Industry DNA: What is it?
I’m not sure how I came up with the term “industry DNA” Perhaps it’s because when I think about business, I tend to start with the building blocks of the business or the industry in which it operates. Who cares how I derived the term, the real value is understanding what it is and applying it to your business as you think about all things strategy, structure, tactics, and resources for your company. So what is it? The term "industry DNA" is not a commonly used or widely recognized phrase. However, if we interpret it metaphorically, we can understand it as the fundamental characteristics, elements, or traits that define a particular industry or sector. The reason understanding your industry’s DNA is so important is so you can align your business with the core elements of the industry to improve your chances of success.
I’m not advocating perfect alignment b/c then you won’t be able to claim any differentiating factors from your competitors. It is important however for your company to not be so misaligned with the industry DNA because that often signals risk to others in the industry. For example, if you’re launching or running a company that is innovating on several different levels (business model, products, pricing, sales channels, marketing, etc) then the prospects in the industry may be slow adopters given your business presents too much differentiation. I’ve seen early stage companies ‘over-innovate’ (yep, I just made up that word too) only to find themselves languishing due to a lack of customers.
Here are a few defining factors that should be considered when determining your industry’s DNA:
Core Activities: Every industry has a set of core activities that form the backbone of its operations. These activities can include manufacturing, production, distribution, sales, marketing, research and development, and customer service. The specific combination and emphasis on these activities vary from industry to industry.
Technologies and Processes: Industries often rely on specific technologies, tools, and processes that are unique to their sector. For example, the automotive industry utilizes advanced manufacturing techniques, such as robotics and automation, while the software industry relies on coding languages and development methodologies. These technological aspects contribute to the industry's DNA.
Regulatory Environment: Industries operate within a regulatory framework that influences their operations and practices. Regulations may include safety standards, quality control measures, environmental regulations, licensing requirements, and more. Compliance with these regulations shapes the industry's DNA and can have a significant impact on its functioning.
Market Dynamics: The market dynamics within an industry, including supply and demand forces, competitive landscape, consumer preferences, and trends, play a crucial role in shaping its DNA. For example, industries that are highly competitive and fast-paced, such as technology or fashion, have different characteristics compared to more stable and regulated industries like utilities or healthcare.
Business Models: Different industries have distinct business models that govern how they generate revenue, create value, and interact with customers. For instance, the retail industry typically follows a business model centered around physical or online stores, while the software industry often relies on licensing or subscription-based models. These business models contribute to the industry's DNA.
It's important to note that the concept of industry DNA is a metaphorical way of discussing the defining elements and characteristics that shape an industry. Be sure to uncover your industry DNA in order to align your business just enough to look familiar to prospects but maintain category defining differentiation. Dealtalk can help you uncover your industry DNA.