King of the hill: Dethroning the industry leader

Abstract

Executive Overview An important goal of many second-or third-ranked firms in an industry is to dethrone the leader and attain the number one position. Other things being equal, industry leadership, because of scale and scope effects and customer-switching costs, is often associated with greater profitability. Industry leaders also enjoy other reputation and brand-identification benefits. This article examines how challengers can successfully overtake industry leaders. The focus is on the specific competitive behaviors or new competitive actions that challengers take to dethrone the leader. The study also examines the competitive actions leaders take to guard against aggressive challengers. Employing Schumpeter's theory of creative destruction, the article describes the dynamic competitive actions and reactions of challengers and industry leaders in what the authors refer to as the battle for king of the hill. Drawing from a sample of nearly five thousand competitive actions in 41 industries over a seven-year period, we found that successful challengers were more aggressive in taking action, carried out a more complex repertoire of actions, were unpredictable in the timing and location of attack, and were able to delay the reaction of industry leaders. The reasons that industry leaders fall victim to the actions of challengers are discussed, and strategies are offered for industry leaders to more effectively defend their position as king of the hill.