Shaping an Industry in Your Favor

In 1939, at the age of 26, Lew Wasserman arrived in Los Angeles with the talent agency MCA. Over the next three decades, he took MCA from a peripheral player to becoming the dominant studio in Hollywood. How did an outsider manage to change the competitive landscape of the entire moviemaking industry so completely? A study of this fascinating historical account reveals the process by which a firm can achieve “architectural advantage.” Managers may be familiar with the idea that “shocks” brought on by technological and regulatory changes can trigger the emergence of novel industry structures. The Wasserman case shows there is more to it than that. An innovative business model, by itself, is not sufficient. Rather, the acquisition of mispriced resources by newcomers and the incumbents’ (in)action are also critical for newcomers to enter the industry, redraw its boundaries and achieve architectural advantage. Are there opportunities for your company to position itself in segments that would put it in the dominant position? Wasserman’s experience in the movie and television business, as well as other timely examples drawn from music and publishing, provide useful insights for managers operating in industries with unstable, contested architectures; entrepreneurial firms trying to develop architectural advantage in an emerging industry; and venture capitalists trying to identify investment opportunities.