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:

Industry Dynamics: Rethinking the Effects of Velocity on Product Innovation from Ian McCarthy

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.

Ian McCarthy

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