Industry Dynamics: Rethinking the Effects of Velocity on Product Innovation
by Ian McCarthy
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Focusing on new product development, I present a framework that dispels this notion that speed always leads to business success. I explain that to simply characterize business environments as ...
Focusing on new product development, I present a framework that dispels this notion that speed always leads to business success. I explain that to simply characterize business environments as fast-changing or highly dynamic, is to overlook the fact that the velocity of an industry - its rate and direction of change - is composed of multiple factors, each with a distinct velocity of its own. These factors, or industry dimensions as we call them, include: technologies, products, competitors, demand and regulations. It is rare for an industry to be uniformly high-velocity in nature (i.e. all dimensions are changing rapidly and discontinuously). Instead, businesses typically face what we call “velocity regimes”, patterns of multiple velocities of all the different dimensions involved. Thus, I will argue that it is misguided to focus on designing and managing a business that is uniformly fast. What’s important is determining your “velocity regime” – the multiple different rates and directions of change in your world – and then ensuring that different innovation activities are organized and coordinated to effectively respond to these different velocities.
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