Short answer
When designing for a market where competences are converging, focus on leveraging existing strengths and incremental innovation. If competences are diverging, there may be opportunities for disruptive innovation by specializing in a niche.
- Field
- Innovation & Markets
- Source
- Academy of Management Journal (2017)
- Method
- Empirical research
- Evidence
- Strong effect
When technological and customer competences required for different market segments become more similar, established companies (incumbents) are better positioned to maintain their market share, whereas new entrants struggle to gain a foothold. This innovation & markets research insight is drawn from a 2017 study published in Academy of Management Journal. Using Empirical research, researchers explored how this design variable affects real-world outcomes. The key design takeaway: When designing for a market where competences are converging, focus on leveraging existing strengths and incremental innovation. If competences are diverging, there may be opportunities for disruptive innovation by specializing in a niche.
Submarket Convergence Favors Incumbents, While Specialization Creates Entrant Opportunities
When technological and customer competences required for different market segments become more similar, established companies (incumbents) are better positioned to maintain their market share, whereas new entrants struggle to gain a foothold.
Academy of Management Journal · 2017
Key Findings
- 01Convergence in both technological and customer competences decreases entrants' survival chances.
- 02A lack of convergence in either technological or customer competences provides entrants with opportunities to enter and potentially disrupt incumbents.
Application
Design takeaway
When designing for a market where competences are converging, focus on leveraging existing strengths and incremental innovation. If competences are diverging, there may be opportunities for disruptive innovation by specializing in a niche.
How to apply
Before launching a new product or service, analyze the technological and customer competences required for existing offerings in your target market. Assess the degree of overlap to understand potential barriers for new entrants and strategic positioning for incumbents.
Project actions
- 01When researching a market, look for how similar or different the skills and customer needs are for various product types.
- 02Consider how your design choices might make it easier or harder for new competitors to enter the market.
Method & Evidence
Variables
Strengths & Limitations
Strengths
- +Empirical evidence from a relevant industry.
- +Addresses a key aspect of industry evolution: incumbent-entrant dynamics.
Limitations
The findings are based on a specific industry (semiconductors) and may not apply universally. Measuring 'competence' can be subjective.
Reliability & validity
The study's validity relies on the accuracy of data from the semiconductor industry and the operationalization of 'competence convergence.' Reliability would depend on the consistency of measurement across different time periods or firms.
Think critically
To what extent can incumbents actively manage competence convergence or divergence to maintain or gain competitive advantage?
Design Principles
"Market entry and product development success is influenced by the degree of shared competences across related submarkets."
This dynamic highlights how the degree of overlap in required skills and customer understanding across different product areas within an industry significantly influences competitive landscapes. Designers and strategists must consider this convergence when developing new products or entering existing markets, as it dictates the barriers to entry and the strategic options available to both new and established players.
What This Means for Your Design
Imagine a market where making different types of products requires very similar skills and knowledge about customers. This makes it hard for new companies to start because they have to be good at everything at once. But if making different products requires different skills or customer knowledge, new companies can focus on one area and have a better chance to succeed.
How to use in your project
- 1.Reference this study when discussing market analysis, competitive strategy, or the impact of technological evolution on design choices in your design project.
Add to My Project
Quick Cite
Paragraph starter
Analysis of industry evolution suggests that the convergence of technological and customer competences across submarkets significantly impacts competitive dynamics. High convergence favors incumbents by creating barriers to entry for new firms, while divergence in competences can provide opportunities for entrants to specialize and disrupt established players. This insight is crucial for strategic product development and market entry planning.
Source
Academy of Management Journal
A Competence-Based View of Industry Evolution: The Impact of Submarket Convergence on Incumbent−Entrant Dynamics
journal · 2017
View sourceQuestions About This Research
- What does the research say about submarket convergence favors incumbents, while specialization creates entrant opportunities?
- When designing for a market where competences are converging, focus on leveraging existing strengths and incremental innovation. If competences are diverging, there may be opportunities for disruptive innovation by specializing in a niche. Evidence: Academy of Management Journal (2017).
- Why does "Submarket Convergence Favors Incumbents, While Specialization Creates Entrant Opportunities" matter for design?
- This dynamic highlights how the degree of overlap in required skills and customer understanding across different product areas within an industry significantly influences competitive landscapes. Designers and strategists must consider this convergence when developing new products or entering existing markets, as it dictates the barriers to entry and the strategic options available to both new and established players.
- How can designers apply this research?
- When designing for a market where competences are converging, focus on leveraging existing strengths and incremental innovation. If competences are diverging, there may be opportunities for disruptive innovation by specializing in a niche.
- What were the main findings?
- Convergence in both technological and customer competences decreases entrants' survival chances.. A lack of convergence in either technological or customer competences provides entrants with opportunities to enter and potentially disrupt incumbents.
- What research method was used?
- Empirical research.
- How strong is the evidence?
- Evidence strength is rated Strong effect, based on a 2017 journal from Academy of Management Journal.
- What should I do differently in my next project?
- Before launching a new product or service, analyze the technological and customer competences required for existing offerings in your target market. Assess the degree of overlap to understand potential barriers for new entrants and strategic positioning for incumbents.
- What are the limitations?
- The study is specific to the semiconductor industry, and findings may not directly translate to all industries. The definition and measurement of 'competence convergence' could be subject to interpretation.