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Change the Rules

So many companies start believing that being the market leaders makes them infallible. Don Dodge cites plenty of instances where innovation & market leaders were taken over by rivals who imitated them.
List of innovation leaders and fast followers.
  • AltaVista -> Google
  • Napster -> iTunes
  • VisiCalc -> Lotus 123 -> Excel
  • Word Perfect -> Word
  • Netscape -> Internet Explorer
  • Apple Newton -> Palm Pilot -> Blackberry
  • IBM PC -> Compaq -> Dell
  • Double Click -> Google Ad Sense
  • Ofoto -> Flickr
  • Compuserve -> AOL -> @Home -> Comcast & Verizon

All of these companies were innovation leaders and market leaders. Yet, they were eclipsed by fast followers, in some cases multiple times, who imitated their innovation. My belief is that the technology was outstanding...the management was not.

What's the way out when you are the leader? Or, when you want to be the leader! If you can't beat 'em all by their rules of the game, CHANGE THE RULES!

Clayton Christensen (author of the famous book: The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail) and others recommend Disruptive Innovations and Sustaining Innovations for changing these rules.

Classic example is this story Judo Strategy: Nintendo Wii Smacks Microsoft, Sony by Zack Urlocker.
The newest entry from Nintendo is not trying to beat competitors with better more advanced processors and the more complicated games that hardcore gamers crave. Instead Nintendo's new console is a stripped-down product that aims to widen the market by pulling in non-gamers. How? With a technically inferior product that gets the job done for regular people and occasional gamers.

Nintendo's management realized there's no way they could outspend Microsoft and Sony when it comes to advanced hardware design. So why even bother? Instead the new Nintendo Wii gaming console takes a disruptive approach: focus on fun and expand the market by appealing to non-gamers.
From my experience, I firmly believe that innovation requires orchestration from the top. The IBM Global CEO Study confirms it. History is witness to the downfall of many organizations when this did not happen. Try comparing the list of Fortune 500 companies of 1986 with the Fortune 500 list of 2006 and you will realize how the equations change over a short span of 20 years.

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This entry was posted by Nawal Kishore Lodha, on Friday, February 23, 2007. You can leave your response.

“Change the Rules”

  1. Blogger Ravi Says:
    February 23, 2007 at 1:14 PM  

    Reminds me of a quote from The Pirates of the Silicon Valley:

    Bill Gates to Steve Ballmer: "Success is a menace Ballmer. It drives people to think they can't lose."
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