A New Industry Lifecycle Model
Product, Process, and Service: A New Industry Lifecycle Model
Michael Cusumano
MIT Sloan School of Management 50 Memorial Drive, E52-538 Cambridge, MA 02142-1347 USA 617-253-2574 cusumano@mit.edu
Fernando F. Suarez
Boston University School of Management 595 Commonwealth Ave., Room 546-F Boston, Massachusetts 02215, USA 617-358-3572 suarezf@bu.edu
Steve Kahl
MIT Sloan School of Management 50 Memorial Drive, E52-511 Cambridge, MA 02142-1347 USA 617-253-6680 skahl@mit.edu
March 8, 2007
Product, Process, and Service
Product, Process, and Service: A New Industry Lifecycle Model
Abstract
Existing models of industry lifecycle evolution tend to focus on changes in products and processes and largely overlook the importance of services. Sales of services, however, are becoming increasingly significant in the revenues of many industrial and high-technology firms either because of industry evolution or strategic decisions or both. In this paper, we extend lifecycle theory by explicitly incorporating the role of services at different stages in the potential evolution of an industry. Building on the literature in service management and industry evolution, we provide theoretical support for our propositions regarding the potential role of services in the early, mature, and post-discontinuity phases of an industry lifecycle.
Keywords: industry lifecycles, services, maturity, business models
Product, Process, and Service
1. Introduction
One of the main tenets of how firms and industries evolve is that, as some businesses mature, the basis of competition shifts from product innovation to process innovation (Utterback and Abernathy 1975; Utterback and Suarez 1993; Utterback 1994; Klepper 1996, 1997; Adner and Levinthal 2001). For example, the model initially
proposed by Utterback and Abernathy in 1975, holds that, early after the birth of a new industry, firms compete based upon product differentiation, investing heavily in developing new
Michael Cusumano
MIT Sloan School of Management 50 Memorial Drive, E52-538 Cambridge, MA 02142-1347 USA 617-253-2574 cusumano@mit.edu
Fernando F. Suarez
Boston University School of Management 595 Commonwealth Ave., Room 546-F Boston, Massachusetts 02215, USA 617-358-3572 suarezf@bu.edu
Steve Kahl
MIT Sloan School of Management 50 Memorial Drive, E52-511 Cambridge, MA 02142-1347 USA 617-253-6680 skahl@mit.edu
March 8, 2007
Product, Process, and Service
Product, Process, and Service: A New Industry Lifecycle Model
Abstract
Existing models of industry lifecycle evolution tend to focus on changes in products and processes and largely overlook the importance of services. Sales of services, however, are becoming increasingly significant in the revenues of many industrial and high-technology firms either because of industry evolution or strategic decisions or both. In this paper, we extend lifecycle theory by explicitly incorporating the role of services at different stages in the potential evolution of an industry. Building on the literature in service management and industry evolution, we provide theoretical support for our propositions regarding the potential role of services in the early, mature, and post-discontinuity phases of an industry lifecycle.
Keywords: industry lifecycles, services, maturity, business models
Product, Process, and Service
1. Introduction
One of the main tenets of how firms and industries evolve is that, as some businesses mature, the basis of competition shifts from product innovation to process innovation (Utterback and Abernathy 1975; Utterback and Suarez 1993; Utterback 1994; Klepper 1996, 1997; Adner and Levinthal 2001). For example, the model initially
proposed by Utterback and Abernathy in 1975, holds that, early after the birth of a new industry, firms compete based upon product differentiation, investing heavily in developing new