Shrink a Market!

I wrote recently about asymmetric competition in my entry Purpose-Driven Media. I pointed out CraigsList as an example of a company that was disrupting the classified advertising market as a result of its non-commercial ideals. While such enterprises do represent the extreme of asymmetric competition. Josh Kopelman explains how asymmetric competition can come from companies that are very much profit focused, in his post Shrink a market! He describes how Microsoft Encarta destroyed Brittanica's business, replacing Brittanica's $650 million business with a $100 million business:

"For every dollar of revenue Microsoft made, it took away six dollars of revenue from their competitors. Every dollar of Microsoft’s gain caused an asymmetrical amount of pain in the marketplace. They made money by shrinking the market."

Of course, Josh notes that Encarta was in turn vulnerable to the next disruptive innovation, the world-wide web (and more specifically, Google and Wikipedia.) Josh also talks about his own experience with half.com, and his new investment in Jingle Networks' free 411 service. Some other examples: Bob Young, founder of Red Hat, used to say his goal was to shrink the size of the operating system market; GlobalSpec noticed an opportunity they could drive a truck through in disrupting the existing business of the Thomas Register. (This isn't to say that an existing business can't figure out the competition and respond, as Thomas Register has apparently done.)

Still, Josh's point is a really good one. While there are a lot of "build it and they will come" success stories, where the business model wasn't visible till long after the company became successful, there are also lots of opportunities that are defined by bringing new technologies (and with them new efficiences and user benefits) to existing markets. This is a post that every internet entrepreneur should read.