Leadership is a double-edged sword. On the plus side, leadership in your industry means that every potential competitor will have to play catch-up with the strategic decisions you make: you’ll be defining the game of strategic competition, and this can lead to extremely strong profitability. On the downside, leadership requires you to constantly push your company out of its comfort zone. You won’t always know what to do, or even, in some cases, what you’re doing, and you’ll end up making mistakes along the way. This is the main reason most companies fail to achieve a leadership position effectively: it’s scary and bad things can happen if you get it wrong.

The good news about strategic leadership is that the main perceived disadvantages are not real. This is not to say that leadership isn’t scary, or that things can’t go wrong. Rather, those problems will exist whether you are in a leadership position or not! In other words, you will make mistakes whether you lead your industry or follow it. True, more people will notice the leader’s mistakes, but the sad truth is that companies that “play it safe” make just as many mistakes, and have the added disadvantage that the market never perceives an advantage to “safety.” of innovation.

So if we accept the mandate to lead our industry, how do we choose the “BIG things”? What really makes the difference between incremental innovation and industry-leading innovation? There are three main innovations that will tend to lead the industries:

1. Innovation that is TOO HARD for most competitors.

2. Innovation that is TOO EXPENSIVE for most competitors.

3. Innovation that most competitors are NOT WILLING TO FOLLOW for any other reason.

If your strategic planning has helped you find a strategic competitor that works in your industry, chances are certain types of innovation you can look for fit nicely into at least one of these categories. This is because one of the big side effects of competency-based strategy is that it leads organizations to focus on things that are easier for them and harder for competitors. For example, it’s no secret that design based on user experience is a strong point for Apple. What this means, strategically, is that Apple products may not always be the cutting edge of what is technically possible, but the experience of using an Apple product will always be better. Why? Because it’s more intuitive, simpler, and designed for “feel” rather than features. Is it possible for a competitor to get it right and compete effectively with Apple? Certainly, and in some rare cases, competitors can give Apple a run for their money, but at the end of the day, Apple will win in this type of competition because it’s now easier and cheaper for Apple.

If you want to compete effectively with Apple, you can do so by focusing your strategy on the things Apple doesn’t do so well: technical features, open source, and commodity prices. This combination is exactly why Google’s Android operating system is so successful in competing with Apple’s iOS. It’s not that one system is better than the other, but rather that Android has strengths that would be difficult for Apple, and vice versa. In terms familiar to those of you who have read Strategic Planning Simplified, iOS is dominating the niche end of the market and Android is dominating the commodity end. Make no mistake: the pure volume numbers will favor Android, but the earnings numbers will favor iOS.

To further dissect this particular example, let’s look at what the “big things” are in the cell phone market. What really matters to users? Here is a short list of reasons why you might be satisfied or dissatisfied with a phone:

Style

Quality of service (i.e. no dropped calls, etc.)

Apps (ie what can I do with my phone?)

Easy to use

Price

Component quality (i.e. camera, controls, etc.)

As you might guess, it would be virtually impossible for a hardware manufacturer to win with all these features. So is one of these the “big thing” in the cellular market? The answer is no: one or two of these elements may qualify as somewhat important when considering strategic leadership. The important thing is to develop the strategic ability to win so decisively that the market clearly recognizes your leadership. This, simply being slightly better than HTC in quality of service, will not give Apple a leadership position. Likewise, having one or two small design advantages over Apple doesn’t get you the crown of style or the crown of ease of use. Only when the market perceives clear superiority is industry leadership achieved, and the benefits of true leadership only come after the market begins to act on that perception.

To see how this might play out in a different scenario, let’s take a look at some very strange developments happening in another market: TV entertainment. Interestingly, some of the same players (Apple and Google) are becoming very interested in this market. It’s also interesting that there are two very clear channels for innovation: hardware and content delivery. As of this writing, Netflix appears to be dominating content delivery through a strategic approach to content acquisition and marketing, but services like Hulu and Xfinity are gaining increasing market share. One could also argue that Google’s YouTube and Apple’s iTunes are also part of this market, as either of these channels can deliver video content. So what are the important things you need to master to lead the video content market?

content library

Prices

Easy to use

portability

That is all. There isn’t much else that would propel a winner here. Netflix has the upper hand right now because their content library is great, but they’re also very strong on portability (I can use Netflix on my iPhone, my Windows PC, and my Nintendo Wii, and it doesn’t matter who my phone or broadband provider is). wide). it is). Apple gets pretty good marks for ease of use, but it’s not necessarily a clear winner here, as YouTube, Hulu, and Netflix are pretty easy to use. Pricing leadership can become a big killer for someone looking to unseat Netflix, but success with this approach will require well-negotiated content and delivery deals coupled with high user volume. Interestingly, many, many other players, including Intel, for some strange reason, are trying to gain a foothold in this business by becoming “virtual cable TV operators.” Without a strategic competition that can generate industry leadership in one of the big things, these initiatives and me also don’t stand a chance.

So who will emerge victorious in the video war? Once again, there is no safe bet. Based on its user-experience-based design, Apple is betting that integrating hardware with a content ecosystem will lead to profitable and engaged customers, and its business model seems to prove it right. Google appears to be taking a more open source approach that once again fits with its competition and business model. Netflix will have to pedal harder and harder to stay in this race and will face ongoing challenges from owners of parts of its downstream distribution system, such as cable companies. However, if they continue to lead on portability, there’s a good chance Netflix will retain market leadership for the foreseeable future. This is because portability isn’t even attractive to most of the big competitors in this space, with the possible exception of Google. However, you can count on some of the distribution network players (like Comcast) to try to use the power of their position to gain traction with their own video offerings (like Xfinity) or get some favorable concessions from the larger players. large. in this market.

What about your industry? Do you have a clear idea of ​​what are the great things that you could master? How do those things compare to your strategic competition? In my next article, I’ll discuss some ways to choose what’s most important to focus on, and how to feel good about letting go of the other important things.