Every innovation needs a competitor
I often meet startup founders with truly groundbreaking ideas. When I ask them about their competitors, they frequently try to convince me that their product is unique. However, history has shown that the most successful innovations only succeed when they have a competitor. Not only does an idea need to be good, but customers also need to understand and trust the seller enough to buy it. The most successful innovators find their nearest competitor and embrace the value they bring to frame new markets.
Before the internet transformed retail, the United States thrived on a vibrant mail-order catalogue tradition, championed by giants like Sears, Roebuck & Co., Montgomery Ward, and Lands’ End. In stark contrast, Australia’s retail landscape approached catalogues differently, with their use largely confined to niche products and in-store promotions. This all changed in the early 1990s when Myer, Australia’s largest department store brand, sought to capitalise on its logistics capabilities by launching Myer Direct. However, the response was tepid at best. Despite a robust offering, Australians were unfamiliar with the mail-order concept, causing the venture to struggle due to the lack of a clear frame of reference.
Myer Direct tackled the challenge head-on by licensing the iconic US brand Lands’ End for the Australian market. Although Lands’ End struggled to gain traction and was ultimately considered a commercial failure, its presence made a significant impact. Consumers began to take notice and, soon after, Myer Direct’s catalogue sales began to grow. While shoppers may not have been eager to purchase from Lands’ End, its introduction helped to legitimise the catalogue mail-order concept in Australia, providing a crucial frame of reference that paved the way for a new market.
In another example of the importance of framing a market, Amazon’s single-handed foray into cloud computing was almost accidental. In 2006, the tech giant recognised the surplus computing capacity it had amassed for its retail operations and decided to market it as Amazon Web Services (AWS). Initially, adoption was modest, but everything changed when Google and Microsoft entered the cloud services arena a few years later. Their presence not only legitimised the market but also framed it in a way that spurred AWS’s growth. While AWS maintained its position as the market leader, it thrived not on its uniqueness but on being the first to define the opportunity.
Similarly, when the Toyota Prius first hit dealer showrooms around the turn of the century, the innovative hybrid struggled to create a market for itself beyond the small group of environmentally conscious enthusiasts who first bought the car. However, sales growth really took off after Tesla’s groundbreaking entry into the electric vehicle market in 2008. Suddenly, the hybrid began to resonate with a broader audience, transforming its image and appeal. This unique dynamic, where two different products created context for each other’s significance, ignited a surge in demand for the Prius, again showcasing how competition can reshape consumer perception.
However, excessive competition without clear differentiation can be detrimental. Today, Tesla faces challenges as a flood of new EV competitors enter the market, from established automakers to fresh startups in Asia. While Tesla shaped the EV landscape, the narrative is shifting to favour these newcomers, highlighting the delicate balance between innovation and market saturation.
Like Tesla, Sony was an innovator in video recording technology in the 1970s and 80s through their Betamax technology and recording standard. Despite having arguably superior technology, Sony’s Betamax lost to VHS, developed by JVC, which addressed a crucial weakness: recording time per cassette. Sony saw VHS as a competitor to beat rather than an opportunity to frame a new technology in a way that consumers could relate to. Once Sony accepted that VHS was the de facto standard format, they were able to leverage the underlying innovations in their recording and playing technology to benefit from the burgeoning market.
Inventions from the steam engine to the telephone had the luxury of years to find their natural place in society and their commercial markets. Recent decades have seen the pace of technology innovation be matched only by the ruthlessness of the market to eliminate ideas that do not properly frame themselves.
As I’ve written before, not every breakthrough idea succeeds, otherwise we’d use SixDegrees.com rather than Facebook and the Sinclair C5 would have pioneered electric vehicles. Our world is dominated by breakthroughs that combine the right idea with the right positioning in the market.
SixDegrees.com pioneered social media way back in 1997 and attracted a few million users at its peak. But without readily available, always on, internet access (most people used dial-up) social media was an idea ahead of its time. It was Myspace that really pioneered social media as we know it today but, mismanaged the framing opportunity that Facebook’s launch offered. Just as Sony should have embraced JVC’s VHS as a competitor to help frame a market, Myspace should have embraced Facebook as an opportunity to expand social media beyond what was still a relative niche. Rather than working to frame a bigger market, they ceded it entirely to the upstart new entrant.
The Sinclair C5 was also an example of mismanaged market framing. The vehicle was way ahead of its time and technology. Relying on heavy, inefficient, battery technology there was no way it could compete with motor vehicles of the 1980s. Unfortunately, Clive Sinclair positioned the product as a revolutionary car framing it in a market where it was always going to fail. He could have been much more successful with the same product if the point of reference was scooters or even personal mobility devices.
Most innovators see their role as looking for the next brilliant idea. It is equally important for them to identify competitors who will help frame the market for their brilliant idea to succeed. Ultimately, innovation does not thrive in isolation; it requires the interplay of competition to create a market that consumers understand and trust. Perhaps through these insights, would be collaborators won’t be surprised the next time I ask them who they want to embrace as their competitor!