Growth and Value Creation  161
the market for hand soap will grow faster. Similarly, if antivirus software pro-
vider McAfee convinces computer owners that they need better protection 
against hackers and viruses, total demand for antivirus software and services 
will grow faster. Direct competitors will not respond, because they benefit as 
well. The ROIC associated with the additional revenue is likely to be high, 
because the companies’ manufacturing and distribution systems can typically 
produce the additional products at little additional cost. Clearly, the benefit 
will not be as large if the company has to increase costs substantially to secure 
those sales. For example, offering bank customers insurance products requires 
the expense of an entirely new sales force, because the products are too com-
plex to add to the list of products the bankers are already selling.
Attracting new customers to a market also can create substantial value. Con-
sumer packaged-goods company Beiersdorf accelerated growth in sales of 
skin-care products by convincing men to use its Nivea products. Once again, 
competitors didn’t retaliate because they also gained from the category expan-
sion. Men’s skin-care products aren’t much different from women’s, so much 
of the research and development, manufacturing, and distribution cost could 
be shared. The major incremental cost was for marketing and advertising.
The value a company can create from increasing market share depends 
on both the market’s rate of growth and the way the company goes about 
gaining share. There are three main ways to grow market share, and these 
don’t fall next to each other in our pecking order shown in Exhibit 9.3. When 
a company gains market share in a fast-growing market, the absolute revenues of 
its competitors may still be growing strongly, too, so the competitors may not 
retaliate. However, gaining share in a mature market is more likely to provoke 
retaliation by competitors.
Gaining share from incremental innovation—for example, through incre-
mental technology improvements that neither fundamentally change a prod-
uct nor create an entirely new category and that are possible to copy—won’t 
create much value or maintain the advantage for long. From a customer’s 
viewpoint, hybrid and electric vehicles aren’t fundamentally different from 
gas or diesel vehicles, so they cannot command much of a price premium to 
offset their higher costs. The total number of vehicles sold will not increase, 
and if one company gains market share for a while, competitors will try to 
take it back, as competitors can copy each other’s innovations before the in-
novator has been able to extract much value, if any. All in all, auto companies, 
whether new or incumbent, may not create much value from hybrid or electric 
vehicles; competition will likely transfer most benefits to consumers.
Gaining share through product pricing and promotion in a mature market 
rarely creates much value, if any. Huggies and Pampers dominate the dispos-
able-diaper market and are financially strong, and each can easily respond 
if the other tries to gain share. Therefore, any growth arising from, say, an 
intense campaign to reduce prices that hits directly at the other competitor 
will provoke a response. And as Amazon continued expanding into the U.S.