As a result of this column you and your organization will: Begin with a single merchandising line. Grab sales from mortar and brick-based competitors by discounting at levels they can’t match. Offer ease of ordering and reliable delivery. Dell Computer provides a great example of how innovation can propel a marginal competitor to market leadership. As we noted previously, in 1994, Dell held about 3 percent of the personal computer market. Seven years later, it was the worldwide leader. Michael Dell forced the company to focus on direct sales over the Internet. Dell became the first company to perfect the strategy combining mass customization and just-in-time, supply chain delivery with rapid, remote fulfillment and service. Like Dell, with no storefronts to worry about, many other insurgent organizations around the world will:

• Begin with a single merchandising line.
• Grab sales from mortar and brick-based competitors by discounting at levels they can’t match.
• Offer ease of ordering and reliable delivery.

On the other hand, insurgents sometimes expand offerings into a range of general merchandise and move into the mainstream of retailing. A classic example of this is Amazon.com, which started out small, selling mail-order-books on the web and then grew quickly.

After dwarfing Barnes & Noble and Borders in book sales, Amazon expanded its line of general merchandise to include apparel, electronics, toys and home and garden products and is now twice as valuable as Sears.

The sad fact is that many incumbents can’t master the forces of change in their markets. The formula that propelled them to market leadership takes on a life of its own, limiting their willingness to adapt to better models.

Antiquated information systems can inhibit an established firm’s ability to introduce new products or processes. Existing channels of supply and distribution can create strong resistance to innovation.

Successful incumbents must remember that Xerox ceded the low end of the photocopier market to Japanese rivals. Detroit’s Big Three automakers were never interested in making small cars. Ignoring demand in an emerging low-end of your market can jeopardize decades of effort.

No single factor better predicts incumbent success or failure more than the quality of a company’s leadership. While stewardship is a virtue, promoting leaders who are solely wardens of the established organization is often fatal.

• Betting-the-company on fundamental innovation is the most frightening kind of change for the incumbent.
• For many companies, it takes a crisis to force them to embrace a new strategy.

As insurgents, organizations have taken delight in disrupting the established order. But as incumbents, they seek to minimize disruption. The best incumbents remain active in the chaos zones that affect their industries.

To stay ahead of the insurgents, incumbents need to either initiate or acquire the sources of innovation in their industry. That won’t happen if the firm is only looking at incremental improvement of its current operations.

To remain market champions, incumbents must lead the revolution that upsets the status quo. The best way to sustain market leadership is to combine innovation and integration. Seize the sources of market change and integrate them into your ever incrementally improving core business.

Many opportunities exist for both insurgents and incumbents in the worldwide marketplace. Remember, improvements will take place, if not by established players, by new players. Technology utilization enhances your options.

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