In a business landscape often dominated by bold innovation and sweeping transformation — think Apple launching a new product or Uber launching ride sharing services — new research from FIU Business challenges the notion that only dramatic moves shape industry dynamics. Instead, the study finds that moderate changes to a company’s product portfolio are most likely to spark competitive responses and influence the pace of change across an industry.
Conducted by Stav Fainshmidt, professor of international business and strategy at FIU Business, the research analyzed over 6,000 U.S. companies over 25 years, using textual analysis of annual reports to track how firms describe their product offerings. The study reveals that firms making moderate, not minimal or extreme product portfolio changes are most effective at triggering a higher pace of product portfolio changes among competitors over a three-year period, creating what Fainshmidt and his research colleagues call “ripples in the pond.”
“Business research tends to focus on adaptation and how firms respond to change,” said Fainshmidt. “But our study shows that firms themselves often drive change, and not necessarily through dramatic moves. Subtle, visible shifts can be just as powerful.”
Conversely, when companies overhaul their portfolios too drastically, competitors may hesitate to respond, viewing the changes as erratic or risky. “There’s a sweet spot,” Fainshmidt said. “Too little change doesn’t move the needle. Too much, and you might be ignored or dismissed.”
The research also found that firms known for being attuned to consumer preferences are more likely to influence competitors when they make changes.
“If a company is seen as having its finger on the pulse of the customer, its rivals are more likely to interpret its moves as signals of shifting demand,” Fainshmidt explained.
The study also highlights the role of financial resources in competitive response. Competitors with more cash on hand are better positioned to react to changes initiated by others.
“If your competitors are cash-strapped, your efforts to influence the industry may fall flat,” Fainshmidt noted.
For managers, the findings offer practical guidance. “Don’t think of product changes in isolation,” Fainshmidt advised. “You’re part of a competitive ecosystem. Your moves will be seen and interpreted by others, and that can have unintended consequences.”
The takeaway? Fainshmidt says strategic timing as well as customer and rival awareness and understanding competitor readiness are key. Whether a firm wants to lead change or avoid stirring the waters, knowing when and how to act can make all the difference.