Excerpt from Transformative

Research indicates that later market entrants tend to have a broader product/market scope and enter the market with more innovative and differentiated solutions. Transformative companies are more likely to rewrite their industry’s rules and norms, creating a new form of competitive asymmetry in which they have the advantage. That asymmetry begins with resetting what customers value and includes developing new company capabilities that support the customer outcome and give the challenger an advantage.

Creative rethinking of the industry structure can enhance it further because as long as the rules remain the same, the incumbent is more likely to win.

This type of innovation of the industry structure is known as reframing, and we’ve already examples of it from transformative companies like Dollar Shave Club, Dell Computers, and Netflix. Each chose to operate contrary to standard industry practices, changing the rules that other industry participants accepted as given. In doing so, they leveraged competitor strengths into weaknesses while creating their own advantages.

Reframing an industry is a powerful concept because it creates a new competitive dynamic by actively looking for opportunities to change the rules. Yet I believe it’s difficult because we have a fixed mindset about the industries in which we compete. As we saw from our previous exercise, even a question as simple as “What would you change about your industry?” is difficult to answer because it is hard to objectively view the way we have always seen things in a new light. A fixed mindset focuses on competing in an existing market and takes existing assumptions, rules, methods, and structure as given.
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Reframing is founded on a growth mindset. It focuses on the opportunity without presupposing existing market definitions as limitations. It embodies the new-customer-first approach we’ve spoken about in earlier chapters, empowering companies to rethink their industry’s structure to attract new customers. A growth mindset opens up the opportunity for changing the industry to improve both the customer outcome and its potential market reach. What often results is a breakdown of traditional market boundaries to create something entirely new.

Explore this and other topics in the upcoming book Transformative.