Most rivalries are hard-fought, drawn-out battles. But there are exceptions — blitzkriegs in which market shares trade hands with spectacular speed and redoubtable industry leaders are worsted by underdog rivals almost overnight. Think of Tesla in the car industry and boutique banks in investment banking.

What causes this David and Goliath phenomenon? Are the Goliaths stupid, or prone to be caught napping? Of course not. It was their very excellence that left them open to successful competitive attack. This mastery — and the skill and asset commitments necessary to achieve it — makes leaders vulnerable to attack from rivals shrewd enough to aim at a chink in Goliath’s armor.

Usually, established leaders — focused on maintaining internal consistency and maximizing economies of scale and scope — have used the same overall business approach to serve client segments with divergent product requirements. However, when the client segment-to-segment differences are sufficiently great, this strategy is dangerous. It invites rivals to move in with differentiated approaches tailored to the needs of particular segments — hence the rise of boutique banks in M&A.

With less costly business models, more time for clients due to less red tape, and by tailoring their service to the needs of their target client segments with a razor-sharp focus on M&A, boutique investment banks have grabbed a sizable share of the market. Meanwhile, the business model commitments of leaders are so interlocked that it takes them years to marshal their forces when challenged by new competition. Apart from the fossilization of their erstwhile winning business approach, fundamental changes in regulation undermine those winning formulas, too. Vested interests and other roadblocks to change take shape.

So, how can established players navigate this situation? Sticking to the status quo risks suffering the same fate as Goliath. The secret is to seed new forests while harvesting the old — a strategy Morgan Stanley implemented effectively and timely (Blackrock is pursuing a similar strategy of entering the private lending market, exemplified by its recent acquisition of HPS, part of Blackrock’s near $30 billion private markets M&A spree in 2024). This intricate process takes foresight and courage. Goldman Sachs’ foray into consumer banking serves as a cautionary tale — courage without foresight.

In real life, Goliath can win, but letting no assumption go unchallenged is crucial. Key success factors are [1] courage (the willingness to embrace new opportunities), [2] foresight (where in-depth analytics meets world-class intuition), [3] synergy (regarding established capabilities and reputations), [4] enough time (transformation takes time), and [5] comprehensive analyses (it is essential to step back and take a long and analytical look at the forces that drive future client needs, priorities, and expectations).