Writing about category strategy in Harvard Business Review in 2018, advisers Peter Yoon and Parker DeRensis warned against the false sense of security that can affect even the undisputed king of a mountain.
A category domination strategy, they write, “encourages managers to focus most of their attention on market share and not enough on the category itself. It assumes your category will continue to be relevant and grow so you can be a big fish in a big and growing pond. But what happens when your category is not growing — or even declines? Being No. 1 in a declining market isn’t a great place to be.”
The larger the company and the older the industry, the greater the threat. But as the pace of technological advancement increases, every company runs the risk. Categories can be quite arbitrary, and not just for market leaders. As Yoon and DeRensis noted, “a ‘category’ is often inaccurately defined, which creates blind spots from unexpected competitors.” Ultimately, consumers decide who and what your competitors are. This is how flavored waters and seltzers became a problem for soda manufacturers, how Wikipedia toppled a centuries-old encyclopedia publishing giant and how the quirky hip-hop tune “Old Town Road” shot up Billboard’s Hot Country Songs chart.
Part of the threat comes from within. In its Benchmarking Innovation Impact Report 2018, Innovation Leader notes, “Survey respondents agree about the biggest obstacles to delivering impact for their organizations. The first is a group of challenges we dubbed ‘company politics, turf wars, or lack of alignment.’ The second most common obstacle was ‘cultural issues.’”
Regardless of where these conflicts originate, it is leadership’s responsibility to overcome them. Thawing the so-called “frozen middle” is crucial.
As an executive, you need to be sure that your company is hiring or partnering with people who can help you plan a vibrant category strategy. That includes foreseeing new competitors, anticipating landscape shifts and finding opportunities elsewhere. Your company’s core competencies can almost certainly be applied in an adjacent category. But knowing that your technology or process could be applied in other industries is one thing; it’s quite another to spot opportunities in unfamiliar markets, decide which to pursue and map out the steps to get there. That shift must start with an honest and thorough assessment of where the organization is, where it wants to be and what that journey will entail.
A researcher who studied NASA’s adoption of open innovation models found that the engineers’ views of themselves and their work affected whether they saw the change as a threat or an opportunity. As one put it, “It is a shift from thinking, ‘The lab is my world,’ to ‘The world is my lab.’” Companies need to take a similar stance. There are many more markets open to you than you realize.
Put simply, you need to be willing to disrupt yourself before someone else does.
Bill Nottingham is vice president at Nottingham Spirk.
