Somewhere, right now, someone is founding a company in your industry (and Facebook's, and SAP's, and Salesforce.com's...) that is 100% focused on the personal device ("mobile") experience. These companies will seem wrong-headed for their messianic zeal and focus... or at the very least like they're just servicing a low-margin niche market. Meanwhile, you—the successful incumbent—will wisely tend the garden that made you successful.

And when we look back in five years, that same laser focus, that same zeal, that same "niche thinking" will have been the competitive advantage that enabled some of those upstarts to utterly disrupt their field. And you.

I recently read an overview of a case study on Blockbuster versus Netflix. I'm as guilty as any meritocratic nerd of thinking that Blockbuster was "dumb" and Netflix was "smart," but the funny thing about it is that Blockbuster did everything right—they weren't blindsided by Netflix, they weren't victims of corporate arrogance, and they sure as hell weren't "dumb"—they thoroughly analyzed the opportunity early on. What they found was that the existing and projected mail order DVD market was far smaller and had thinner margins than their existing—and very successful—model. Netflix, on the other hand, didn't have any business to compare their model to. To Netflix, small margins and a small market were better than no margins and no market at all.

Blockbuster would've done well to analyze the opportunity not in terms of their existing business, but whether that existing business would be there at all in five years. That's easy for us to say now, with the benefit of hindsight. But if you're at the helm of a growing business with billions in revenue and extraordinary margins, would you have interpreted the analysis differently? I don't know if I would have. Or could have.

My personal take is that just about everyone in the web application business is smack dab in the middle of a similar textbook example of the Innovator's Dilemma. Established web application companies aren't wrong to focus on what's made them successful—I mean, it's called a dilemma for a reason: It's extremely difficult to tend your garden (the smart thing) whilst at the same time turning it over (also the smart thing).

But regardless of how difficult the dilemma may be, you're going to want to do your level best to solve it: Your industry's Netflix is out there—that much is certain.

Posted
AuthorArt Gillespie