Escaping the Complacency Trap: The Attacker’s Advantage

I have co-authored this article with my friend and Partner Raj Ganguly.

There is no shortage of examples to prove the value of the attacker mindset. In digital security, for instance, hackers are constantly reinventing their offensive strategy, giving them a clear advantage over reactive systems designed to defend against known threats. Even in the workplace, proactive people are inclined to outshine their less preemptive counterparts in job searches and productivity. This advantage is most pronounced in the business realm, where innovative digital companies come from nowhere and can quickly outpace established industry players at a staggering rate.

The significance of the attacker mindset isn’t a novel concept. In fact, by the 1980s, it was clear that accelerating market growth also meant companies had to choose sides in the war zone overtaking business play. Sadly, more than three decades later, many organizations are still struggling to adjust to this dilemma.

Think of it as a radical game of tug-of-war. On one side, there are the attackers. These companies form an aggressive stance, striving to capture market share quickly while also leapfrogging competitors using original products and ideas. They come on strong and drown opponents in a flood of innovation. On the other side, there are the defenders—the organizations that once held the lion’s share of the market. They pull on the rope, clinging to their existing offerings to help save them from the oncoming tide. Clearly, these two opponents aren’t even following the same rules, yet the defenders are unable to adapt.

The individual components of a defensive strategy don’t matter until they include an equally developed offensive blueprint. Until then, the end result will almost always be the same. The attackers will force competitors inward, encouraging them to stick to the core while simultaneously chipping away at their business morale. At best, this requires a resource-intensive remediation strategy. At worst, it serves as the catalyst for a complete turnaround initiative. History has long reinforced the role of determination on the battlefield, and the result is no different in business. A hit to morale can be almost as devastating as a loss in real value.

This isn’t to suggest that defensive tactics are pointless. Defenders can expand to new markets, reduce costs, invest in acquisitions, augment products or adopt a wait-and-see approach—all of which are useful when faced with a robust offense. Even so, the most strategic countermeasures require innovative thinking, and an element of attack is almost always necessary when attempting to recover lost ground.

After all, the attacker’s greatest weapon involves the concept of consumer attraction. Companies with a strong offensive design are better positioned at the core, offering original value propositions to current and unforeseen markets. Eventually, when defenders stop offering superior value to clients, their usefulness evaporates and drains their market share with it.

Take the case of Netflix, which is still one of the most widely discoursed examples of the attacker mindset to date. Netflix entered the video market with a rental-by-mail strategy and quickly leapfrogged Blockbuster altogether with their innovative streaming service. Netflix offered customers superior technology and an original product, which effectively opened up an entirely new market. Blockbuster, on the other hand, stumbled behind Netflix in both products and services. Having lost their competitive advantage, they attempted to rally by implementing their own subscription service while also peddling loyalty programs. Blockbuster’s greatest error wasn’t their lack of product development, however. Their biggest mistake actually occurred years earlier when they passed on the opportunity to buy Netflix during their emergence. They’d overlooked their innovation window in favor of maintaining operations, which is all too common when attempting to accelerate business defensively.

More recently, Rocket Internet has completely disrupted the world of online business. As one of the fastest developing global Internet platforms, they monitor and analyze customer behavior aggressively and unremittingly, seeking out innovative opportunities across industries while also isolating novel and underserved markets. Rocket Internet then builds businesses, designing them to dominate within target markets, and brings them to scale in a way that demands constant origination. Consequently, innovation becomes a product of its own, bonding with the business core in an inextricable way.

Many business leaders believe that only small upstarts are capable of innovation. Larger companies with a sizable share of the market, they argue, risk everything by ignoring their existing customer base or investing too aggressively in new products and ideas that have no promise of success. Such nearsighted leaders mistakenly position innovation against effective operations rather than assigning them equal value. Consider the example of Netflix again. Once they’d successfully implemented their mail-based video rental model, they could have settled down and enjoyed their profits. CEO Reed Hastings avoided the complacency trap by pulling resources from the existing DVD operations and investing in digital streaming. Hastings didn’t cannibalize the old business structure entirely, but he did look forward, and it paid off to the tune of more than 60 million subscribers worldwide. Hastings hasn’t stopped there, either. Netflix invested heavily in original content and has been rewarded with critical acclaim and increased customer appeal ever since.

Ultimately, the attacker mindset is more about holistic acceleration than any single idea. By pioneering a new technology or developing an original product, businesses will certainly gain some value. Nevertheless, such singular advances are inevitably short-lived. The next innovator will eventually enter the marketplace (or create a new one) and offer customers something different, and so the cycle goes on forever. In order to create a truly disruptive offensive strategy—one that ensures lasting growth—companies must implement a comprehensive approach to innovation. Ideas, market trends, products, services—the requirements are expansive and grow in line with consumer needs. Each area must have its own innovation strategy, and if it doesn’t, then the existing business model must include enough flexibility to pivot in a new direction at any given moment.

Despite the initial results, relying on a single well-developed strategy isn’t enough for most attackers to completely overwhelm effective operations and a loyal customer base. Instead, companies with a dedicated attacker mindset will mount multiple offenses that extend across and beyond the defensive line. They invest in a portfolio of innovation that simultaneously accelerates a variety of investments and strategies, which places them in a revolving state of transformation, incubation and commercialization.

The attacker mindset is particularly important when it comes to capitalizing on market friction. For many business leaders, the notion of operational resistance borders on taboo; it’s an elusive foe, stifling value from unexpected hiding places. To put it more simply, friction includes any organizational issue that reduces the efficiency or quality of a business, service or market, and it drastically undermines consumer appeal. Friction has a terrible reputation for killing off companies and causes leaders to experience a collective stomach-churning whenever they face it—and with good reason.

Fortunately, there is still such a thing as productive friction, and it’s almost always the attackers who most benefit from this form of innovation. The mobile transportation network Uber, for example, is expected to reach a revenue run rate of $10 billion a year in 2015, and it achieved this by capitalizing on friction in the existing taxi market.

Taxi services have always been a mid-market stronghold in major cities like San Francisco and New York, where space and convenience prevent many drivers from owning or operating their own vehicles. Historically, taxi companies have exploited this need by relying on a tenuous growth model built on consumer demand rather than quality, efficiency and innovation. For some consumers, it was better to walk a few miles or take the subway rather than spend money on the low quality vehicles offered by taxi services or hassle with the line of people waiting to hail a cab. Inefficiency and inferior products had essentially capped the taxi market in major cities, and Uber strategically obliterated these obstacles through a well-planned offense. By offering superior services, cleaner vehicles and digital connection processes, Uber stole a huge portion of the taxi market while also extending value to a neglected group of consumers. Reports from the transportation authority of San Francisco are especially telling, as the average monthly trips per cab tumbled from 1,424 in 2012 to 504 in July of 2014. This offensive has already decimated the defenders, and it was accomplished by investing in innovation.

Friction is a persistent liability, though—even for innovative companies like Uber that use it to reach new markets. In recent months, Uber has experienced its own challenges, which are mostly related to ambiguous wage data and labor laws. At one point, Uber reported that the median New York City driver earned a business income of $90,000 a year. This number didn’t hold up in the press, however, and many were quick to point out the financial impact of Uber’s partnership model on drivers, who don’t receive reimbursement to cover the costs of vehicle maintenance and gasoline, let alone healthcare or car insurance. As the pressure to raise wages and designate drivers as employees rather than contractors gains traction (not to mention the resistance from regulators who’ve questioned the service’s legality), Uber is faced with its own source of friction, and it will need to innovate again soon to stay competitive.

In the end, longevity requires more than visibility and resources. It even extends beyond talent, cost efficiency, customer loyalty or any single brilliant idea. Substantial market endurance demands an evolutionary business outlook. It calls business leaders to action and emboldens them to attack without abandon, driving competitors out through the sheer force of innovation.

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