The rankings of electronics companies published every five or ten years show that market leadership is short lived. Yet analysis of the reasons for the rapid turnover is not easy to come by. The most common explanation is changes in technology, but our work with electronics companies suggests that the underlying cause has as much or more to do with how managers run their businesses at different stages of a market’s life cycle.

It seems that managers are faced with different strategic goals in the course of the market cycle. In the first stage, when technology opens up a new product market, rapid growth must take precedence over profit if companies are to gain a leading market share. In the second stage, when the new product penetrates the market, the goal shifts from growth at any cost to a balance between growth and profit. The final stage entails maximizing profit in a mature market.

Managers have to operate in different ways to attain each goal. Moreover, because they may need to switch goals suddenly, they must be able to adjust their operations swiftly. We formulated the hypothesis that rapidly changing performance requirements were one of the main reasons why...