Posted 30 December 2002 - 04:21 AM
Managing investment in an emerging industry is not a task for the fainthearted. In a mature industry, you know what people are buying, what they are willing to pay, and which features they want. You know who your competitors are, and what the technical triumphs and hurdles are likely to be. In an emerging industry, none of these things are known. There is only certainty that there will be a viable market, products, and revenues. Beyond that, take a lesson from history and count on your competition springing out of nowhere. Few guessed in 1903 that Henry Ford would own 50 percent of the automotive market in less than 15 years.
The major investment problem of emerging industries is not the technology. Rather, it is the ability to capture intellectual property that has real commercial value. For example, if you are running a company in a mature industry, such as producing digital versatile disc (DVD) players, then the technology problems have long since been resolved. As a DVD player manufacturer, you can either purchase components on an original equipment manufacturer (OEM) basis, or manufacture them according to industry standards. The issues you have to focus on are keeping the costs out of the products, incorporating features that make the products attractive to consumers, and setting up marketing and distribution systems that ensure that consumers want what you have and can get it when they want it. Even if a better, cheaper, faster DVD replacement technology becomes available that can produce higher quality at lower cost, the inertia of the installed base means that current consumers and producers of DVD program material will take years to evaluate the new technology and consider whether to embrace it. As a mature player in a mature market, you must be responsive, but you have plenty of time and staying power to weather the occasional storms.