Winning the old game faster is still playing the old game
Competing on the incumbent's terms means competing where the incumbent is strongest. Changing the terms can make its strengths irrelevant.
Play a new game, not the older game but faster.
A newcomer that competes with an established company by doing the same thing a little faster or cheaper is fighting where the incumbent is strongest. The incumbent has more money, more customers and more experience at that exact game, and it can usually match a small improvement. Seth Godin, the marketing writer and founder of Squidoo, argues for changing the rules instead.
Blockbuster and Netflix are the example of the moment. Blockbuster ran video rental stores and made much of its money from late fees. Netflix, starting in 1998, did not open faster or cheaper stores. It mailed DVDs to subscribers for a monthly fee with no late charges, and it later added streaming. Blockbuster’s strengths, thousands of stores in good locations, became costs under the new rules. Blockbuster filed for bankruptcy in 2010.
The new game rarely looks threatening at first. Mail-order rental was slower than walking into a store, and for years it served only a subset of customers who planned ahead. Incumbents tend to dismiss a new game because it is worse at the thing they measure. By the time it is better at what customers care about, the incumbent’s investments point the wrong way.
The line fits a start-up’s position well. A small company rarely wins a race on the incumbent’s track. It can win by choosing a dimension the incumbent ignores, such as a different business model, a different customer or a different channel. Changing the game also changes which skills matter, and new skills are where a small team can lead.
The line overstates the case, though. Many companies have won by playing the old game better. Google did not invent web search; it ranked results more usefully than the engines already in the market, and that was enough. A new game is not automatically better, and some new games have no players: plenty of start-ups invented a new way of doing something that customers were happy doing the old way. The question to ask is whether the old game has a weakness a new one can exploit, and whether customers will follow.