Companies know that to succeed, they must innovate. Yet too often they compete head-to-head for a bigger share of existing markets. In a six-part weekly series,  W. Chan Kim and Renée Mauborgne show  how companies can identify opportunities for distinctive products or services and break free from the competitive pack 

The internet, the euro, globalisation, deregulation, the crisis in Asia, Russia and Brazil, the green movement - in this fast-changing economy, why does your company deserve to thrive? 

Because it has a lot of resources? A strong brand name? Has been in operation for 100 years? Or because it is the most efficient in its industry? None of these will be sufficient. 

Think of Compaq overtaking International Business Machines to become the world's largest personal computer maker, or Virgin Atlantic Airways successfully challenging the far larger British Airways. Xerox had a strong name in copiers, as did Hoover in vacuum cleaners. But that did not stop either Canon or Dyson becoming bestsellers in their respective industries. 

If the traditional routes to success are no longer enough, what will ensure future success? Look at the companies that are rising. Merrill Lynch may be the biggest bull on Wall Street, but the market capitalisation of Charles Schwab, the online broker, recently exceeded Merrill Lynch's. And Schwab has created more new jobs over the past decade, not to mention garnering more positive press coverage. 

The market capitalisation of Intel, the world's largest semiconductor manufacturer, exceeds that of all the companies in India combined. Compaq earned a place on the Fortune 500 just three years after its inception, and from 1991 to 1997 grew from a Dollars 3bn to a Dollars 25bn enterprise based almost entirely on internal growth. 

Between 1975 and 1995, 60 per cent of the companies on the Fortune 500 were replaced. Irrespective of their industry, what is common to the new entrants to the list is that they either created new markets or recreated existing ones. By contrast, the declining companies were competing for a bigger share of existing markets. 

What is astounding here is the rapidity with which those rising companies create and accumulate their wealth. The wealth-generating power of innovation in this knowledge economy is beyond doubt. 

Imagine a market universe that is made up of known and unknown market space. While known market space embraces all markets that exist today, unknown market space embraces those that are not yet in existence. Any market in existence today, however, once belonged to unknown market space. Today gas-fired electricity plants may be the largest market for natural gas in North America, but this market did not exist a decade ago until Enron created it. Or think of one of the fastest-growing segments in the car market today, multi-purpose vehicles. A little over a decade ago this market did not exist; nor did the market for fun fashionable watches that Swatch created, or routers, switches and other networking devices Cisco designed. The list goes on. 

Yet while wealth and excitement increasingly come from exploring unknown market space, companies have a poor understanding of how to go about it. Almost all of the work in the field of strategy is about exploiting known market space. Companies are advised to enter an industry with high growth and profit potential, and position themselves in it to outdo existing rivals. No wonder companies' strategies tend to regress towards capturing a bigger share of existing markets. 

Knowing how to position a company in known market space provides little insight into how to create new market space. There is a huge gap between what companies need to create wealth in the future and what the current body of knowledge on strategy has to offer. 

This gulf came through in our interviews with more than 500 senior managers across the globe: while more than 80 per cent saw creating new market space as a key strategic priority, an even higher percentage were at a loss as to how to systematically achieve this end. 

For the past decade, we have studied companies that have successfully created new markets and recreated existing ones. Our aim was to develop a robust analytical framework that companies can apply to break out of existing boundaries. We have identified six basic paths, applicable to all industries. 

Contrary to most companies' imaginations, none requires any special vision or foresight about the future; all come from looking at familiar data from a new perspective. 

In a drive to match their rivals, many companies share the same ideas about who their customers are and what products and services they want. The more that companies share this conventional wisdom about how they compete, the more they fight for incremental improvements in cost or quality. 

Has your company fallen into this trap of competitive improvements? Do you know how to break from the competitive pack? Is your company lagging behind in profitable growth? Do you want to go for a step change, but do not know how? 

In the next few weeks, we will show how your company can break free from competitive convergence and go for breakthrough profitable growth. 

The first path examines how Bloomberg, SAP, Canon and Philips Lighting created new market space by re-defining the buyer group of their industry.