Industry Life Cycle
● Demand Growth
● Creation and Diff usion of Knowledge
● How General Is the Life-Cycle Pattern?
● Implications of the Life Cycle for Competition and
◆ Managing Organizational Adaptation and
● Why is Change so Diffi cult? The Sources of
● Organizational Adaptation and Industry Evolution
● Coping with Technological Change
◆ Managing Strategic Change
● Dual Strategies and Organizational Ambidexterity
● Tools of Strategic Change Management
● Dynamic Capabilities
● Developing New Capabilities
● The Contribution of Knowledge Management and
the Knowledge-Based View
◆ Self-Study Questions
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208 PART III BUSINESS STRATEGY AND THE QUEST FOR COMPETITIVE ADVANTAGE Introduction and Objectives
Everything is in a state of constant change—the business environment especially. One of the greatest challenges of strategic management is to ensure that the fi rm keeps pace with changes occurring within its environment.
Change in the industry environment is driven by the forces of technology, consumer needs, politics, economic development, and a host of other infl uences. In some industries, these forces for change combine to create massive, unpredictable changes. For example, in telecommunications new digital and wireless technologies combined with regulatory changes have resulted in the telecom industry of 2012 being almost unrecognizable from that which existed 25 years ago. In other industries—food processing, aircraft production, and car rental—change is more gradual and more predictable. Change is not just the result of external forces. As we have seen, competition is a dynamic process in which fi rms vie for competitive advantage, only to see it eroded through imitation and innovation by rivals. The outcome is that industries are continually recreated by competition. The purpose of this chapter is to help us to understand and manage change. To do this we shall explore the forces that drive change and look for patterns that can help us to predict how industries are likely to evolve over time. While recognizing that every industry follows a unique development path, there are common drivers of change that can help us to recognize similar patterns, thereby helping us to identify opportunities for competitive advantage. Understanding, even predicting, change in an industry ’s environment is the easy part. By far the greatest challenge is ensuring the adaptation of the fi rm to that change. For individuals change is disruptive, costly, and uncomfortable. For organizations the forces of inertia are even stronger. As a result, the life cycles of fi rms tend to be much shorter than the life cycles of industries: changes at the industry level tend to occur through the death of existing fi rms and the birth of new fi rms rather than through continuous adaptation by a constant population of fi rms. We need to understand these sources of inertia in organizations to see how resistance to change can be overcome. Going beyond adaptation, some fi rms become initiators of change. What determines the ability of these fi rms to become game-changers in their industries?
Whether a fi rm is adapting to or initiating change, competing in a...
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