Where is Your White Space?

by Mark Johnson

"We see local as the big white space."

That's America Online (AOL) CEO Tim Armstrong recently explaining to a group of investors how AOL's "digitizing towns" initiative (to offer one-stop website-management services to municipalities all across the U.S.) would position the company to compete against the likes of Google, Yelp, and CitySearch as the company looks for a clear path away from the disappearing dial-up subscription market.

In this context, white space basically means "a place where a company might have room to maneuver in a crowded playing field."

As a metaphor, white space is at once ubiquitous and frustratingly ambiguous. There may be as many definitions circulating as there are business thinkers. Some people define it as a place where there's no competition. Others as an entirely new market. Still others use it, as Tim Armstrong has, to refer to gaps in existing markets or product lines.

For all its ambiguity, though, white space is undoubtedly a metaphor about opportunity; different thinkers define it differently because they take varying approaches to capturing opportunity. In that spirit, let me offer up another way to look at white space — a very specific meaning I think would be particularly useful to Tim Armstrong and to any other top executive engaged in strategy formulation.

Rather than think of white space as external — as some indistinct but desirable land outside your company's walls — I suggest that it's more productive to view it as an internal signpost — as a way to map your company's ability to address new opportunities or threats. So by white space, I mean "market opportunities your company may wish — or need — to pursue that it cannot address unless it develops a new business model."

These might be opportunities to bring your own innovations to market — Apple's iPod is a great example and so were the mouse and laser printer (albeit ones their inventor, Xerox, failed to develop). Alternatively, they might be imperatives to address a competitive threat or a radically altered market landscape — like the one AOL faces as it watches its dial-up subscription market melt away or the one I suspect many, many companies will face this spring as they contemplate a world devoid of credit-induced demand.

Defining white space in this way is important to strategy formation for three reasons.

First, many companies have drawn too broad a conclusion from failed efforts to enter their white space — not that those opportunities couldn't be captured without changing their business model, but that those opportunities could never be captured at all. As a result, they've retreated to their core operations and adjacencies — and unnecessarily limited their options to only those strategic moves that they can execute with their current models. Too many companies act like Xerox in this situation and not like Apple.

Second, if viewed in this way it becomes clear that one company's white space may be another company's core competence. This may well be so for AOL as it tries to switch from a profit formula based on subscriptions to one funded through advertising, something very far from its core but very familiar to its born-on-the-Web competitors (though perhaps the fact that Armstrong is a former Google executive will carry the day).

But ultimately what this definition allows you to do is map a new opportunity or impending threat against your company's current ability to meet it, rather than assuming that the odds of success depend mainly on how near or far it is from other competitors. If white space really were just a place where no competitors lurked, companies would have little trouble bringing their most innovative ideas to market, since they'd be, practically by definition, the ones least subject to competition. But we all know how often that turns out to be true.

Mark W. Johnson is chairman of Innosight, a strategic innovation consulting and investing company with offices in Massachusetts, Singapore, and India, which he co-founded with Harvard Business School professor Clayton M. Christensen. Mark's book is Seizing the White Space: Business Model Innovation for Growth and Renewal.