Identifying "White Space" to Build Competitive Advantage

Summer is supposed to be a quiet time, especially in construction-related industries, not so for me; I have been completely consumed in the past few months working for a number of clients that are motivated to build competitive advantage in their respective industries. For one client we spent many hours identifying the white space in the markets they serve; spotlighting new strategic growth opportunities and targeting alternative markets ready for their new disruptive solution offerings.

White Space Opportunity

So what is White Space? Adam Hartung, author, consultant, and Harvard MBA describes white space as providing a location for new thinking, testing and learning i.e. opportunity. In his book Create Marketplace Disruption: How to Stay Ahead of the Competition he introduces his Phoenix Principle a recipe for saving oneself from the innovation death spiral which can bring even the best companies crashing down. He calls on corporate leaders not to fear marketplace disruptions, but to actually embrace them, even instigate disruption if possible and use this "creative destruction" force to keep the competition off-balance.

In simple terms, the Phoenix Principle promotes continuous re-invention and self-cannibalization to identify new opportunities from white space and take ownership of them to maintain growth. Hartungs vaunted Phoenix Principle is founded upon four tenets:

Step 1: Be future-oriented

Step 2: Obsess about competitors

Step 3: Disrupt yourself

Step 4: Create and maintain white space

Defining White Space

According to Hartung there are two types of white space; the type that extends a markets existing core offerings into adjacent space and the type that disrupts a markets core offerings in pure white space.

Market Adjacencies: Defend and Extend

Hartung is hugely critical of the defend and extend strategies employed by many companies that strive to survive on the back of a limited number of innovations and offerings. He explains that these sustaining innovations strategies are responsible for a 65% upswing in revenues but only a 15% upswing in profits.

According to Hartung, the problem with the defend and extend approach is that its unlikely to engage new customers or open up new markets as much of the offering overlaps with incumbent solutions and therefore in Hartungs own words treads on the toes of gatekeeper staff whose careers have been built upon the technology and processes that new offerings threaten. Further, the competitive advantage realized by extending a current offering is likely to be unsustainable in the longer term as current competitors also defend and extend their own offerings.

Hartung states that new product offerings should never violate lock-in (where lock-in = business as usual) to gain traction in customer accounts. According to Hartung, violating lock-in requires that the customer changes and is therefore likely to meet sufficient financial and enablement resistance to stall adoption.

Market Disruption: Attacking Lock-in

Conversely by targeting clear white space with no real competition, innovators can quickly gain traction in new accounts by adding value and threatening no one. These disruptive innovations target new customers to open up new revenue streams. Accordingly they are more likely to attract share of budget and avoid hostile rejection in target accounts. Perhaps this is why 85% of incremental profits come from disruptive innovations. Compare that to the 15% of incremental profits from sustaining innovations.

This approach is backed-up by Mark W. Johnson in his book Seizing the White Space: Business Model Innovation for Growth and Renewal which describes white space as the range of potential activities not defined or addressed by the company’s current business model, that is, the opportunities outside its core and beyond its adjacencies that require a different business model to exploit."

Make sense? It should… A relentless search for white space is what turned Apple from an underdog into the big dog that it is today. Want to follow in Apples innovative footsteps to accelerate your business growth but not sure where to start? We can help with fresh eyes to take a close look at your offerings, the markets you serve, and the companies you want to convert into clients.