THREE

Second Law: Competitive Position Determines Your Options

Never interrupt your enemy when he is making a mistake.

—NAPOLEON

IN THE 1980S, NIELSEN MEDIA RESEARCH, THE MARKET LEADER IN the television-ratings business, found itself under sharp attack from competitors on two fronts. Nielsen fought back. When the dust cleared, Nielsen was still on top. It remains there today.

The experience curve, taken to its logical extension, implies that as long as a leader maintains its focus, followers will never catch up. They won’t have sufficient funds to invest in overtaking the leader. So maybe we could chalk up Nielsen’s success simply to the power of market leadership. But then how do we explain challengers’ victories? In 1994, the Super Nintendo ...

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