Helmer defines Counter-Positioning as a newcomer adopting a superior business model that incumbents do not mimic because of anticipated damage to their existing business.

Evidence 3 passages

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  fast-improving computer technology, entrenched channel disincentives, consumer misinformation, and so on. In situations like this, it falls to the strategist to carefully peel back the layers of complexity and eventually seize upon some irreducible kernel of insight amidst the competitive reality. To understand the ascendancy of Vanguard, I must first note these characteristics. 1. An upstart who developed a superior, heterodox business model. 2. That business model's ability to successfully challenge well-entrenched and formidable incumbents. 3. The steady accumulation of customers, all while the incumbent remains seemingly paralyzed and unable to respond. These elements were not unique to Vanguard. They were pieces of an oft-repeated story. Think of Dell vs. Compaq, Nokia vs. Apple, Amazon vs. Borders, In-N-Out vs. McDonald's, Charles Schwab vs. Merrill Lynch, Netflix vs. Blockbuster, and so on. But nearly always, these feature the same outcome. The incumbent responds either not at all or too late. These victories aren't born of happenstance, of course. They are strategic, and the upstarts usually succeed in creating a lot of value for themselves, while severely diminishing that of the incumbents. Returning to our benefit-slash-barrier characterization of power. Benefit. The new business model is superior to the incumbents' model due to lower costs and or the ability

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  to charge higher prices. In Vanguard's case, their business model resulted in substantially lower costs, the elimination of expensive portfolio managers, as well as the reduction of channel costs and unnecessary trading costs, which then translated into superior product deliverables, higher average net returns. Due to their business structure of returning profits to their fund holders, they realized value from market share gains, bar S in the fundamental equation of strategy, rather than ramping up bar M. Barrier. The barrier for counter-positioning seems a bit mysterious. How could a powerhouse, such as Fidelity Investments in this case, allow itself to be persistently humbled by an upstart over such an extended period. Couldn't they foresee the potential success of Vanguard's model? Frequently in such situations, naive onlookers castigate the incumbent for lack of vision, or even just poor management. Often too, they level this accusation at companies with prior plots for business acumen. In many cases, this view is unjust and misleading. The incumbent's failure to respond, more often than not, results from thoughtful calculation. They observe the upstart's new model and ask, am I better off staying the course or adopting the new model?

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  Counterpositioning applies to the subset of cases in which the expected damage to the existing business elicits a no answer from the incumbent. The barrier, simply put, is collateral damage. In the Vanguard case, Fidelity looked at their highly attractive active management franchise and concluded that the new passive fund's more modest returns would likely fail to offset the damage done by a migration from their flagship products. With this preliminary understanding, I can now place counter-positioning on the 7 powers chart, which can be found in the supplementary PDF, figure 3.4. This allows me to define counter-positioning. A newcomer adopts a new, superior business model, which the incumbent does not mimic due to anticipated damage to their existing business. The Varieties of Collateral Damage There can be several possible reasons for the incumbent's failure to mimic the upstart. In this section, I will detail those differences, as knowing them will clarify the correct strategic posture. Here's a useful way to visualize this. Imagine the incumbent CEO's business development team must evaluate the prudence of investing in

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