The boom-and-bust syndrome typically applies to emerging markets and cyclical businesses. The dot com industry in the late 1990s is a good example. During the boom, many companies entered the industry leading to excess capacity. As competition intensified and prices fell, many players found the going tough. The successful companies focused on operational excellence and cut costs ruthlessly.

The seismic-shift syndrome is more applicable to mature industries. Such industries enjoy prosperity for years together in a protected environment, with minimal competition and decent margins. A seismic shift takes place when these factors disappear. Deregulation, globalization and technological discontinuities are some of the factors that can cause a seismic shift. A good example is the pharmaceutical industry before the emergence of managed health care. In a physician driven environment, price was not an important factor. Physicians did not hesitate to prescribe expensive medicines which drug companies gleefully marketed. The emergence of HMOs has reduced the importance of physicians.

Day refers to survivors from a boom and bust shakeout as adaptive survivors and those from a seismic shift syndrome as aggressive amalgamators. Adaptive survivors impose discipline in operations and respond efficiently to customer needs and competitor threats. Dell is a good example of an adaptive survivor. During the initial shakeout in the PC industry in the 1980s, Dell survived due to its lean build-to-order direct selling model. In the early 1990s, Dell stumbled when it entered the retail segment and its notebook computers failed to get customer acceptance. Founder, Michael Dell did not hesitate to make sweeping changes in the organization. He put in place a team of senior industry executives to complement his intuitive and entrepreneurial style of management. Dell became the largest manufacturer of PCs in the world, emerging as an adaptive survivor in an industry, which saw the exit of several players.

Aggressive amalgamators show an uncanny ability to develop the right business model for an evolving industry. They usually make one or more of the following moves: rapidly acquire and absorb smaller rivals, cut operating costs and invest in technologies that increase the minimum scale required for efficient operations. Mittal Steel is a good example. The company’s appetite for acquisitions and global consolidation is legendary.