My brother Derek was in Denver for a wedding this past weekend with his girlfriend and snapped this photo on one of their trail runs of a warning sign admonishing hikers what to do should they encounter mountain lions - "If Attacked, Fight Back".

This reminded me of the idea laid out in Clay Christensen's missive on Signals of Change when targeting overshot consumers - that is:

"Although they don't create new-growth markets, innovators in overshot market tiers can create new-growth companies by using low-end disruptive innovations to establish a beachhead among the incumbent's least demanding customers. These customers are the most overshot. They are likely using the incumbent's product or service because it is the only available alternative. But they are unsatisfied. They are paying for functionality and features that just aren't important to them. They are most likely to desert the incumbent for a company offering lower prices or more convenience."

The most ironic part of this of course is something we humans tend to do when confronted with mountain lions - we tend to flee. Counterintuitively it would seem, our best bet is to turn and fight.

Similarly as with our human instincts in business, incumbents flee up-market toward their most profitable customers rather than fight for the loyalty of their least profitable ones. Like mountain lions, low-end innovators will chase incumbents all the way to the top of the demand curve and right off the edge of the cliff where there is insufficient market demand to sustain the cost structure of the business. Think GM buying Hummer or Ford buying Jaguar. Both exemplify the instinct to move toward more profitable markets whether or not sufficient demand exists to sustain them. So what should incumbents do instead?

If Attacked, Fight Back

If you're sure you're facing a low-end innovator, don't give an inch and instead fight back, lest they hide behind the "shield of motivation" and sharpen their "sword of skills" (in disruptive innovation nomenclature) enabling them to chase you up-market. Then again, you must make sure you're holding the right territory. You also must be certain you're up against the right foe. Just like you might fight back against a mountain lion, that might be a counterproductive approach if the innovator turns out to be a grizzly bear instead.

The Economist had a few Christensensian thoughts on the subject on the occasion of that poster child of market incumbency, Microsoft, having simultaneously lost two of its most successful franchises - Bill Gates and Windows XP:

Inevitability and temperament are two hallmarks of Gates the innovator. The third is the transience of all pioneers. The argument was brilliantly laid out by Clayton Christensen, of Harvard Business School. The perfecting of a technology by a well managed company catering to its best customers leaves it vulnerable to “disruption” by a cheaper, scrappier alternative that is good enough for everyone else. That could be a description of Microsoft’s Office, which now does more than almost anybody could wish for—even as Google and others are offering free basic word-processors and spreadsheets online.

Mr Gates was haunted by Mr Christensen’s insight—he even asked for his help to keep back the tide. Microsoft successfully extended Windows as an operating system for servers; it has moved into new areas, such as mobile devices and video games; and it has lavished billions of dollars on all sorts of research—without much to show for it. Despite all those efforts, the PC, Mr Gates’s obsession, has ended up as an internet terminal. The company still has everything to prove online (see article). Watching Microsoft in the company of Google and Facebook is a bit like watching your dad trying to be cool.

Likewise, the OS that Gates championed has fled upmarket and overshot too much of the market with Vista after XP proved to be too good a competitor for Microsoft's own good. At the same time they tried to perfect the OS, they overshot that last bastion of their market's sweet spot and now much fight their way back down-market to survive. An insightful blog post from Paul McDougall on InformationWeek.com breaks it down for us:

Microsoft will mark the end of an era this weekend as Bill Gates and Windows XP -- two icons of the company at its zenith -- head for the sunset. Can Redmond survive this transitional moment, or will June 30 be the day Microsoft died?

That Gates and XP are exiting simultaneously is fitting. Both are poster children for a style of computing that is fading, literally, into the clouds. Both also represent a late '90s to mid-oughts Camelot period that Microsoft may never recapture.

In his various roles at Microsoft -- as CEO, chief software architect, and, lastly, chairman -- Gates championed a PC-centric view of computing in which the desktop was king and the operating system was the brains of the whole operation.

And under Gates, Microsoft utterly dominated personal computing with its DOS and Windows systems.

Windows XP was the best of the bunch.

Reliable, relatively secure, and easy to use, XP may go down in history as the last, best OS for the client-server world. XP does everything an OS needs to do to facilitate traditional, networked computing. Indeed, its utilitarian excellence left Microsoft with nowhere to go.

As a result, the failure of the widely maligned Vista OS was almost preordained. All of Vista’s bells and whistles -- like the silly, Flip 3D interface -- are merely subtraction by addition to a Windows environment that didn't need any more tinkering.

As long as client-server was the dominant computing model, that is.

But its days are numbered. Moving forward, computing will be all about the Web as a platform for tapping applications and services. It's a scenario that's been dubbed cloud computing.

Fat OS's, like Vista, and even XP, are overkill when it comes to the cloud. Cloud computing is all about fat pipes and distributed processing power. Thin operating systems that quietly, and modestly, direct traffic while running in the background will be all that's required locally.

In cloud computing, operating systems will be judged like NBA refs. The best ones are the ones you forget are there.

That's why it's appropriate that Windows XP and Bill Gates are retiring at the same time. They embodied Microsoft at its peak -- when client-server computing ruled the earth. But that's so five years ago.

Now, Microsoft needs to move forward with new leadership and new technology that can move it into the clouds if it's to compete with Google and whatever else crawls out of Silicon Valley in the years ahead.

The problem: It doesn't look like Microsoft is heading skyward any time soon.

Steve Ballmer, the current CEO, says he plans to remain at the helm for another decade. Ballmer, like Gates, cut his teeth in the desktop world, so he may not be the man to lead Microsoft's Web efforts.

And early glimpses of Windows 7, the successor to Vista, indicate that it will be as big and bulky as Vista itself.

That’s not good.

If Microsoft waits 10 years, or 5 or even 3, to embrace the cloud, the computing industry will have passed it by. If that happens, tech historians will peg June 30, when Bill Gates and Windows XP exited stage left, as the day Microsoft died.

I've always been a big believer in the impact of worldview - incumbents like Microsoft fundamentally see the world differently than its cloud competitors... largely because Microsoft was TOO successful at defending its core markets for desktop software.

And that, my friends, is why it's so critical for Microsoft, like other incumbent hegemonic competitors before it, must fight back down the demand curve if it hopes to survive. Unfortunately for shareholders, it's unlikely that the incumbent worldview Microsoft holds today will be a match for the challenges it faces going forward.

Finally, that's what the failed Yahoo! bid was all about - an earnest attempt at changing their worldview and fighting down-market for survival while retaining incumbency in their core business. A very tough proposition for even the best strategic decision maker.