• As MCI and Schwab demonstrated, emerging providers can easily innovate and take market share from an incumbent.
• Incumbents are typically looking for higher margins and willingly give away the lower end of the market.

Incumbents have learned, much to their dismay that ever emerging providers continue to gobble market share.

Even when an incumbent does resist, their hearts just usually aren’t in it. Perhaps the reason is that the battle means life or death to the new company and very little to the dominant player. “It is not the size of the dog in the fight. It is the size of the fight in the dog.”

For example, banks used to originate and service all loans. Unfortunately today, with the help of technology, specialist providers now own a large piece of the “credit market” and are servicing new markets with lower costs while adding new complexities daily. The recession of 2009 is, in no small part, a result.

Once upon a time, the print newspaper industry was the only source of help wanted, stock and mutual fund prices…and advertising. Then, along came monster.com and  round the clock on line stock and mutual fund pricing as well as trading ability. Very few look at Newspapers to follow their investments and classified advertising space has shrunk . Due to Amazon.com, traditional bookstores are no longer the only place to buy the latest best seller.

In every case, the incumbent was aware of the technological threat and eventually reacted to it with a “me too” version.

• Classified newspaper ads are now available on line.
• You can purchase a book from Barnes & Noble electronically.

But is it too little, too late? Only time will tell. In the 1990s, IBM sought to leave networking equipment in order to focus on higher-margin services. Cisco saw an opportunity and captured the market. In the meantime, Dell took advantage of the modular nature of the personal computer industry. IBM, a behemoth, old, integrated company, gave up a fast growing market …forever.

• What jobs are clients in your industry trying to get done?
• Are there some client segments not served, over served or underserved by current offerings?

What “bundled” products or services, like the newspaper or AT&T, can be sliced and diced by your using technology to capture a profit center?

Can you, as monster.com did, just take a specific portion of a larger process and do it more cost effectively and efficiently? Can you “fly beneath the radar,” and eat a dominant player’s lunch.

If you’re the “AT&T” in the Financial Services Industry and marketplace, don’t assume that your “MCI” threats are insignificant. Look for ways to be first in innovation and be willing to give up “fat margins.” Be unwilling to cede the low end to new entrants and insist on new business models that are lean so you remain profitable.

As an incumbent, acknowledge that your strengths may also be your weaknesses. Failing to do so will put you in a position of ultimate failure or acquiring the winning firm to stave off ultimate destruction.

Technology will change the landscape for every industry on the face of the earth and always pose threats to the current leaders and great opportunities for new entrants.

If you enjoyed this column you’ll love our Books (click here) and Training Programs (click here). Each is filled with hundreds of leading edge profit enhancing ideas from the best business thinkers in the world. This is one of over 300 columns published and part of the reason why The Wall Street Journal and The New York Times have called The DreamSpeaker^TM about Business Planning Issues.