smehro

6. Industry Life Cycle

Industries, like societies, go through a life-cylce of emergence, growth, maturity, decline and some instances re-birth. The economic concept of creative destruction was first introduced by the Austrian School economist Joseph Schumpeter.

In Capitalism, Socialism and Democracy, Schumpeter popularized and used the term to describe the process of transformation that accompanies radical innovation.[1] In Schumpeter’s vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies that enjoyed some degree of monopoly power. Source: Wikipedia

This graph depicts the Schumpter waves of innovation and destruction from the 18th century to now.

Schumpeter life cycles of industrial innovations
Schumpeter life cycles of industrial innovations
The image below depicts an Industry Life Cycle and the appropriate managerial mind-set for each  phase of the life cycle. In the emerging phase companies look for exploiting open niches (white spaces), in the growth phase the focus should be on exploiting factors of production (process streamlining and innovation), in the mature stage the dominant players consolidate their market position and exploit their market power.
Management actions

Management actions

The image below depicts two waves of innovation, destruction and emergence. The first wave is smaller (in gray tones), the second wave is bigger (in green), and the types of innovation that fuel each phase of the wave. This image is more detailed and specific than the one above about the types of innovations that occur at various phases in an industry life cycle. Can you relate this image to what is happening in the publishing industry today (book, music, movies)? Can you identify the specific innovations that are occuring in these industries?
Creative Destruction and innovation
Creative Destruction and innovation
Laws of creative destruction: To prepare your corporation for the future you must first let go of the past.
Industry Life Cycle and profits
Industry Life Cycle and profits

The broadcast radio industry is a good example of an industry going through creative destruction as a result of the disruptive forces of the internet and digital technology.

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