The Dominant Design Life Cycle

In analyzing the concept of dominant design, we now focus on product categories, i.e. the
categories in which companies choose to position their products. In particular, we will focus on the
life cycle of these categories.
Categorical evolution in nascent market spaces can be divided into two main phases. In an initial
divergence phase, an increasing number of categories are introduced and used; in the subsequent
convergence phase, some categories start to gain favor among market players, while many others
are progressively abandoned.

1) Initial divergence: the creation of categories

At this stage of the life cycle, new industries are rarely well defined, so early entry takes place
against a background of great uncertainty about the meaning, boundaries and even the very
existence of the industry.
Customer needs remain fluid, as does the understanding of the industry by stakeholders, e.g.
customers, manufacturers, critics and regulators.
During this period, the meaning of specific categories and their elements are negotiated.
In these early stages of an industry, differences in categorical positioning often reflect basic
technological differences between products or differences in the way various stakeholders interpret
the new industry and its products.
An example of this dynamic occurred in the inclusion of the early automobile industry. where
stakeholder confusion led to the automobile being "variously referred to as 'velocipede', 'motorbike',
'locomobile', 'electric runabout', 'electric buggy', 'horseless carriage,' and 'quadricycle.
Moreover, categories can also be created by stakeholders other than companies in their attempt to
understand and classify objects in an emerging market space. The category 'mountain bike', for
example, was created by a bicycle enthusiast, while a science fiction writer coined the category
'robot'.
The introduction of new categories by manufacturers, users and other stakeholders during the early
stages of an industry initially results in a rapid increase in the number of categories in use.
However, the fluid state of the various stakeholders' understandings means that no particular
category can gain much traction. Uncertainty and confusion reign supreme and attempts by early
entrants to predict which category and industry understanding will eventually achieve dominance
are prone to error.

2) Convergence on the dominant category

The initial phase of categorical divergence is generally followed by a convergence phase during
which the number of categories in use decreases. The categories that best capture and express such
relevant dimensions are preferred and gain ground over alternatives that are gradually abandoned.
Repeated use and increased experience provide stakeholders with greater certainty about the
meaning of the different categories that remain in use, i.e. the characteristics that products
belonging to a particular category are expected to possess.
Categorical boundaries become better defined and categories gradually take on meanings of their
own; that is, rather than being defined by the products claiming membership, they increasingly
dictate the characteristics a product must possess to be seen as a legitimate member.
At this stage, companies may find it more attractive to position their products in a well-established
category because doing so allows them to enter the consideration set of a broad customer base.
The convergence towards a specific industry perception leads both manufacturers and other
stakeholders to gravitate towards the category that best captures this perception. The preferred
category thus gradually gains dominance and becomes the reference for the emerging industry and
its products. We define the dominant category as the conceptual scheme that most stakeholders
adhere to when referring to products that meet similar needs and compete for the same market
space.

In this diagram, the two phases just defined can be observed. The lifecycle of the industry is
characterized by the increase in the number of categories as the number of firms increases.
The emergence of the dominant category occurs when the number of categories begins to decrease.
This moment marks the opening of the window of opportunity for entry, while the emergence of the
dominant design marks the closing of the window of opportunity.
The dotted line plots the number of categories in an emerging market space. During the first stage
of divergence, the number of categories increases as manufacturers and other stakeholders introduce
new categories. As the industry develops further, a process of convergence develops, in which some
categories gain favor and others withdraw This process leads to the emergence of a dominant
category to which the remaining and future products and producers generally adhere, resulting in a
decrease in the number of categories in the industry.
Reference: Suarez, F. F., Grodal, S., & Gotsopoulos, A. (2015). Perfect timing? Dominant category,
dominant design, and the window of opportunity for firm entry. Strategic management journal, 36(3), 437-
448.