As markets change, they often create new “White Spaces” that are both opportunities for incumbents to capture as well as new entrants to rapidly gain market share.  Frequently, the earliest efforts in these spaces are actually internal R&D efforts at the largest incumbents (the first digital cameras were developed inside Kodak, for example).  But these efforts are rarely given as much freedom as new entrants, especially well-financed new entrants can gain. 

 

As change in the market continues, the incumbents typically split between those who aggressively pursue the change and those who attempt (but generally fail) to protect their existing territory.  During this phase the volume of new entrants proliferates, as venture financing generally “over-finances” the new space, understanding the potential but underestimating the full challenge.

 

As incumbents both wake up and feel threatened, internal efforts are typically combined with smaller acquisitions (generally <10% of the incumbent’s market cap).   Often the largest of the new entrants are also acquiring competitors.  During this phase the markets start really paying attention, both falling in love with the Emergent Star and doubting it can actually “own” this market.

 

By now, it is generally too late, as the Emergent Star (and often one or two others) have become dominant in the new market and at least some of the incumbents have lost much, if not most of their market share.  Others, however, who reacted aggressively, can both maintain share and potentially remain dominant in the new market.