Leg 5. From Hong Kong to Guangzhou (I). Industry Evolution explained.
Good morning to all!
Today is a pleasant day here in my hometown San Salvador. It is a bit windy and the sun is shining so lovely. We will start today with our theme: Industry Evolution-The Life Cycle Model. As you can watch below, you will find all the highlights from Leg 4. Leg 5 represents, some weeks to unfold the nature and the uses of the industry life cycle and the drivers of the industry evolution process.
The reason why this life cycle model has been used for more than 60 years, is because this model provides us with a basis for classifying industries into distinct categories according to their stage of development. Each phase of the Life Cycle model represents a state of development of an entity, and in consequence of industries.
As much as we are born, we go through our growth phase, reach maturity and then we start to decline, industries have followed the same pattern. It is natural to organize companies in their quest for growth this way. Let´s follow the next slides as an introduction to this topic:
If you wish to download the last slides in PDF Format, click here: Eliescalante Leg 5 Life Cycle a 24012018.
The Life Cycle Theory has been common to draw implications not just for explaining a specific company evolution, but also it has implications for marketing strategy, technologies, for markets and industries. The concept of life-cycle is behind the Hype-cycle technology curves used by Gartner.com. But it is also important to say that the life cycle curve is not a standard representation. There is no evidence that most industries follow the same exact pattern of an S-Curve or turning points of the different stages in that predictable way. It can happen that the shape of the sales curve over time (life cycle) appears to be completely idiosyncratic and peculiar for each industry. There are some studies about how different patterns in addition to the typical S-Curve exist.
But for the purpose of this blog, we will keep the general idea about the life-cycle curve as this one:
There are other forms of life-cycle for products or industries. For example, we can name some here:
- The Recycle type: You can see Sales begin to fall off, as in the typical cycle, but then are regenerated as new applications, new product characteristics or new users emerge. This process can be repeated, resulting in a succession of life cycles.
- The Humpback type: After the life cycle apparently enters the decline stage, sales recover again. This may occur when buyers take some time to test and evaluate the products after their initial purchase. When they approve, they place repeat orders.
- The Plateau type: Sales may plateau out when there is no better alternative available. The products are still in demand until a substitute appears, when sales may decline dramatically.
- There are other life-cycle curves. According to one study, there are at least 16 curve patterns specifically for Fad Products, or specialist product industries, pharmaceutical industries, fashion, etc.
It is very crucial to understand which industry are we talking about. If our industry belongs to massive consumer goods, probably the most general S-curve applies. But if we have a beautiful business (hula hoop, music, and some fashion garments) with items which enter quickly with great zeal, peak early and decline quickly, then we probably are talking about Fad Products.
On my next post, we will continue with the two factors identified as fundamental to driving industry evolution: Demand growth and production-diffusion of knowledge. It is key to understand this topic because it is so related to the digital technologies “industry”.
See you soon. Blessings and have a happy day! Thank you.
Disclaimer: The content and presentation slides shown on this blog are prepared by me. Nevertheless, all the pictures or videos shown on this blog are not mine. I do not own any of the lovely photos posted unless otherwise stated.
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