Whether your business is in the fledgling stages or has been around for years, understanding your industry lifecycle can be important to your success. What exactly is the concept of an industry lifecycle, and how does it affect you?
Every industry goes through a lifecycle that begins at the startup phase—that is, when the industry first comes into existence. Obviously, some industries' startup phase was decades or even centuries ago, such as homebuilding or restaurants. However, even within those types of industries, there are special niches that can continually come into existence—think of them as sub-industries. For example, while homebuilding as a business has been around for centuries, environmentally friendly homebuilding using reclaimed or recycled materials and solar energy is a relatively new niche within that industry.
Next can come a phase of rapid growth. Inspired by the success of industry pioneers, other entrepreneurs may follow suit and launch companies in that field.
Eventually, the industry reaches maturity. It may not be brand new and exciting anymore, but it can also offer stability and a good chance for business success.
Types of Decline
At some point, every industry can begin to decline a bit from its mature peak. This can happen one of three ways:
A rapid decline. Often this is precipitated by some drastic event, or combination of events—such as the way the travel industry, and in particular travel agencies, declined after 9/11. At the same time, the growth of online travel search and booking sites helped those who needed to travel to book their own plans without an agent.
A slow decline. Slow declines can be the most common type of industry transformation. They can occur for many reasons, including a change in the target market’s demographics or attitudes, new inventions or technology, or dwindling resources or materials that the industry needs. Print publishing is an example of an industry in slow decline: Although print magazines and newspapers still exist, the advent of online publishing, which cost less and is accessible to everyone, has made print less profitable.
Reinvention. Sometimes an industry starts to decline, then reinvents itself, leading to a new lease on life—and new opportunities for profits. For instance, TV broadcasting is reinventing itself after a slow decline due to the popularity of online video and online streaming services. Even traditional broadcast networks are joining the game by offering at least some of their content to these services.
Researching Your Industry
Before you ever start a business, of course, you should have a good idea of where the industry you're entering is in its lifecycle. However, once you're up and running, try not to let the day-to-day challenges of business blind you so that you don't see the forest for the trees. Make sure you stay up to date on news and trends in your industry, as well as related industries and your target market. It can be especially useful to read forecasts or projections—even if they may sometimes seem farfetched, they can often spark good ideas.
What’s the best place to be in an industry lifecycle? Probably either the rapid growth or reinvention phase. If you're the first mover in a new industry, you may stand a good chance of being too far ahead of your time. If you wait until a few other companies have succeeded, however, you may still be able to get in on the ground floor and enjoy the rapid growth.
If your industry is mature, you may face a lot of competition, and it can be more difficult to make your business stand out. To get around this hurdle, many mature businesses branch out into new product lines, spinoff businesses or specialize niches to differentiate themselves.
A rapid decline can be challenging, especially since you don't often get a warning it’s going to happen. However, by performing regular SWOT analyses and brainstorming possible things that could threaten your business, you may have a better chance of being at least somewhat prepared.
If your industry is starting a slow decline, the good news is you may still have time to act. Will the industry decline slowly enough that you still have time to sell your business and start something new? Can you modify your business to be more successful in the changing industry?
Ideally, a declining industry will bounce back through reinvention—and that's where entrepreneurs can come in. In fact, for true entrepreneurs, an industry decline can spell opportunity, not disaster. As competitors fall by the wayside, new openings may be created. As markets change, new needs may arise. By reinventing your industry, you could enjoy greater success than ever before.
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