The Why behind Transformative
#Recently a podcaster asked me “Why would anyone want to write a book?” It was not a rhetorical question. But before I could answer he added, “It’s too hard.”
While he was questioning my choice of medium, it brought me to a similarly important question, “What is the ‘Why?’ behind Transformative?” Why did I want to write this book, and why now?
I can best answer by describing a company I met with recently who approached me with an investment pitch. I met with the team multiple times and really liked them: great managers going after a sizeable existing market with a very good product that appeared to have good points of differentiation. They had a drive to own a market that was languishing and showed success with some significant customers. Overall, any observer would believe this company has a lot of potential.
In the end, I turned down the investment because, in today’s competitive environment, those admirable attributes are no longer enough. Not enough to gain sizeable market share. Not enough to dominate a market. Not enough to win.
Why is it so hard to become a market leader? We’ve been taught to believe that the path to greatness by out innovating the competition and building a better product with more features or higher performance. Like the company mentioned above the key believe is that we just need to solve the customers’ problems better to be successful.
Companies are innovating more now than ever to do just that. More than three quarters of organizations now place innovation among their top three priorities. And a recent survey by Gartner found that 41% of CEOs believe their company is an innovation pioneer and 37% claimed to be right behind as fast followers.
Yet, herein lies the paradox: organizations rely so much on product innovation that it no longer provides the differentiation they need to be a market leader. Despite best efforts and investment, 94% of CEOs are dissatisfied with their company’s innovation performance. Perhaps more discouraging are the results of digital transformation initiatives which actually dilute company performance and result in sub-optimal results 75% of the time.
Making matters more difficult is that leaders have subscribed to the idea of technology innovation as a strategy to achieving their goal and they are pursuing it all out by defaulting to the theme of just building something better. But better doesn’t win.
All this is happening under the context of massive shifts in industries as companies jump traditional swim lanes to create new opportunities. While more two-thirds of CEOs believe they are actively disrupting their own industry, more than half believe that their next significant competitor will come from outside their industry.
In my own work as a founder, investor, startup mentor, and through five years of doctoral research I have continually asked the question of why some companies become a breakout success to the point of owning a market while others, who are innovating just as hard, fail to achieve expectations. My research into hundreds of companies, focusing on those that quickly rose to market leadership, looked for patterns of what made them so successful. The results of the research were a set of critical insights, of which two were most significant.
The first was that the research clearly showed that the most successful companies weren’t always first movers who create something entirely new and lead their market to the top. In fact, the most reliable and successful path companies take is to target existing markets with latent, unseen demand, and transform them into an entirely new market that they can own. The best companies were not first movers, they were market transformers, organizations that created something game-changing to win.
This is critical to understand because most new markets today are not new at all—more often they are formed from shifts, offshoots, or reformulations of existing markets going through the process of Schumpeterian creative destruction. New market pioneers are those companies that can manage the transformation of those markets and reset the rules are invariably the most likely to win.
The second was more important in that my research uncovered that regardless of industry, product, or service, there is a clear and simple pattern to how these companies succeed in achieving their game-changing status. Critically, it starts when companies introduce category-creating solutions that fulfill existing customer needs in needs unique ways. What these companies deliver wasn’t just better, it was different, with a different customer outcome.
By creating new outcomes for the customer that also fulfill previous buyer needs, companies redefine customer buying criteria and become almost incomparable to the existing competitive solutions. This immediately creates an obstacle for incumbents who are fixated on optimizing their product for a specific purpose. Moreover, these new outcomes are most often appealing to new marginal customers in a way that shifts and expands the market until the new category takes it over completely.
Further, delivering a new outcome naturally leads these companies to be structural innovators, rethinking how to deliver the solution and the capabilities they need to do it. Doing so breaks down existing barriers to entry, changes the industry structure, and creates new advantages and defensive moats for the transformative company. These two types of innovation: customer outcome and structural innovation together create a transformative advantage that drives change and creates multiple competitive asymmetries.
These distinct actions along with the unique way these companies approach market entry and expansion form a pattern or framework for how these and other transformative innovators change and win markets. This framework, used by market-leading companies such as Dollar Shave Club, Amazon, Apple, Netflix, Starbucks, Walmart and dozens of other companies exhibits a pattern of what these companies do well, including:
1. They excel at creating new customer outcomes. Fundamental to game-changing success is developing solutions that deliver a fundamentally new and unique outcome to the customer. The solutions these companies develop change the very reason why the customer buys, initiates larger market opportunities, and changes the basis of market competition.
2. They are masters at structural innovation. Structural innovation refers to changing the type of company capabilities and industry structure required to deliver a solution. When companies change industry structure and compete based on new capabilities it produces competitive asymmetries and leverages traditional incumbent strengths into disadvantages in a way that changes the competitive dynamics of the market.
3. They actively transform the markets they enter. Transformative organizations recognize that the best markets to enter are those that are expanding and changing. They know how to take advantage of scale accelerators, capabilities approach that aid in growing and expanding markets by democratizing and simplifying solutions, targeting non-consumers and low consumers, creating more profitable business models, borrowing from other industries, and setting aside norms, rules, and conventions to win the markets they are creating.
For me, the research resulted in an astounding conclusion that there is greater opportunity in breaking out of traditional product and market definitions than there is in trying to follow them. Even more important: the learnings from these companies form a framework of actions for any company can increase their odds of success.
Despite this, companies often resign themselves to staying within the lines of their current product, market, and industry structure. Companies that accept the rules of the market are condemned to live by them and limit their ability to compete to a narrow set of product features and performance. Those that open themselves to a broader view of how to innovate to win have many more options for success.
But the real message of this book is this: any company can take advantage of this framework of actions to improve their ability to innovate, create better market opportunities, and improve their competitive position. My goal was to write Transformative with the objective of helping readers understand how to build the momentum and strategy to become a game-changing organization. To do that I have included time-tested and industry-proven actions that will help leaders understand how to improve their company through three main objectives:
I believe that focusing on these three principles: creating a strategy for building and delivering game-changing solutions that produce new outcomes, innovating to win by expanding and changing markets, and enabling your organization with the tools to be innovative and successful today and in the future, are essential for every organization’s success in today’s hyper-competitive environment.
Organizational leaders recognize that change is necessary to adapt. A survey of Fortune 500 CEOs found that 94 percent agreed that “My company will change more in the next five years than it has in the last five years.” However, many don’t know where to start in taking advantage of the opportunity to change by doing something truly transformative. So, the “Why?” behind this book is clear: the framework of principles in this book can help organizations to develop both the momentum and strategy that will help them innovate to win.
There is no single playbook for how companies can be successful. However, through Transformative I hope you’ll join me in understanding how your company can design and create your own transformative success. Over the coming months I’ll be sharing many of those concepts and welcome your feedback on the concepts and principles of this book.
 2018 CEO Survey: CIOs Should Guide Business Leaders Toward Deep-Discipline Digital Business,” Gartner Research, April 6, 2018.
 Breaking Down the Barriers to Innovation, Harvard Business Review, November-December 2019
 Orchestrating a Successful Digital Transformation,” Bain Briefing, November 22, 2017
 Agile or Irrelevant, Redefining Resilience: 2019 Global CEO Outlook,” KPMG; “A Marketplace Without Boundaries? Responding to Disruption,” 18th Annual PWC CEO Survey, 2015.
 “A Marketplace Without Boundaries? Responding to Disruption,” 18th Annual PWC CEO Survey, 2015.
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William Kilmer is a venture capital investor, tech founder, author, and innovation strategist.