Undermining Barriers to Entry

An offensive strategy focused on identifying and dismantling a key barrier that protects an incumbent, thereby opening the market to new competition.

"Identifying a barrier to entry into a market and reducing it to encourage competition."

• Simon Wardley

🤔 Explanation

What is Undermining Barriers to Entry?

This is an attacking strategy where a company, typically a challenger, identifies a critical barrier to entry that protects an incumbent and then actively works to dismantle it. Barriers can take many forms, such as high costs, proprietary technology, complex regulations, or exclusive distribution channels. By undermining the barrier—for example, by open-sourcing a key technology or creating a low-cost alternative—the attacker opens the floodgates to new competition, leveling the playing field and eroding the incumbent's advantage.

Why use this strategy?

This is a classic disruptive move. The key benefits are:

• Neutralizing an Incumbent's Advantage: It directly attacks the source of an incumbent's power.
• Leveling the Playing Field: It allows a challenger to compete on more favorable terms.
• Stimulating an Ecosystem: By lowering a barrier, you can enable a whole new ecosystem of smaller players to emerge, creating a more dynamic and competitive market.
• Changing the Basis of Competition: It can shift the focus of competition away from the incumbent's strength (e.g., a proprietary technology) to an area where the attacker is stronger (e.g., service, user experience, or business model).

🗺️ Real-World Examples

Google's Android vs. Apple's iOS

In the early days of the smartphone market, building a competitive mobile operating system was a massive barrier to entry. Apple's iOS was a proprietary, closed system that gave them a huge advantage. Google undermined this barrier by developing Android and open-sourcing it. This allowed dozens of other hardware manufacturers (like Samsung, LG, and HTC) to enter the smartphone market without having to build their own OS from scratch. This move dramatically increased competition and turned the smartphone market into a two-horse race.

Mozilla Firefox vs. Microsoft Internet Explorer

During the first "browser war," Microsoft's Internet Explorer had a dominant market share, and its proprietary rendering engine was a significant barrier to entry for new browsers. The Mozilla project undermined this barrier by creating Gecko, a powerful, open-source rendering engine. This allowed them to launch Firefox, a competitive browser, and also enabled other developers to build their own browsers on top of the Gecko engine, breaking Microsoft's stranglehold on the market.

Robinhood and Commission-Free Trading

For decades, the high commissions charged by brokerage firms were a significant barrier to entry for small, retail investors. Robinhood undermined this barrier by offering commission-free trading. This move opened up the stock market to a whole new generation of investors and forced the entire brokerage industry to eliminate their own commission fees, fundamentally changing the competitive landscape.

🚦 When to Use / When to Avoid

🚦 Undermining Barriers to Entry Strategy Self-Assessment Tool

Find out the strategic fit and organisational readiness by marking each statement as Yes/Maybe/No based on your context. Strategy Assessment Guide.

Landscape and Climate

How well does the strategy fit your context?

• Your map shows an incumbent protected by a single, clear barrier to entry (e.g., a proprietary component, high cost of entry).
• This barrier is a source of frustration for customers or other players in the ecosystem.
• You have a technology or business model that can significantly reduce or eliminate this barrier.
• The market is stagnant, with little innovation due to the incumbent's protected position.

Organisational Readiness (Doctrine)

How capable is your organisation to execute the strategy?

• We are a challenger, not the incumbent who benefits from the barrier.
• We have a clear strategy for how we will compete and win in the more competitive market we are about to create.
• We have the resources and the risk appetite to take on a powerful incumbent directly.
• Our brand is associated with disruption, openness, or being on the side of the customer.

Assessment and Recommendation

Strategic Fit: Weak. Ability to Execute: Weak.

RECOMMENDATION
Consider alternative strategies or address significant gaps before proceeding.

Use when

• You are a challenger trying to break into a market dominated by a powerful incumbent.
• You have a way to turn an incumbent's strength into a weakness (e.g., by open-sourcing their proprietary technology).
• You are prepared to compete in the more dynamic, competitive market that you will create.

Avoid when

• You are the incumbent who benefits from the barrier.
• You do not have a clear plan to capitalize on the new, more open market. You might simply be creating opportunities for other competitors.
• The barrier is protected by strong patents or other legal means that you cannot overcome.

🎯 Leadership

Core challenge

The core leadership challenge is to have the courage to make a bold, disruptive move that will likely provoke a strong reaction from the incumbent. It requires a willingness to challenge the established order and to embrace a more open, competitive environment. Leaders must also have a clear vision for how their own company will thrive in the new world they are creating.

Key leadership skills required

• Disruptive Thinking: The ability to see how an incumbent's strength can be turned into a weakness.
• Boldness and Risk-Taking: The courage to take on a powerful, entrenched competitor.
• Ecosystem Thinking: The capacity to see how lowering a barrier will benefit a whole ecosystem of players, not just your own company.

Ethical considerations

This strategy is generally seen as pro-competitive and beneficial for consumers, as it leads to more choice and lower prices. However, it can be destructive to the incumbent's business and the jobs of its employees. Leaders should be mindful of the broader impact of their actions and be prepared for the creative destruction that this strategy unleashes.

📋 How to Execute

1. Identify the Key Barrier: Analyze the market and identify the single most important barrier that is protecting the incumbent.
2. Develop Your Weapon: Create the tool or technology that will undermine the barrier. This could be an open-source project, a low-cost alternative, or a new business model.
3. Launch the Attack: Release your solution to the market and actively promote it as a way to circumvent the old barrier.
4. Foster the New Ecosystem: Encourage other companies and users to adopt your solution and participate in the new, more open market.
5. Compete on New Terms: Once the barrier is down, be prepared to compete on a new basis, such as user experience, service, or brand.

📈 Measuring Success

• Barrier Reduction: Has the cost or difficulty of entering the market been significantly reduced?
• New Entrants: Are new competitors entering the market as a result of your actions?
• Incumbent's Reaction: Is the incumbent being forced to change its business model or lower its prices?
• Your Market Share: Are you successfully capturing a share of the newly opened market?

⚠️ Common Pitfalls and Warning Signs

Creating Competition for Yourself

You might successfully undermine the barrier, only to find that you are out-competed by other new entrants who also benefit from your move.

Incumbent Response

A powerful incumbent will not stand by idly. They may respond by lowering their own prices, improving their product, or using their market power to crush you.

Incomplete Destruction

If you only partially undermine the barrier, the incumbent may be able to adapt and maintain their dominant position.

🧠 Strategic Insights

Asymmetric Warfare

This is a form of asymmetric warfare. A smaller, more agile challenger can use this strategy to attack a much larger incumbent at their weakest point.

The Power of Open

Open-sourcing a key technology is one of the most powerful ways to undermine a barrier that is based on a proprietary system. It enlists a whole community of developers in your cause.

❓ Key Questions to Ask

• The Keystone: What is the single barrier that, if removed, would cause the incumbent's entire position to crumble?
• Our Weapon: What unique capability do we have that can dismantle this barrier?
• The Day After: What will the market look like after the barrier is gone, and how do we win in that new world?
• The Incumbent's Response: What is the most likely way the incumbent will retaliate, and how will we counter it?

🔀 Related Strategies

• Open Approaches: This is the most common tactic used to undermine a barrier based on proprietary technology.

• Market Enablement: By undermining a barrier, you are often enabling a new market to emerge.

• Fool's Mate: Undermining a critical barrier can be a key move in executing a Fool's Mate, leading to a rapid collapse of the incumbent's position.

• Tech Drops - releasing open or low-cost versions of core technology to erode proprietary barriers and attract new entrants.

⛅ Relevant Climatic Patterns

• Most competitors have poor situational awareness – trigger: incumbents may not notice barriers eroding until it's too late.
• Components can co-evolve – influence: removing a barrier lets related components evolve together more rapidly.

📚 Further Reading & References

• The Innovator's Dilemma by Clayton M. Christensen. Provides the theoretical framework for understanding how disruptive challengers can attack and defeat established incumbents.
• Judo Strategy by David B. Yoffie and Mary Kwak. A book focused on how smaller players can use an incumbent's weight and strength against them.