vs. Akamai · 2010–26
Cloudflare
Counter-positioning: free traffic lowers cost and trains defenses
- What it did
- CDN free since 2010 because it serves the paid security products
- Akamai
- Traffic only from paying customers, billed by use
Counter-positioning
What is Counter-positioning?
Counter-positioning is Hamilton Helmer's term for a newcomer's business model that the market leader can see and could copy, but won't, because copying it would damage the business the leader already earns from. Netflix's no-late-fee subscription worked this way: Blockbuster collected $800 million in late fees in 2000.
Also calledCounter-Positioning (Helmer, Power #3)the incumbent's dilemma (Christensen)counterpositioning
How Counter-positioning works
The barrier is the incumbent's own math. The newcomer picks a model that makes money in a way the leader's existing business can't absorb: a lower price, a subscription in place of a license, a channel the leader's partners would resent. The leader sees it and holds back, because matching it would cut into revenue it depends on today.
Salesforce charged $50 per user per month in 1999, while Siebel held its free hosted Sales.com back to protect more than $600 million in license revenue. E*Trade kept commissions for four years after Robinhood launched; when it went to $0 in 2019, it gave up an estimated $75 million a quarter.
The advantage is temporary. Once the leader's old business is small enough to abandon, it can copy, so the newcomer has to build another advantage in the meantime, usually switching costs or scale.
Robinhood launchesFree stock trades on a phone, 2015
E*Trade holds backCommissions were about 17% of its revenue
Robinhood grows6 million customers by October 2018
E*Trade goes to $0October 2019, at an estimated $75M a quarter
How companies won with Counter-positioning
From the win chains in Strategy Canon case studies: what the winner did, and what its rival did at the same step.
vs. Blockbuster · 1999–2007
Netflix
Rental by mail from a website, on a no-late-fee subscription
- What it did
- Discs ordered from a website, mailed from a queue, kept with no due dates or late fees (Sept 1999)
- Blockbuster
- Collected $800 million in late fees (2000); dropping them gave up about $400 million (2005)
vs. Amazon Redshift · 2017-20
Snowflake
Neutral across clouds, with live data shared between accounts
- What it did
- Data sharing without copies, the consumer paying for compute (June 2017)
- Amazon Redshift
- Runs only on AWS; data sharing arrived in preview Dec 2020, between Redshift clusters on RA3 nodes only
vs. Oracle · 2006–12
Workday
Counter-positioned against Oracle's maintenance base
- What it did
- Per-user monthly subscription instead of $100,000-to-millions up front (2008)
- Oracle
- Maintenance at 22% a year earned $12B vs $11.5B in new licenses (2009)
Also tagged: Amazon · Autodesk · CrowdStrike · Dayforce · Duolingo · HashiCorp · Okta · Robinhood · Salesforce
Counter-positioning vs. Incumbent system inertia and Disruptive innovation
| What it is | How to tell it apart | Example | |
|---|---|---|---|
| Counter-positioning | A newcomer's business model the leader won't copy because copying would hurt its existing business | The leader could copy it and chose not to, to protect current revenue | Salesforce's monthly CRM against Siebel's licenses |
| Incumbent system inertia | An incumbent that struggles to change because of its own systems, contracts and habits | The leader tries to change and can't, instead of choosing not to | A legacy vendor whose rebuild takes years |
| Disruptive innovation | A cheaper, simpler product that starts at the low end and improves until it serves the leader's customers | The product starts out worse; counter-positioning only needs a model the leader won't copy | Christensen's minimill steelmakers |
How to tell if a company has it
- A different business modelThe newcomer makes money in a way the leader's current business can't: price, pricing unit, channel or delivery.
- The leader could copy itCopying was technically and financially possible. A leader unable to build it is a different mechanism.
- Copying would hurt the leader's revenueName the income at risk, such as license, maintenance, late-fee or commission revenue.
- The leader held backFind a dated delay, a half-measure or a stated refusal while the newcomer grew.
Who names it — 3 of the canon
| Author | What they call it / where it appears |
|---|---|
| Helmer | Counter-Positioning (Power #3) |
| Christensen | Disruptive innovation (the incumbent's dilemma) |
| Kim & Mauborgne + | The result of value innovation |
| Neumann | Startups weaponizing incumbents' system rigidity |