I would like to share some of the insights I learned from the article ‘The birth of new industries’ by Gustafsson, R., Jääskeläinen, M, Maula, M, Uotila, J. 2011. Our professor is one of the authors and the topic is strongly linked with the themes that we have been discussing during the course.
According to Gustafsson et al. (2011), three constitutive elements are required for the birth of a new industry;
1) activity network
2) industry identity
3) commercial viability
The article claims that each element influences other elements and they are dependent on each other. Additionally, the birth of a new industry can only be experienced through all the elements being in place in interaction.Gustafsson et al. (2011) defines an industry as “a collectivity of economic actors connected by perceived similarity based on the characteristics of their commercial activity” p.6.
1) Activity network
Industry boundaries and actual players of the industry are hard to define in the early stage of industy emergence. At the stage of birth actors can be defined as group of firms which are trying the shape and influence the perceived value for driving a particular activity. This group around a company can be called as activity network. (Gustafsson et al., 2011).The article also argues that activity networks become influencial in directing industry identity.
2) Industry identity
Gustafsson et al. (2011) argues that industry identity is about perceived similarity connecting the parties involved and these similarities can be based on multiple characeristics such as product and customer needs-served.In terms of the birth of a new industry, it needs to be considered whether a company can meet the expectations for a new emergent industry and whether the company is a credible player in that industry. Let’s take the example of Nokia being in the mobile payment industry; Would Nokia be a credible player in this industry? The need for re-establishing identity must be derived from consumers since Nokia needs to be credible enough to win the trust of consumers and partners. Also a good thing to keep in mind is that companies cannot compete in all new industries; focus on one or two and build on them.
3) Commercial viability
As is common knowledge for us a new emergent industry must generate sufficient revenues and for companies this is the primary goal if they want to be part in establishing a new industry.
As a final thought the three constitutive elements cannot be separated; a new industry can only be established if all element are in place since they are highly interconnected. For example, commercial viability of a new industry attracts new members to the network which again may shape the industry indentity to a new level.
For more information: Gustafsson, R., Jääskeläinen, M, Maula, M, Uotila, J. 2011. The birth of new industries. Working paper
Regards,
Jenna
Strategies Beyond Markets 