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2020 | OriginalPaper | Chapter

4. Ten Ways to Innovate and Revitalize Industries

Authors : Jagdish Sheth, Can Uslay, Raj Sisodia

Published in: The Global Rule of Three

Publisher: Springer International Publishing

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Abstract

This chapter addresses vital questions such as the following: How are industries born? How do they grow, plateau, and get revitalized? How do they get creatively destroyed? Disruptive technologies or business models typically emerge from outside of the industry and revolutionize it. Industries exist in a dynamic balance between monopolistic competition and oligopoly. Industry evolution and inertia are primarily driven by two factors that are often at odds with each other: the need for efficiency and growth. Contrary to conventional wisdom, industries are born due to many reasons besides new technological breakthroughs. Most new industries are born by transformation from manual to automation; outsourcing; reducing friction in commerce and consumption; tapping into unmet needs; converting wants into needs; moving from unbranded to branded products and services; leveraging platforms and infrastructure; government policy; inventing here, marketing there; and finally eureka! Access to capital is the real competitive advantage of entrepreneurs. Shakeouts and mergers occur more due to capital shortage than differentiation and competition. De jure as well as de facto standards are equally important in industry organization. Corporate strategy is becoming more dynamic and volatile. The breakup value is often greater than the original corporation value.

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Footnotes
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For example, Pulitzer history prize recipient Alfred D. Chandler (1918–2007) at Harvard Business School, Ronald Coase (1910–2013) at the University of Chicago, and Nobel memorial prize recipient Oliver E. Williamson (1932–2020) at University of California Berkeley all made seminal contributions to the theory of the firm. In terms of strategy, Kenneth R. Andrews (1916–2005) of Harvard Business School, H. Igor Ansoff (1918–2002) (pioneer of the widely used product-market growth matrix), and especially Edward Chamberlin (1899–1967) (known for the concepts of product differentiation and monopolistic competition) and Joan Robinson (1903–1983) at Cambridge University (who coined the term monopsony) are widely cited for making structure-conduct-performance paradigm mainstream, whereas Edith Penrose (1914–1996) is credited for pioneering today’s academically dominant resource-based view of the firm.
The early pioneers such as Adam Smith (1776) advanced some systematically related statements about separation of firm ownership and control; however, it took more than 150 years for Coase (1937) and more than 200 years for Williamson (1979) to develop an empirically testable theory of the firm in the form of transaction cost theory, and Chandler to author three seminal books—Strategy and Structure (1962), The Visible Hand (1977), and Scale and Scope (1990) on the subject. Nevertheless, extant research is mostly unsatisfactory when it comes to a comprehensive treatise of industry life cycle or market evolution.
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Alas, we still lack in our understanding of when and why these shifts occur. The ecological resource partitioning theory (Carroll 1985, 1997) examines the competitive dynamics between the generalists and specialists and provides further empirical support for the gradual convergence toward a few generalists and the Rule of Three theory. In summary, abundant and varying types of resources early on in an industry’s life cycle causes generalists to proliferate. In turn, these generalists validate market potential and attract numerous specialists that position themselves in peripheral niches (Carroll 1985). However, the resources available to each organization begin to get scarce during this evolutionary process. The increasing degree of product line overlap between the generalists causes them to compete directly, which increases the casualty rate among them.
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The emerging specialty domain of entrepreneurial marketing attempts to remedy this drawback by pointing out the tremendous value of marketing for entrepreneurs and the effectiveness of non-conventional marketing for corporate marketers. The rise of entrepreneurial marketing can be traced back to Jay Conrad Levinson at UC Berkeley. His students engaged with start-ups were questioning him on how they could compete with the large corporation with huge marketing budgets. Levinson (1984) examined addressing marketing opportunities with little or no budget and published the first guerilla marketing book in 1984. The guerilla marketing book series became the most successful marketing book series of all time. The series now has close to 40 original volumes, has been translated to 62 languages, and sold well over 20 million copies.
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Metadata
Title
Ten Ways to Innovate and Revitalize Industries
Authors
Jagdish Sheth
Can Uslay
Raj Sisodia
Copyright Year
2020
DOI
https://doi.org/10.1007/978-3-030-57473-4_4