# Counter-Positioning ## The Idea in Brief A newcomer adopts a business model that incumbents can't copy without damaging their existing business. The power comes not from being better, but from making imitation irrational. The incumbent sees the threat, understands the model, but still can't respond—because responding would cannibalise what's already working. --- ## Key Concepts ### The Rational Non-Response Counter-positioning works because the incumbent's inaction is rational, not stupid. They run the numbers: copying the new model would destroy more value in the existing business than it would capture in the new one. So they don't copy. They watch. They wait. They lose. **Vanguard vs active managers.** Index funds offered lower fees and better average returns. Active managers understood this. But switching meant giving up the fee income that funded their entire operation. Rational to stay put. Fatal over time. ### Opposite Strategies, Both Rational The test of a real strategy: the opposite is also a rational choice. Counter-positioning often appears as mirror images—two companies in the same industry, with opposite approaches, both succeeding. **Heico vs TransDigm.** Both make aerospace aftermarket parts. TransDigm prices aggressively on sole-source components, capturing maximum value through pricing power. Heico prices 30-50% below OEM, competing on value and building customer loyalty. Opposite strategies. Both compound at 20%+ annually for decades. Neither could adopt the other's model without destroying what makes them work. **Vitec vs PE rollups.** Vitec pays 10x+ EBIT for vertical software companies, invests in modernisation, and holds forever. PE rollups pay 4-6x, extract costs, and flip in 3-5 years. Vitec can't extract like PE (it would destroy the culture founders join for). PE can't hold forever (their fund structure demands exits). Both models work. Neither can imitate the other. ### The Collateral Damage Test To identify counter-positioning, ask: if the incumbent copied this, what would they have to give up? If the answer is "something valuable," you have counter-positioning. If the answer is "nothing much," you just have a better mousetrap—which they'll copy soon enough. **What incumbents would lose:** - Revenue from existing products (cannibalisation) - Margins from existing pricing (commoditisation) - Relationships with existing channels (disintermediation) - Capabilities they've invested in (stranded assets) --- ## Implications **In M&A:** Acquirers who build a distinctive model—whether Danaher's operational transformation or Constellation's radical autonomy—create counter-positioning against each other. Danaher can't be hands-off (DBS is their edge). Constellation can't integrate (autonomy is their edge). This lets both win deals that fit their model. **In strategy:** If your strategy doesn't have a rational opposite, it's not a strategy. "We focus on quality" isn't counter-positioning—no one chooses to be bad. "We price 30% below and accept lower margins" might be—if competitors would destroy their positioning by matching. **In competition:** Watch for incumbents who understand your model but don't respond. That's not ignorance—it's counter-positioning working. Press the advantage while they're paralysed. --- ## Sources - [[7 Powers]] — Counter-Positioning is one of Helmer's seven powers; the barrier is the incumbent's rational choice not to imitate - [[Playing to Win]] — Strategy as integrated choices; counter-positioning emerges when your choices are coherent and your competitor's imitation would break their coherence --- ## See in Notes - [The Heico Playbook](https://www.anishpatel.co/the-heico-playbook/) — Value-based positioning as counter-position to TransDigm's pricing power - [The TransDigm Equation](https://www.anishpatel.co/the-transdigm-equation/) — Sole-source pricing power as counter-position to collaborative models - [The Vitec Approach](https://www.anishpatel.co/the-vitec-approach/) — Kaizen modernisation and growth focus as counter-position to PE extraction - [Vertical Market Playbook](https://www.anishpatel.co/vertical-market-playbook/) — Strategic framework for vertical software - [Context Beats Category](https://www.anishpatel.co/context-beats-category/) — Categories are given; context is chosen - [Depth Before Breadth](https://www.anishpatel.co/depth-before-breadth/) — Win a corner before expanding