Venturing into the White Space


1 April 2010 Mark Johnson


How do companies decide where to focus and how to grow? Mark Johnson of Innosight explains all in an excerpt from his book, Seizing the White Space.


For decades, businesses of all stripes have wrestled with, failed to capitalise on, or passed over unique growth opportunities that did not seem to fit with what they already do well. Just think of Xerox's Palo Alto Research Center (PARC), which famously owned the technologies that helped catapult Apple, Adobe, and 3Com to success. Why didn't Xerox exploit them? More broadly, what underlying forces prevent great companies from embracing transformational opportunities?

The "where" and "how"

Before we can answer that question, we must first understand something about where and how businesses tend to spend their time and resources in pursuit of new growth. At its most basic level, a company exists to deliver value in return for compensation. Every functioning company has a discrete sphere of operation – the activities it performs to serve a customer and in return make a profit. Early in a company's life, this space may resemble an inkblot without any logical boundaries flowing tentatively along paths of least resistance. As a company matures, its operations become better defined, its borders more clearly established. Company efforts and capabilities become concentrated on this core operating space.

Over time, a successful company becomes very good at growing its core. It secures resources, improves existing products and creates new ones, expands markets, and increases efficiencies by improving processes, all to extract the most value from its core activities.

"At its most basic level, a company exists to deliver value in return for compensation."

It also continues to develop and refine the key business rules and metrics that ensure proper execution, establish discipline, and exert control throughout the organisation. Either explicitly or implicitly, the company is operating according to a business model, which defines the way the company delivers value to a set of customers at a profit. Like a highly specialised organism, this model evolves until it perfectly suits the company's needs – showcasing its competitive strengths, honing its key resources and processes, and eliminating its vulnerabilities.

But what happens when an opportunity arises outside a company's core, an opportunity to serve a wholly new customer or an existing customer in a radically new way?

What happens when an opportunity arises to create an entirely new market or to significantly transform an existing one? What of challenging new growth opportunities?

Many of these opportunities, even those that appear at first glance very different from the traditional core opportunity, fit quite well with the company's existing business model and thus are often called "adjacencies". But some require a company to operate in a fundamentally different way, with a different formula for making money, a new set of resources and processes, different expertise, and maybe a new way to coordinate and control activities. When this occurs, when delivering new value to the market requires you to reconsider the fundamental building blocks that make the business work, that opportunity lies in your company's "white space".

"As a company matures, its operations become better defined, its borders more clearly established."

White space

The term white space has been used in business parlance to mean uncharted territory or an underserved market. But what I mean by the term is "the range of potential activities not defined or addressed by the company's current business model, that is, the opportunities outside its core and beyond its adjacencies that require a different business model to exploit".

White space is a subjective valuation: one company's white space may be another company's core. What matters is that it describes activities that lie far outside a firm's usual way of working and presents a series of unique and perplexing challenges to that organisation. It's an area where, relatively speaking, assumptions are high and knowledge is low, the opposite of conditions in the company's core space.

The chance to seize a piece of white space presents a tantalising opportunity. Success here can bring the transformational growth that so many business leaders seek. Yet understandably, a play for the white space feels risky, and often the numbers don't appear to add up. The market seems too foreign, or core capabilities won't apply. Some executives, having made one unsuccessful foray, just won't risk failing again.

Edited extract of Seizing the White Space reprinted by permission of Harvard Business Press. © 2010 Mark Johnson. All rights reserved.