The Competitive Life Cycle in Detail

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En provenance du cours de BCG

Digital Transformation

684 notes

BCG

Digital Transformation

684 notes

Digital transformation is a hot topic--but what exactly is it and what does it mean for companies? In this course, we talk about digital transformation in two ways. First we discuss the pace of change and the imperative it creates for businesses. Next we provide the context for this transformation and what it takes to win in the digital age. Then we walk through BCG's proprietary framework, which helps you identify key areas to digitize, including strategy, core processes, and technology. By the end of this course, you'll be able to: --describe the underlying economics of innovation, technology, and market disruptions --weigh the pros and cons of current digital technologies driving advancement --utilize BCG's digital transformation framework as a ""how-to"" for digitizing your organization

À partir de la leçon

The Mechanics of Disruption

Disruption is not new, and we can learn from the past how to thrive given the constant disruptions that are the hallmark of the digital age. This week, we will explore the foundations of digital transformation and the nature of the competitive life cycle. We will look at the underlying economics of innovation and technological change. Finally we will explore incumbency and the economics of innovation through the lens of digital transformation.

Week 2 Introduction1:14

A Historical Perspective6:39

Disruption Is Not New Part I5:36

Disruption Is Not New Part II9:35

Environmental Analysis & the Competitive Life Cycle6:09

The Competitive Life Cycle in Detail6:19

Rencontrer les enseignants

Michael Lenox
Senior Associate Dean and Chief Strategy Officer
Darden School of Business
Amane Dannouni
Principal at Boston Consulting Group, Singapore
Sonja Rueger
Project Leader, Boston Consulting Group
Ching Fong Ong
Senior Partner and Managing Director, Boston Consulting Group

We've previously introduced the idea of the competitive lifecycle.

Let's take a deeper dive into how the competitive lifecycle often unfolds.

Early on in the competitive life cycle,

we have what we might even refer to as the Era of Ferment.

This is the idea that early on things are largely exploratory.

Innovation focuses on different product features and different underlying

technology that might eventually become the dominant form within the industry.

It's at this period we often see small entrepreneurial firms

entering in the industry, in many cases pioneering the industry.

And to the extent that profits are made,

they're often made more through differentiation and niche placement,

than they are through, for example, a low cost structure within the industry.

So let's refer to the automobile, and in particular, the automobile industry

100 years ago when it first emerged from the remnants of the carriage industry.

When the automobile industry first appeared we had lots of different

competitors, hundreds of different competitors, in fact.

We saw incumbents moving in to the industry.

Studebaker brothers in fact were the largest most successful makers of

horse-drawn carriages in the United States.

I mean, upwards of 60% market share in the United States.

They saw this transformation occurring and

they made investments to make this transition into the automobile industry.

We saw others come from examples like the bicycle industry.

Many other just entrepreneurs who were interested and got into the industry.

What was fascinating about the early phases of the automobile industry,

there were lots of different drive trains within the industry.

We had the Stanley Steamer using steam power.

There were actually numerous electric vehicles

early on in the automobile's history.

There were kerosene-powered engines and

of course,there was the gasoline internal combustion engine.

All competing to be the dominant technology within the industry.

Now over time what we typically see, is a dominant design start to emerge.

We see, not necessarily one technology,

but in many cases of limited number of technologies emerge,

that become the dominant form factor we see within the industry.

Now, as we see this occur, innovation begins to shift from innovation and

experimentation around different form factors to things like manufacturing,

processing, delivery, service.

And this is where a shakeout typically occurs,

where we might be left with just a few large efficient firms.

And interestingly enough,

many of the pioneering firms might actually wither away.

Think again about digital music players and the Rio.

So it's not guaranteed that being the first mover or the first entrant into this

new technology or new industry is going to guarantee long term success.

So let's go back to the automobile again.

So eventually as we all know,

the gasoline internal combustion engine becomes the dominant technology.

It's interesting to note this may take a long time.

In fact, even as late as the late 1930s, 1940s,

there were electric vehicles throughout different cities throughout the world.

In New York City, they actually had a fairly significant market share for

delivery vehicles.

But over time, we eventually settled in to the internal combustion engine being

the dominant technology.

It's interesting to note that it's not necessarily that the best technology wins.

In fact there's lots of factors that might drive why one technology dominates

over another.

In the case of the automobile industry in the United States, eventually

companies like Ford would enter in and compete more on efficiency of production,

for example through the assembly line process.

Than it was necessarily through the innovations of the technology of

the automobile itself.

Eventually we were left in the US once again with the big

three of General Motors, Ford and Chrysler.

General Motors in particular was interesting,

is that they in essence rolled up the industry through acquisitions.

They bought up a lot of different players to create the General Motors company.

All the while, other companies were going out of business.

Studebaker brothers made a good go for it for a couple of decades, but

they eventually are now a footnote in history and have gone away.

So, when we think about this process, we eventually

want to think about the renewal of this process through a new disruption.

So once we reach that dominant design and

the market matures, this actually creates the seeds for future disruption to occur.

That disruption might be exogenous, it might be driven by a technology change,

what we sometimes refer to as technology push.

It could also be driven by the market itself,

as consumer preferences shift, what we often call demand pull.

The same S-curve that we talk about in terms of cumulative revenue,

we can also think about in terms of technology performance.

And it's often the case that there are some potentially,

even physical limit to how well the technology can improve.

So let's turn our attention now to again to the automobile example.

We are in the midst of another disruption in the industry driven by electric

vehicles and autonomous vehicles.

This after nearly 100 years of stability within the industry.

Why is this occurring now?

Well we can speculate.

One is underlying advances in the technology,

the technology push concept here.

Some of it driven by digital transformation itself,

making these technologies more viable.

Some of it also is being driven by consumer demand.

For example, consumers demanding low emissions vehicles,

leading to the prevalence of electric vehicles in the market.

We see, obviously, a lot of incumbent firms competing and

offering vehicles along these lines.

But we also see new entrants, like Tesla, making significant inroads.

In fact, by 2017,

Tesla actually had a higher market capitalization than General Motors.

Meaning basically, that the market thinks that Tesla will be a larger,

more significant player in the future.

We see companies like Volvo,

an established player in the market, pledging to go all electric by 2020.

So once again, we don't know how this will exactly play off, but

we have a pretty good idea.

We'll probably see entry into the industry.

We'll probably see competing designs here in terms of what the dominant design

technology might look like.

And we'll probably eventually see a shakeout and a coalescing around a common

form factor for the industry in the somewhat near future.

So again, diving into the details of the competitive lifecycle,

gives us a greater understanding of how competition unfolds

when we have these disruptions taking place.

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