"The pervasive fear felt by so many incumbent company managers is rooted in the false assumption that the currents of change, of which Amazon is emblematic, will completely disrupt industries and leave no place to hide or prosper.In fact, hundreds of studies of industry profitability in the industrial organization economics literature show the opposite. The most profitable overall industry configuration is one with a relatively small number of competitors, with each having a different strategy and each being very profitable—some serving small customers, others serving large customers; some offering arm’s-length service, others building-integrated customer relationships; and so on. In fact, contrary to popular belief, the industry model of a big winner and a lot of losers consistently provides low overall profits to all industry participants.Today, the winning strategy is “choose your customer."...The overwhelmingly important problem for all too many managers in incumbent firms is that they are stuck in the obsolete strategic paradigm of the fading Age of Mass Markets in which the primary goal is to maximize all revenues while minimizing all costs. In essence, they are choosing all possible customers, which is no choice at all."
“Continuing to act on the obsolete assumption that all revenues are good and all costs are bad leads all too many managers to dilute and waste resources trying to hold on to all of their business, rather than choosing their customers and focusing on building their high-profit, defensible business in their target strategic group. This is the single most important issue in business today, and most managers do not even see it.”