Leap

1. Competitive Advantage is Transient; Continuous Leaping is Essential.

No value proposition, no matter how unique, remains unchallenged.

The illusion of permanence. The history of industries, from textiles to personal computers, reveals a stark truth: competitive advantages are fleeting. What makes a pioneer successful initially—be it superior craftsmanship, market positioning, or proprietary technology—eventually becomes a weakness as knowledge matures and is easily copied. The story of Steinway & Sons, once the epitome of piano craftsmanship, illustrates this perfectly as it was eventually outmaneuvered by Yamaha, a latecomer focused on automation and scale.

The "mudslide" of knowledge. In a world where labor, information, and capital flow easily and cheaply across borders, any competitive edge is quickly eroded. Pioneers are constantly pushed downwards by the "mudslide" of evolving knowledge. To avoid being buried by competition, companies must constantly "leap" into new knowledge disciplines, effectively resetting the competitive landscape and creating new avenues for growth.

Pioneers must reinvent. This continuous reinvention is the "miracle drug" for long-term survival. Companies like Novartis and Procter & Gamble have thrived for over a century not by clinging to their initial strengths, but by repeatedly shifting their foundational knowledge—from organic chemistry to microbiology to genomics for pharma, and from mechanical engineering to consumer psychology to organic chemistry for P&G. This proactive embrace of new disciplines is the only way to stay ahead.

2. The Knowledge Funnel Dictates Industry Evolution.

As history has proved, what begins as an act of human creativity by a world-class expert usually ends in machine automation.

Knowledge matures over time. The "knowledge funnel" illustrates how industry know-how evolves from tacit craftsmanship to codified rules, and eventually to automation. In nascent industries, knowledge resides in the intuition of a few masters. As experience accumulates, this know-how is documented, allowing less-skilled workers to follow standard procedures. Ultimately, these procedures are automated, making the process efficient and replicable.

Latecomers' advantage. This progression explains why latecomers often triumph over pioneers. When knowledge is codified and automated, it becomes easily disseminated through copying, imitation, or even theft. Yamaha, for instance, systematically dismantled Steinway pianos to emulate their methods, then leveraged automation to produce pianos faster and cheaper, eventually dominating the market.

Shifting capabilities. Competing successfully at different stages of the knowledge life cycle demands vastly different organizational capabilities. What works for early-stage craftsmanship (e.g., deep expertise, human judgment) becomes a rigidity in later stages, where efficiency, standardization, and automation are key. Unless pioneers proactively shift their knowledge base, their core competencies can become core rigidities, leaving them vulnerable to agile copycats.

3. Embrace Self-Cannibalization to Survive.

If you don’t cannibalize yourself, someone else will.

The counterintuitive imperative. A critical, yet often resisted, strategy for long-term survival is the willingness to proactively replace one's own profitable products or processes with potentially less profitable ones. This "self-cannibalization" goes against conventional financial wisdom, which prioritizes short-term ROI and fears sales erosion. However, as Steve Jobs famously stated, if you don't disrupt your own business, a competitor surely will.

Overcoming financial myopia. Managers often hesitate to invest in new, lower-margin products because financial models like discounted cash flow (DCF) tend to extrapolate current profitability indefinitely, making new ventures seem less attractive. This marginal thinking biases companies towards leveraging existing infrastructure rather than building new capabilities for the future. Procter & Gamble's decision to invest in synthetic detergents, despite fears it would "ruin the soap business," exemplifies this bold, necessary move.

The pioneer's dilemma. For pioneers, being at the top can be a gilded cage. There's often no more "headroom for growth" in their existing high-end segments, and a focus on differentiation can lead to market share loss. Latecomers, starting from the bottom, have lower profitability expectations, enabling them to invest in new capabilities and take on new markets without the same internal resistance. This willingness to embrace disruption, even at a cost, is what allows companies to leap ahead.

4. Leverage Ubiquitous Connectivity for Decentralized Innovation.

Enlightened trial and error succeeds over the planning of a lone genius.

The power of the crowd. The exponential growth of computing power (Moore's Law) and network speed (Edholm's Law) has made ubiquitous connectivity a reality, fundamentally changing how individuals and organizations innovate. The era of the "lone genius" is giving way to the "wisdom of the crowd," where external novices can be as competent, if not wiser, than internal experts.

Mass-producing decisions. Companies can now leverage external knowledge, previously diffusely distributed, to market, design, and even invent products. Examples include:

• Alex Osterwalder's book: Crowdsourced 470 coauthors, raising funds and promoting the book through their networks.
• WeChat's "official accounts" and "Mini Programs": Empowered third-party developers and businesses to create new functionalities and services, turning the app into an indispensable mobile tool for nearly a billion users.
• DARPA's FANG Challenge: Crowdsourced the design of an amphibious fighting vehicle, attracting thousands of participants and generating innovative solutions that traditional defense contractors couldn't.

Decontextualizing problems. To effectively harness the crowd, complex problems must be broken down and "decontextualized" into generic engineering or design challenges. This allows external talent to focus on abstract optimization without needing deep industry-specific knowledge, as demonstrated by DARPA and Syngenta's algorithm competition.

5. Automate Intuition with Machine Intelligence.

Not only is it possible to technologically replicate the intuition of a human expert, but also to surpass it.

The rise of thinking machines. Machine intelligence, particularly deep learning and self-taught algorithms, is rapidly automating cognitive tasks that once required human intuition and expertise. From Amazon's Amabot outperforming human editors in sales to Google's AlphaGo mastering the complex game of Go by teaching itself, machines are proving capable of learning and strategizing autonomously.

Scaling expert judgment. Businesses that rely heavily on expert judgment face a fundamental growth limitation: human brains cannot be copied or scaled easily. Automating the workflow and instinct of experienced managers is crucial for scaling. Wanda Group, China's largest commercial property company, uses an information system to manage mall development, breaking down complex projects into thousands of sub-tasks and automating oversight, allowing rapid expansion without relying solely on experienced staff.

Beyond human limits. The sheer volume of new information, especially in fields like medicine, overwhelms human capacity. IBM Watson, trained on millions of medical texts and cases, can provide evidence-based treatment recommendations for oncologists with higher accuracy than human doctors, augmenting their capabilities and democratizing world-class knowledge. This shift from human intuition to algorithm-driven decision-making is a natural consequence of the long march toward ultimate automation.

6. Unleash Human Creativity to Solve "Mysteries."

No great discovery was ever made without a bold guess.

The human advantage. As machines automate routine cognitive tasks, the unique human capacity for creativity, empathy, and sense-making becomes paramount. While computers excel at solving "puzzles" (problems with clear data), they struggle with "mysteries"—problems where the answer doesn't yet exist and requires a shift in thinking, integrating social interactions, and understanding human emotions.

Design thinking in action. Rosanne Haggerty's work with Common Ground to address homelessness in Times Square exemplifies solving a mystery. Instead of relying on conventional wisdom, her team immersed themselves in the lives of the chronically homeless, uncovering their aversion to shelters and their desire for housing. This deep empathy led to the "housing first" strategy, which dramatically reduced homelessness by prioritizing the most entrenched cases.

Transforming experiences. Similarly, Doug Dietz at GE Healthcare redesigned the terrifying MRI experience for children into an "Adventure Series" by applying design thinking. By observing children's fear and engaging with various stakeholders, he transformed a medical procedure into a fun adventure, reducing sedation rates and boosting patient satisfaction. These examples highlight that human creativity, driven by empathy and bold guesses, is indispensable for innovating beyond what data alone can reveal.

7. Strategic Leadership Requires "Deep Dives" and Risk Absorption.

Money doesn’t matter. Let’s just do it.

Beyond visioning. In turbulent environments, a CEO's role extends beyond strategic visioning to direct intervention in implementation. This "deep dive" involves personally engaging at operational levels to overcome organizational inertia, absorb career risks for mid-level managers, and ensure disruptive initiatives are funded and executed, even when they involve self-cannibalization or uncertain outcomes.

Overcoming internal resistance. Mid-level managers often shun risky projects, even those with high potential, due to personal career implications (e.g., fear of being fired for failure). Leaders like Daniel Vasella (Novartis), who pushed for Gleevec despite limited market projections, and William Cooper Procter (P&G), who championed synthetic detergents, demonstrated this willingness to absorb risk and declare that "money doesn't matter" when a transformative opportunity arises.

Purposeful intervention. Jonney Shih, chairman of Asus, personally managed the development of the Eee PC, a low-cost netbook that disrupted the company's traditional laptop offerings. He intervened to:

• Drive product concept: Worked directly with engineers, using anthropological observations.
• Resolve internal debates: Co-located teams in an "obeya" to foster cross-functional collaboration.
• Challenge norms: Approved sidestepping corporate assurance for "Thousand User Testing."
• Quiet "noises": Personally addressed resistance from other divisions.
  This direct, hands-on leadership was crucial for launching a product that initially seemed to violate established corporate policies.

8. Blend Deliberate and Emergent Strategies for Adaptability.

Corporate direction evolves from an incremental adjustment to unfolding events.

The duality of strategy. Effective strategy is a blend of deliberate planning and emergent adaptation. Deliberate strategy involves clear goals, structured execution, and measurable metrics, suitable for known environments. However, in unpredictable conditions, where "we don't know what we don't know," strategy must be emergent, allowing for flexibility and learning from unexpected opportunities.

Learning from the unexpected. Honda's entry into the US motorcycle market exemplifies emergent strategy. Their initial deliberate plan to sell large motorbikes failed. However, managers recognized an accidental opportunity when their small Super Cubs became popular for recreational dirt-biking. This pivot, driven by bottom-up observation and adaptation, led to explosive growth in a market segment Honda had not foreseen.

Empowering bottom-up initiatives. Companies like Google, with its "20% time" policy, and Toyota, with its quality circles, empower employees at all levels to champion new ideas and conduct small-scale experiments. While top management provides strategic guardrails (e.g., Google's focus on advertising revenue), the cumulative effect of these decentralized decisions can fundamentally reshape the company's trajectory, requiring leaders to be humble enough to recognize and capitalize on these emergent initiatives.

9. Codify Human Insights to Scale Impact.

The spread of a new practice also requires a concerted effort to codify expert understanding into explicit knowledge, easy-to-follow instructions that others can adopt.

From tacit to explicit. While human creativity is essential for solving "mysteries," scaling these insights requires codifying tacit knowledge into explicit, easy-to-follow instructions. Rosanne Haggerty's Common Ground, after discovering the effectiveness of targeting the chronically homeless, developed the "Vulnerability Index." This simple survey instrument codified expert knowledge, allowing less experienced communities to identify and prioritize the most vulnerable individuals.

Enabling widespread adoption. The Vulnerability Index transformed homelessness intervention from an art into an applied science. It enabled:

• Standardized assessment: Eight distinct markers identified individuals at extreme risk.
• Prioritized action: Shifted from first-come, first-served to helping the most vulnerable first.
• Community mobilization: Empowered diverse local groups to conduct "registry weeks" and link individuals to housing.
  This codification allowed the "100,000 Homes Campaign" to house over 100,000 vulnerable individuals nationwide, demonstrating that what worked in New York City was transferable elsewhere.

Augmenting human capacity. This process of knowledge reengineering, whether through a simple index or advanced AI platforms, frees up human capacity from routine tasks. Recruit Holdings, for example, uses its AI lab and platforms to automate administrative burdens for small businesses, allowing them to focus on their core services. This blending of codified knowledge and human creativity is key to thriving in an age where automation displaces narrowly defined expertise, creating new, general-purpose jobs that leverage uniquely human strengths.

Last updated: November 29, 2025