Predicting changes in industry structure

Abstract

PurposePrevious Reaching for value columns, have looked at companies and industries in historical terms. (How did smart companies use strategic market positioning (SMP) to make acquisitions and other investments? How did less smart companies pick the wrong growth path?) This column aims to consider how the basis of competition in an industry can change over time, with big implications for many of those operating in the industry today. A challenge for business strategists is to know when the time is right to launch new business models that go against established business practices. Too late and they risk ceding first‐mover advantage to competitors; too early and they risk launching businesses that fail to yield expected operating benefits and financial returns. This paper seeks to usesthe example of the healthcare industry to examine how changing operating models and market forces are likely to influence the future competitive landscape for US healthcare providers.Design/methodology/approachIn this paper, different sectors of the US healthcare industry are considered and what has caused some sectors to be dominated by national or global‐scale competitors while others continue to be served by thousands of local‐scale providers are examined. To illustrate the points the recent emergence of retail clinics, such as RediClinic, owned by national pharmacy companies and attempts by hospital organizations such as HCA and Mayo to build national‐scale businesses are considered.FindingsThe paper finds that just because an industry sector has been operating one way for many years does not mean that the basis of competition can never change. Companies that can identify when new technology or other factors have made the conditions right for a newer, more efficient way of doing business can unlock value and leapfrog competitors by launching new product or service offerings and building the right capabilities and scale for the new environment.Originality/valueBy looking in detail at current and future benefits of scale in the healthcare industry, the paper provides valuable insights into how to understand and predict when major discontinuities in the structure of an industry sector are likely to.