By: Brian Reuben, PhD
The skilled executive positions his resources with ease because he begins by occupying territory not contested by others.
Google Inc launched its search-advertising program, Google AdWords in the year 2000. AdWords represented a revolution in the advertising industry. It was an idea that challenged every known advertising model and put the power to control the advertising content, timing and cost in the hands of the advertiser.
AdWords’ system relies partly on cookies and partly on keywords determined by advertisers. Based on these characteristics Google determines where to place advertising copy to increase the relevance of the ad. Advertisers only pay when users click on their advertising copy. These features made AdWords most appealing to advertisers especially as it made it possible for small businesses to get attention. The result was USD $43.7 billion revenue for Google in 2012. As a matter of fact by 2011, AdWords represented 96% of Google’s earnings according to venturebeat.com.
When the internet began disrupting things in the global music industry about two decades ago, the traditional pre-recorded forms of music distribution was replaced by illegal file sharing, downloadable tracks and, more recently, cloud-based streaming.
It began with the .mp3 format in the mid-1990s, which provided a means to store audio in a compressed format that was far smaller than uncompressed audio. With the relatively small hard drives of the time, this enabled people to store their music collection on their personal computers, and create their own compact discs of mixed compilations.
As a natural progression from the.mp3, internet-based file sharing platforms were developed beginning with Napster, launched in 1999, many large-scale file sharing applications proliferated, all designed to help the illegal sharing of .mp3 files. Law suits upon lawsuits by artists and record labels filed against the offending companies followed, and also against individual users exploiting the platforms. Although some progress was made in curbing the use of these sites, there are still an estimated 16 million Americans who download pirated music. The music industry reportedly eventually lost 90% of its revenue.
But, while record companies and artists saw a piracy problem and responded with lawsuits, Apple Inc responded with its iTunes music store and iPod device in 2002 to help legitimize downloading of individual tracks. The store was an immediate success, with more than five million songs downloaded in the first two months.
These two cases represent how leading companies change the rules of the game and dominate the competition. The text I inserted as an epigraph was known to have come from Sun Tzu. I agree with that. Great executives lead the competition by occupying territories not contested by others. That is what has come to be known as leading by innovation.
Being an innovative company begins with the ability of the organisation to think independently, it is about being the chess player rather than the chess piece. If managers understand the industry structure and how it’s changing as well as how these changes threaten their business models and that of the market leaders then their chances of leading the competition sees a rapid increase.
According to Nathan Rothschild, the famed British banker and financier, ‘great fortunes are made when the cannonballs fall in the harbour, not when the violins play in the ballroom’. He is right. It is in times of structural instability and rapid change that you have a chance to lead the competition. The key is to conquer with knowledge and imagination. It is to create better products; uncover unmet needs; provide better satisfaction. It is by outflanking your competitors in the mind of your constituents without resorting to a head on battle or lengthy campaign.
Leading the competition requires moving ahead of the competition. By offering more and better value leveraging technology and futuristic thinking you create an advantage difficult to out-pace by the competition. That was what Research In Motion, makers of the BlackBerry phone did not do and that’s why they lost 62 million of their subscribers in only three years! Apple Inc understood the mind of the constituents and led a revolution in the smartphone market with the iPhone. Together with Google and their android device, they brought in a new era of mobile telecommunications and that’s why they are leading that market today.
But their ability to retain that position still depends on their ability to do what gave them the position in the first place again and again because the world is not static and consumer demand is always evolving. That gives you a chance to lead the market also if you only do one thing- ‘be the chess player and not the chess piece.
Brian Reuben, Lead Consultant, D•Seven Associates and Head of BusinessDay Training is an advisor in leadership and strategy. email@example.com