“Like a siren, it calls,” Horace Dediu writes for Asymco. “The Auto Industry is significant. With gross revenues of over $2 trillion, production of over 66 million vehicles and growing it seems to be a big, juicy target. It employs 9 million people directly and 50 million indirectly and politically it must rank among the top three industries worthy of government subsidy (or interference). Indeed, in many countries – the US included – government interference makes it practically impossible for a producer to go out of business, no matter how poorly it’s managed or how untenable the market conditions.”
“But this might be the tell-tale sign that danger lurks. Theory suggests that incumbents going out of business is an essential indicator of industry health,” Dediu writes. “Without their exit, entrants are never allowed to bring disruptive ideas to bear and innovation simply stops. Is this interference with mortality the only indication of entrant obstacles? Are things about to change? Is there pressure for innovation? Can we spot other indications of a crisis in this industry?”
“As technology companies listen to the siren’s song they should contemplate the basis of survival in the industry,” Dediu writes. “Whether your approach and innovation sustains the hegemony or changes it will largely depend on your business model being asymmetric to the incumbent. Determining what is and isn’t symmetric should be the first step in your analysis.”
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