Diagnose Industry Type
Classify an industry's evolutionary stage and structural type by matching observable market signals against Porter's diagnostic criteria, then route to the appropriate strategy skill.
Input
- Industry name (required)
- Observable market data: growth rates, concentration ratios, buyer profiles, product innovation pace, competitive dynamics, capacity trends, profit trends
Output
- Industry type classification (emerging | fragmented | transitioning to maturity | declining)
- Confidence level (high | medium | low)
- Key signals matched
- Recommended downstream skill for strategy formulation
Procedure
- Gather signals. List what is known about the industry across: growth trajectory, number/size of competitors, buyer sophistication, product standardization, capacity dynamics, profit trends, substitution threats, and regulatory shifts.
- Score against the 14 evolutionary processes (below). Identify which processes are most active — this reveals the industry's evolutionary position.
- Run each classification checklist (below). Count matching signals per type.
- If declining signals match, apply the structural vs. cyclical decline test.
- Resolve conflicts. An industry can be both fragmented AND emerging, or fragmented AND declining. If multiple types match, note the primary classification and secondary overlay.
- Assign confidence. High = 5+ signals match one type clearly. Medium = 3-4 signals, or two types compete. Low = sparse data or ambiguous signals.
- Route to the appropriate downstream skill.
The 14 Evolutionary Processes (Diagnostic Signals)
These predictable dynamic processes occur in every industry. Assessing which are most active reveals evolutionary stage:
- Long-run changes in growth — is the growth rate accelerating, plateauing, or declining?
- Changes in buyer segments served — are new segments emerging or old ones shrinking?
- Buyers' learning — are buyers becoming more experienced and sophisticated?
- Reduction of uncertainty — is the technology/business model becoming proven?
- Diffusion of proprietary knowledge — are trade secrets spreading? Are patents expiring?
- Accumulation of experience — are cost curves flattening?
- Expansion (or contraction) in scale — is the industry growing or shrinking in absolute terms?
- Changes in input and currency costs — are cost structures shifting?
- Product innovation — is the pace of new product introductions accelerating or slowing?
- Marketing innovation — are new channels, positioning, or promotional methods emerging?
- Process innovation — are manufacturing or delivery methods being reinvented?
- Structural change in adjacent industries — are suppliers, buyers, or complementors changing?
- Government policy change — are regulations tightening, loosening, or shifting?
- Entries and exits — are new firms flooding in, or are incumbents leaving?
Classification Checklists
Emerging Industry
- Created by technological innovation, shifts in relative cost relationships, or emergence of new consumer needs
- "No rules of the game" — competitive rules are still being established
- High uncertainty about technology, strategy, and market size
- Many new entrants experimenting with different approaches
- First-time buyers dominate; no repeat-purchase pattern yet
- Proprietary knowledge is closely held; little diffusion
Fragmented Industry
- No firm has a significant market share or can strongly influence industry outcomes
- Large number of small- and medium-sized companies, many privately held
- Absence of market leaders with power to shape industry events
- Low barriers to entry
- Diseconomies of scale or other structural reasons preventing consolidation
Transitioning to Maturity
- Slowing growth sparks increased competition for market share
- Sales increasingly shift to experienced, repeat buyers
- Competition places greater emphasis on cost and service
- "Topping-out" problem: capacity additions must slow or overcapacity results
- Manufacturing, marketing, distribution, and research methods undergoing change
- New products and applications become harder to discover
- International competition increases
- Industry profits fall during the transition period
- Dealer margins squeezed, but dealer power increases as manufacturers compete for distribution
Declining Industry
- Absolute decline in unit sales over a sustained period
- Decline driven by technological substitution, demographics, or shifts in buyer needs/tastes
- Capacity exceeds demand; exit barriers trap competitors
- Surviving firms compete for shrinking pie
Structural vs. Cyclical Decline Test
Porter is explicit: true structural decline cannot be ascribed to the business cycle or short-term discontinuities (strikes, material shortages). Apply this test:
| Factor | Structural Decline | Cyclical Downturn |
|---|---|---|
| Duration | Sustained, multi-year | Tied to economic cycle |
| Cause | Technological substitution, demographic shifts, permanent changes in buyer needs | Recession, temporary supply disruption |
| Reversibility | Irreversible without fundamental reinvention | Self-correcting as cycle turns |
| Substitutes | Growing substitute eroding demand permanently | No new substitute; demand returns |
If structural: route to end-game strategy. If cyclical: do not classify as declining — reassess at next cycle.
Routing Logic
| Classification | Downstream Skill |
|---|---|
| Emerging | strategize-emerging-industry |
| Fragmented | strategize-fragmented-industry |
| Transitioning to maturity | select-generic-strategy -- no dedicated maturity skill exists; Porter's maturity advice (compete on cost/service, rationalize product mix) is closest to generic-strategy selection |
| Declining | strategize-declining-industry |
| Ambiguous / multi-type | Re-gather data or present both classifications with caveats |
During synthesis, consult reference.md for Porter's heuristics on industry evolution; before finalizing, check its failure modes.
Output Template
## Industry Diagnosis: [Industry Name] **Classification:** [Emerging | Fragmented | Transitioning to Maturity | Declining] **Confidence:** [High | Medium | Low] ### Signals Matched - [Signal 1] - [Signal 2] - ... ### Active Evolutionary Processes - [Process name]: [observation] - ... ### Structural vs. Cyclical Assessment (if declining) [Assessment] ### Recommended Next Step → Route to: `[downstream skill name]` → Rationale: [why this classification leads to this skill]
Worked Example
Industry: U.S. traditional print newspaper publishing (circa 2015)
Signals matched (Declining):
- Absolute decline in unit sales (circulation) sustained over 10+ years
- Technological substitution: digital news consumption replacing print
- Demographic shift: younger cohorts never adopted print habit
- Shift in buyer needs: advertisers migrating spend to digital platforms
- Capacity exceeds demand: printing presses underutilized, bureaus closing
Active evolutionary processes:
- Long-run changes in growth: negative, accelerating decline
- Diffusion of proprietary knowledge: news content freely available online
- Structural change in adjacent industries: advertising industry shifted to digital
- Entries and exits: multiple exits (closures, mergers); few entries
Structural vs. cyclical test: Decline persists through both recession and recovery periods. Driven by permanent technological substitution (digital) and demographic shifts, not economic cycles. Verdict: structural decline.
Classification: Declining (structural)
Confidence: High (6+ signals, clear structural cause)
Route to: strategize-declining-industry
