Zone to Win

“A Crisis of Prioritization”

Competitive companies today either introduce new technologies that disrupt their rivals or defend their products against all comers. You can attack as the “disruptor” chasing “the next wave.” Or you can play defense as the “incumbent” who tries to prevent the next wave from catching you. On the NASDAQ over a 10-year period, some companies showed increases of more than 1,000%, including Apple, Salesforce and Amazon. Other major firms increased their valuation at lower rates, such as Oracle (229%), Microsoft (88%) and SAP (70%). What’s the difference? Apple, Salesforce and Amazon didn’t deliver superior performance during that period, but growth investors rewarded them for catching “new category waves” in digital music, marketing automation and cloud computing. Many high-tech companies didn’t manage to catch that next wave, including Honeywell, Atari, 3Com, Netscape and Nokia. They have great management teams, but they didn’t manage the crisis of prioritization.

To please growth investors, set out to catch the next wave. But first determine how many of your resources to put into existing product lines and how many to invest in new, emerging...