When your industry becomes volatile, diagnose your own exposure — and then act.

Disruption scholars have focused on how established companies, complacent in their industry position, fail to anticipate their collapse. The companies wither not because they are surpassed in their core capabilities but because they don’t recognize that the competencies that once made them distinctive no longer define success.1 These stories have a whiff of tragedy — companies that used to be front-runners are overtaken by a changing world and stick with the status quo rather than investing in capabilities that will bring the next win.

When volatility puts a leading company at risk, it also threatens the leaders, managers, and others who work for it — and that exacerbates the problem, because their insight is precisely what’s needed to curb the company’s tendency not to adopt new capabilities in the face of volatility.2 Companies of course can shift and enhance their institutional know-how by hiring new people, but individuals cannot swap out well-honed skills quickly enough to suit changing markets. As human capital theory tells us, even as people recognize their need to gain new skills, they seldom adapt rapidly.3 That’s largely because skills are accumulated slowly through years of formal education, training, and work experience. Learning simply takes time.

After World War II, managers who climbed the corporate ladder often had an expectation of implicitly guaranteed lifetime employment, as an inducement to deepen their institutional knowledge and their commitment to the company. Those personal investments made them more productive in their work for their current company but also limited their opportunities for alternative careers. Today’s executives, in contrast, rarely stick with one organization for a lifetime. As industry volatility has increased, the responsibility for career management has shifted from companies to individuals. Therefore, as you manage your career, you need to understand how broader trends in industry volatility affect your employability. You must learn how to preserve the value of your accumulated experience while carefully examining whether your current position is helping you acquire new, enduring skills.

In this article, we discuss how to diagnose the risks that disruptive industry forces pose to you — and offer suggestions on how to mitigate the threats.

References

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2. D. Teece and G. Pisano, “The Dynamic Capabilities of Firms: An Introduction,” Industrial and Corporate Change 3, no. 3 (Jan. 1, 1994): 537-556; and D.J. Teece, G. Pisano, and A. Shuen, “Dynamic Capabilities and Strategic Management,” Strategic Management Journal 18, no. 7 (August 1997): 509-533.

3. G.S. Becker, Human Capital: A Theoretical and Empirical Analysis With Special Reference to Education, 3rd ed. (Chicago: The University of Chicago Press, 1994).

4.Major Household Appliance Manufacturing Industry in the U.S.,” IBISWorld, December 2018.

5.Job Openings and Labor Turnover,” U.S. Bureau of Labor Statistics.

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9.Designers at McKinsey — Vive la Différence!” McKinsey & Co., Oct. 8, 2015.

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11. D. Hunn, “Woe in the Oilfield: 213 Companies Have Now Declared Bankruptcy,” FuelFix.com, Oct. 25, 2016.

12. L. Downing and E. Gismatullin, “Biofuel Investments at Seven-Year Low as BP Blames Cost,” Bloomberg, July 8, 2013.

13. “The All-America Research Team,” Institutional Investor, Dec. 6, 2012, accessed Dec. 12, 2018.

14. J. Zaslow, “How the Former Staff of Arthur Andersen Is Faring Two Years After Its Collapse,” The Wall Street Journal, April 8, 2004; and J.D. Glater, “Life After Enron for Andersen’s Ex-Staffers,” The New York Times, Feb. 21, 2006.

15. A.E. Knaup, “Survival and Longevity in the Business Employment Dynamics Data,” Monthly Labor Review 128, no. 5 (May 2005).

16. “The All-America Research Team.”

17. T. Davies, “2015 All-America Research Team: Accounting & Tax Policy, No. 1: Christopher Senyek,” Institutional Investor, Oct. 7, 2015.