Wednesday, 2 March 2011

Rethinking industry dynamics: What’s your velocity regime?

Research on environmental velocity highlights  "the importance of organizations operating “in time” with their environments and in synchrony across their subunits and activities" (McCarthy et al. 2010: 618)

Competitive advantages are temporary, especially in fast changing industries. A cover of Business Week magazine asks “Is Your Company Fast Enough?”, and there are scores of popular business books and magazines with titles such as “Fast Company”, “Business @ the Speed of Thought”, and “The Age of Speed”. Such publications suggest that in fast moving industry environments, speed, and in particular being fast, is an important factor in the creation and erosion of competitive advantage.

In an article entitled “A Multidimensional Conceptualization of Environmental Velocity”, that I authored with colleagues Thomas Lawrence, Brian Wixted, and Brian Gordon, we present a framework that dispels this notion that speed always leads to business success.

We explain that to simply characterize business environments as fast-changing or highly dynamic, is to overlook the fact that the velocity of an industry - its rate and direction of change  - is composed of multiple factors, each with a distinct velocity of its own. These factors, or industry dimensions as we call them, include: technologies, products, competitors, demand and regulations. It is rare for an industry to be uniformly high-velocity in nature (i.e. all dimensions are changing rapidly and discontinuously). Instead, businesses typically face what we call “velocity regimes”, patterns of multiple velocities of all the different dimensions involved.

Figure 1: Conflicted Velocity Regime for the Fashion Apparel Industry (McCarthy et al. 2010)

When faced with such a velocity regime, it is misguided to focus on designing and managing a business that is uniformly fast. What’s important is determining your “velocity regime” – the multiple different rates and directions of change in your world – and then ensuring that different business activities are organized and coordinated to effectively respond to these different velocities.

For a detailed description of Figure 1, and the concept of the velocity regimes, please go to the full article. We provide illustrative industry examples and measures for determining your velocity regimes.

Also, you can view and download a presentation of these research ideas:

Adapted from: McCarthy, I.P., Lawrence, T.B., Wixted, B., and Gordon, B. 2010. A Multidimensional conceptualization of environmental velocity. Academy of Management Review, 35(4), 604-626.

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  1. I have often thought that the emphasis on speed and "now-ness" that the digital world encourages is not reflected in many industries actual experience of business -i.e. their customers are living in many non-synchronized time scales - such as that of their nostalgia -yearning for times when things were made "better" e.g. appliances that could be repaired vs tossed for new ones, and returning to their youth e.g. sales of 60's rock stars, contrasted with the consumers societies drive for the latest gadgets and cars etc. How slowly we actually adopt new ideas- such as reduced consumption, change eating habits or adopt new washing powder. There is a disconnect here that your article and diagram make explicit. Donovan Gillman

  2. i have worked in a quite innovative French company (Neuf Cegetel) in a highly distruptive environment (DSL boom in years 2000-2008). i have always feel the urgency and dedication to deliver new stuffs but really, i never had the feeling that anyone inside the company was trying to calcule our speed. we just had to be fast and deliver.

  3. Great post! Keep it up the good work.

  4. I believe it is more complex than that. To understand speed of change and innovation we probably need to look at the entire industry, and the interplay between technology, competition (and cooperation, I think) and regulation. Only then can we really start looking at speed of change.

  5. Like the article, the discontinuity is a good point, we've seen organisations thrash themselves for continuous rapid change chasing diminishing or marginal returns, only to be blind-sided by a slower moving discontinuity introduced by a competitor rendering their frantic actions nugatory. Innovation of both types cannot happen in a vacuum. But... the reason I say slower is because discontinuity innovation has a higher level or prior changes required to create the necessary conditions for it to take hold.

    As such we now practice both innovation tracks with internal R&D. Rapid evolution and slower disruption with a number of shaping actions to instil the preconditions for disruptive discontinuity.