This question is on the mind of many companies in China today who wish to make sure they join in whatever the next major growth industry will be in China. Currently, for example, many companies in a variety of industries are thinking about entering the auto industry, or already have done so.

My thinking about entering new industries is that it doesn't matter so much which industry you go into. What matters is what you do, in that industry, once you are there. (But don't enter the typewriter industry in 1980, because in an industry that will disappear 100% there is nothing you can do.)

Some of the most successful companies in the world (Dell, Southwest Airlines, Walmart) started out in industries that were commoditized (PCs), or chronic money losers (airlines), or outrageously competitive (discount retailing), or dominated by well-established, big companies with strong brand names (all of the above).

Economic analysis predicts that companies will find it difficult to make money in industries suffering from unfavorable conditions (for example, industries that are easy to enter, or where customers or suppliers are very powerful, etc.) From a marketing perspective, however, we are not so interested in industries. Companies, looking at it from a marketing perspective, do not compete in industries. Companies compete in segments. Mercedes Benz and Volkswagen both operate in the auto industry. But a 20% price cut by Volkswagen will hardly affect demand for Mercedes Benz. People thinking of buying Mercedes Benz may also look at BMW, but not at Volkswagen.

So when a company wishes to know if a particular industry should be entered, my question is: What will you do in that industry? Such an answer of course raises another question: What do you think we should do? The answer is quite simple: Create a new segment.

Dell created a new segment. He sold direct and he came to your house to fix your computer if you needed service. The other companies in the industry used stores to sell computers and you had to go back to the store to get service (and wait one or two weeks, or in the case of Toshiba laptops in the United States, even six weeks, to get your computer back). Dell created a new segment, people willing to risk buying a computer without seeing it, because they did not wish to be without a computer for maybe several weeks. As it turned out this was a very big segment.

Walmart, aside from its important innovations in the logistics of large scale retailing, also found success by creating a new segment: good products sold at discount prices to the middle class. The existing discount stores, such as industry leader K-Mart, sold cheap products at discount prices to the lower class. K-Mart became synonymous with low class/low quality. To put someone down you might say: "She has K-Mart taste" or "Nice house, but filled with K-Mart furniture."

Southwest Airlines was perhaps the most radical new-segment creator of all: They are less an airline than a bus company. Like a bus company, they do not use tickets and boarding cards or seat assignments. You want a window seat? Hurry up and you might get one. You want to eat on the plane? Bring your own food. Travel agents want ten percent of the ticket price? Southwest Airlines gives them nothing.

Can you create a new segment in China in the new industry of your choice? There are plenty of opportunities left. But you have to make a conscious effort not to jump in the same direction everyone else is jumping. You must instead jump in a direction no one else has seen yet. This does not come natural to human beings. In one case I teach I ask managers in my class to come up with new product ideas for the company in the case. Invariably, many managers recommend that the company adopts the recently most successful new product idea in the industry.

While it is not wrong to become a successful number two, I think in China you can be assured that there are always far too many companies wishing to be that successful number two, jointly destroying the profitability of the opportunity. Once one company makes money, everyone wishes to join the party. In China's especially competitive environment you have to try to avoid the crowd. You must not climb someone else's mountain; you must build your own mountain.

When Safeguard said: "We are antibacterial," Jahwah said: "Liushen is special refreshing for the summer." When Centrum and its many competitors said: "We have all the minerals and vitamins you need," Huang Jing Da Dang said: "We don't have the minerals and vitamins Chinese people don't need." When snack food companies said: "We have beautiful modern plastic package," Qia Qia said: "We have old-fashioned brown paper bag."

The secret of success in a new industry is simple: You don't have to be better, richer, stronger, or smarter than the current players, but you do have to be different. Further, it may be better to be new and different in an industry where other companies are weak and tired and suffering. The best industry to enter might be one that looks terrible, but where you have an idea of what you will do different. Then you too can be a Dell, a Walmart, or a Southwest Airlines.