How industries change. Explanation of Trajectories of Industry Change of Anita M.

McGahan. (!!"#
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 oston. !he "ublished the model for the first time in the #$ of %ctober &''(.

According to McGahan you can)t ma*e intelligent in+estments within your organi,ation unless you understand how your
whole industry is changing. The need to understand change in your industry may seem ob+ious, but such *nowledge is not
always easy to collect. Com"anies sometimes miss or misinter"ret clues and arri+e at false conclusions often.

$hy industries e%ol%e
$esearch by McGahan suggests that industries e+ol+e as a result of two ty"es of threats of obsolescence-
. A threat to core acti%ities of the industry. A threat to the recurring acti+ities of com"anies, which historically
generated "rofits for the industry.
. A threat to the core assets of the industry. A threat to the durable resources, including intangibles such as
*nowledge and brand ca"ital, that ha+e historically made the organi,ation efficient at "erforming core acti+ities.
How industries change
$esulting out of a combination of the abo+e two ty"es of threats, industries change along one of &our Trajectories of
Industry Change-
/. 'adically. 0hen core assets and core acti+ities are both threatened with obsolescence. Ad+ice-
o Perform a balancing act. Aggressi+ely "ursuing "rofits in the short term while a+oiding in+estments
that could later "re+ent you from decreasing your commitments, P12!-
o Assess how 3uic*ly your core assets are de"reciating. And determine the segments in which you can
"rotect your com"etiti+e "osition from those in which your "osition will erode 3uic*ly.
&. (rogressi%e. 0hen neither core assets nor core acti+ities are jeo"ardi,ed. Ad+ice-
o 4e+elo" a system of interrelated acti+ities that are defensible because of their com"ounding effects
on "rofits, not because they are hard to understand or re"licate5 be the biggest.
6. Creati%e. 0hen core assets are under threat but core acti+ities are stable. Ad+ice-
o Assess how 3uic*ly your core assets are de"reciating. And determine the segments in which you can
"rotect your com"etiti+e "osition from those in which your "osition will erode 3uic*ly.
(. Inter)ediating. 0hen core acti+ities are threatened while core assets retain their ca"acity to create
+alue. Ad+ice-
o Perform a balancing act. Aggressi+ely "ursuing "rofits in the near term while a+oiding in+estments
that could later "re+ent you from decreasing your commitments.
The Trajectories of Industry Change ty"ically unfold themsel+es o+er decades. Fighting the industry change is almost
always too costly to be worthwhile. $ather organi,ations should reconfigure themsel+es for lower re+enue growth and
de+elo" the ability to remo+e acti+ities and resources out of the business. !ystematically analy,ing the business
en+ironment is not easy, but the "ayoff is great- better strategic decision7ma*ing for your com"any