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"How Industries Change"
McGahan, Anita M., Harvard Business Review, 00178012, Oct 2004, Vol. 82, Issue 10.
Industries follow distinctive change trajectories. Investments in innovation are more likely to pay off if you take those pathways into account.

Introduction

The article very methodically points out that one can't make intelligent investments within ones organization unless one understands how the whole industry is changing. If the industry is in the midst of radical change, one will eventually have to dismantle old businesses. If the industry is experiencing incremental change, one will probably need to re-invest in the core. To truly understand where the industry is headed, one have to shut out the noise from the popular business press and the pressure of immediate competitive threats to take a longer-term look at the context in which one does business.

Four Trajectories of Change

In the article, the author specifies that an Industry faces two types of threat; "the first is a threat to the industry's core activities - the activities that have historically generated profits for the industry. These are threatened when they become less relevant to suppliers and customers because of some new, outside alternative. The second is a threat to the industry's core assets - the resources, knowledge, and brand capital that have historically made the organization unique. These are threatened if they fail to generate value as they once did. In the pharmaceutical industry, for instance, blockbuster drugs are constantly under threat as patents expire and new drugs are developed."

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Siddharth Nagpal has done BBS (Batch of 2000-03) from College of Business Studies, University of Delhi and is currently pursuing MBA from XLRI Jamshedpur.