"Giants are not what we think they are. The same qualities that appear to give them strength are often the sources of great weakness" ~ Malcolm Gladwell
Positioning against the market leader offers unique advantages. You can steal their mindshare, hijack their word-of-mouth, or refocus the market conversation. But David, be careful as you face Goliath, as you may not come out alive.
So how do you coexist with the market leader without being targeted by them?
First outlined by Hamilton Helmer in his seminal book "7 Powers", the concept of counter-positioning is when a newcomer adopts a superior business model that the incumbent actively avoids to protect their existing business. To adopt the startup's model, the incumbent would have to destroy their core line of business.
Netflix's counter-positioning against Blockbuster is a prime example. While Blockbuster generated a significant portion of its revenue ($800 million) from late fees in 2000, Netflix introduced a different approach.
By mailing DVDs to customers' homes, Netflix allowed them to pay for up to three DVDs at a time. If customers failed to return them, Netflix withheld the next DVD on their list. As a result, Blockbuster had to eliminate late fees in 2004, essentially succumbing to Netflix's strategy and cannibalizing its own business model for survival.
Counter-positioning leverages the inherit inertia of the market incumbent. Incumbents are often stuck in their ways and too slow to wield together the resources to make a change.
Force the incumbent into a dilemma:
A) should they stick to the current business model, risking market share loss to the new entrant?
B) Or should they embrace the unproven new model, jeopardizing their existing business?
It's a high-stakes decision that could make or break their future. Success lies in either preventing the market leader from responding or capitalizing on their delayed response.
Make 'em dance
Microsoft's embrace of ChatGPT with Bing exemplifies counter-positioning. This is a feature that Google would never ship on its own because it undermines search ads revenue to move to an answers-based model.
Is this Google's Kodak moment? I don't know.
But as Satya Nadella said, "I want people to know that we made them dance".
And Google is certainly in 'code red, reactive mode.
Make 'em dance.