The momentum paradox: Why challengers win and market leaders fail

Introduction

Why do so many market leaders fall from grace? Studies show that over half of Fortune 500 companies will be replaced in the next decade. The reason isn’t competition—it’s a loss of momentum. Category leadership isn’t a permanent state—it’s a battle to stay ahead.

Challenger brands, on the other hand, can reshape industries by capturing belief, not just market share. They understand that leadership is not about protecting the past but shaping the future. This article explores why brand momentum is the real measure of category leadership and how companies can sustain it.

The myth of category leadership: Why today’s giants fall tomorrow

For decades, companies have believed that achieving market leadership is the ultimate goal—a symbol of dominance and stability. However, history shows us that many category giants often fail to retain their dominant position. The reason? They focus too much on preserving their existing position rather than evolving to meet the future.

Take the cases of Nokia, Blockbuster, and Yahoo. These companies were once the undisputed leaders in their industries, yet they failed to maintain their edge. Nokia had the technology but was slow to pivot to smartphones. Blockbuster controlled video rentals but didn’t anticipate the rise of streaming. Yahoo dominated early internet search but lost to Google’s relentless innovation. These companies weren’t just large—they were cultural icons. But size and history didn’t protect them when momentum shifted.

A few more examples reinforce the same lesson:

• Blackberry: Dominated the smartphone market but failed to recognize the demand for touchscreen devices.
• Toys “R” Us: Relied on its retail dominance but failed to adapt to e-commerce, allowing Amazon and Walmart to take over the toy category.
• Kodak: Invented the digital camera but was too invested in film to lead the digital revolution.

A personal lesson from Kodak’s fall

In 2003, my firm, ID Branding, was hired by Kodak to help guide its brand transition from analog to digital. The company had recognized that the world was moving toward digital, and they started their transition within Kodak’s Health Group, migrating from traditional film to digital imaging and practice management software solutions. On paper, Kodak had the brand, the resources, and the technology to remain an industry leader in this new era.

Over the course of a year, we conducted extensive research, developed new branding, and created a go-to-market strategy designed to reposition Kodak as a digital leader. But despite all our efforts, we failed to make an impact. The reason was simple: Kodak did not believe in itself as a digital competitor.

Even though Kodak was one of the most beloved brands at the time, it struggled with internal doubt—it couldn’t adopt a challenger mindset after so many years as a category leader. Leadership was hesitant, implementation was slow, and ultimately, Kodak did not fully commit to executing its strategy in the marketplace. While it was transitioning technologically, it never fully transitioned culturally to become a true digital-first company.

In hindsight, Kodak needed a cultural shift—not just a strategic one. If leadership had embraced a true challenger mindset, it could have redefined the category rather than being defined by it.

Takeaway: The real risk isn’t competition—it’s losing relevance.

The science of brand momentum: The shift from awareness to belief

Many companies operate under the assumption that brand awareness is the key to success. But in today’s landscape, awareness alone is not enough—brand belief is what truly drives momentum.

Industry analysts, such as Gartner’s Magic Quadrant and Forrester’s Wave, often define categories and leaders based on market share and perceived innovation. This is how analysts perceive the company based on an analysis of a combination of market structure, competitive positioning, and performance metrics. While this is helpful, it does not take into account the most important factor: what do buyers value and who do they believe will lead the category in the future? Analyst reports may define the current state of a category, but momentum is ultimately shaped by market perception and customer belief.

Discovering brand momentum: Insights from the Liquid x Avasta Challenger Index

Our understanding of brand momentum emerged from our research conducted for the Liquid x Avasta Challenger Index. In 2023, Liquid, a brand consulting and activation company, collaborated with Avasta, the profitable growth company, to undertake a comprehensive study analyzing incumbent and challenger brands across various B2B categories. Using a “wisdom of the crowds” methodology, we gathered insights from over 5,000 participants, refining the data to 120 validated buyers and power users per category. 

One of the most surprising findings was that some brands with high brand recognition lacked brand momentum because buyers didn’t see them as category leaders.

Through this process, we sought to understand not just which brands were recognized in a category, but which brands buyers believed had the potential to lead in the future. We asked respondents to evaluate brands on key factors like brand perception, product innovation, service quality, and customer experience. But the most revealing insight came when we looked at how buyers predicted a brand’s trajectory—where it had been, where it was headed, and whether they saw it as a future leader.

From this, we formulated the brand momentum score, a metric that captures a brand’s potential growth based on its perceived value and likelihood of future adoption. We learned that momentum is not just a reflection of past success—it is an indicator of future category leadership. High brand momentum signals strong belief in a company’s ability to innovate, adapt, and grow, while low momentum suggests skepticism about its future.

The belief curve: How customers define category leaders

Every brand follows a journey from awareness to belief:


Awareness – People know the brand exists but don’t necessarily engage with it.

Familiarity – People might know something about the brand, but don’t yet consider purchasing from it.

Consideration – The brand is viewed as a viable option but may lack a compelling reason for customers to switch or commit.

Trust – Customers begin to see the brand as credible, consistent, and worth investing in.

Belief – The brand is now perceived as the inevitable leader of the category, shaping its future.

Brands that reach the Belief stage create brand momentum, while those stuck in Awareness or Consideration struggle to gain traction.

This is why buyers are often drawn to challengers. Challenger brands represent the future, create urgency, and challenge the status quo. They are seen as bold, innovative, and more aligned with emerging customer needs. While incumbents are focused on defending their past success, challengers are actively shaping the industry’s direction.

Takeaway: Brands that move people—emotionally and strategically—build momentum.

Category leadership: A battle for belief, not just market share

Owning a category is not just about having the highest revenue or the largest market share; it’s about owning the future narrative of an industry. True category leaders are not just reacting to market changes—they are shaping them. History has shown that market leadership is never permanent. Companies that fail to continuously reinvent themselves risk being overtaken by challengers who embrace change and drive new industry standards.

The evolution of category leadership

Just as civilizations build on the ruins of the past, category leaders must build on their past success without being shackled by it. Many of the most dominant brands—Kodak, Blockbuster, Sears—failed not because they lacked market share, but because they were unable to stay relevant in the eyes of future customers. They became too focused on protecting their existing position rather than adapting to market shifts and leading the next era of their industry.

The concept of creative destruction, introduced by economist Joseph Schumpeter in his 1942 book Capitalism, Socialism, and Democracy, helps explain this cycle. In every industry, a new wave of innovation disrupts the status quo, forcing companies to either adapt or fade into irrelevance. Market dominance alone does not guarantee survival. Leaders who refuse to embrace change are merely holding onto a temporary advantage—one that will inevitably be eroded by brands with stronger momentum. The Challenger Index reinforces this reality—brand momentum is the true measure of future leadership.

The three forces of brand momentum

To achieve sustained momentum, brands need to master three key forces:

Relevance – A company must continuously adapt to evolving market dynamics and customer expectations. Brands that fail to stay relevant lose their ability to inspire belief in their future leadership.

Differentiation – The strongest category leaders don’t just stand apart; they redefine industry expectations and challenge conventional wisdom.

Execution – A great strategy means nothing without action. True leaders translate vision into action, ensuring that their innovation and positioning are visible and tangible to customers.

Takeaway: Category leadership is about shaping the future—brands that fail to evolve and inspire belief will be overtaken.

How to build and sustain category leadership

Achieving category leadership is not a one-time victory—it requires ongoing effort to maintain relevance, drive differentiation, and reinforce belief in your brand’s future. Market leaders that fail to evolve risk being overtaken by challengers who are more attuned to customer expectations. To stay ahead, companies must take proactive steps to shape the future of their category, rather than merely reacting to change.

Complacency is the death of market leadership. Here’s how brands can stay ahead before challengers force their hand:

Challenge yourself before a challenger does it for you. Market leaders who wait for disruption risk becoming irrelevant. Brands that proactively reinvent themselves maintain momentum before challengers force their hand. Netflix saw where the market was headed—not just away from DVDs, but toward an all-digital, original-content future.


Define your category and own its future direction. True category leaders don’t just compete in an industry—they define it. They shape market expectations and set the standard for what customers will expect next.


Align brand, customer, and employee experiences behind a single belief. Brands that sustain brand momentum create a unified experience across all touchpoints. Employee culture plays a critical role in reinforcing brand leadership—companies like Southwest Airlines, Trader Joe’s, and Dutch Bros have built powerful customer relationships by ensuring their internal culture matches their brand promise.


Create movements, not just messages—drive advocacy. Customers don’t just buy from strong brands—they believe in them. Companies that inspire advocacy through emotional and cultural relevance drive long-term relationships.


Build continuous differentiation—momentum is a long game. Category leaders stay ahead by maintaining relevance in four key areas:

Functional relevance – Offering the right products that align with evolving customer needs.

Experiential relevance – Delivering seamless, frictionless interactions.

Emotional relevance – Building trust and deep emotional connections with customers.

Cultural relevance – Fostering a sense of belonging and shared values with the audience.


Activate your brand fully in the market. Poorly executed rebrands can stall momentum, especially in B2B. Changing your branding isn’t enough—you must ensure that customers and employees recognize, understand, and embrace the transformation.


Takeaway: Category leadership is about staying relevant—brands that excel in functional, experiential, emotional, and cultural relevance maintain momentum, while those that don’t risk being overtaken by challengers.

The challenger’s edge: Lessons from fast-moving brands

The brands that have successfully reshaped their industries didn’t do so by accident. They leveraged data, emotion, and belief to create sustained brand momentum. However, not every challenger wins—many gain traction but never overtake the leader.

The airport test: Real-world signals vs. market hype

Market hype often suggests that challengers are poised to dethrone category leaders, but real-world signals tell a different story. Observing consumer behavior in everyday life—what shoes people wear at airports, what coffee they carry, or which headphones they use—often paints a clearer picture of brand dominance than media narratives. For instance, while headlines might suggest Nike is losing ground to On and Hoka, a walk through any major airport still shows the iconic swoosh everywhere.

Challengers don’t always dethrone the leader

Challenger brands can carve out strong niches but may never fully replace category incumbents. Brands like Skechers and New Balance have strong sales, but they don’t challenge the market narrative the way Hoka or On do. Challenging a leader requires more than revenue—it requires momentum, belief, and relevance.

The license to play: Emphasizing impact

Not every brand that aspires to be a challenger earns the market’s permission to lead. The Challenger Index reveals that true challengers are not just the ones making noise—they are the ones customers believe will shape the future of the category. Without this ‘license to play,’ a brand may grow, but it will never own the category conversation—or the future.

Takeaway: True challengers don’t just disrupt—they earn belief and redefine what it means to lead a category.

Final thoughts

Brand momentum is the real measure of category leadership.

Market leaders who fail to evolve will be disrupted. Challengers who capture belief will define the future. The biggest risk isn’t losing to a competitor—it’s losing relevance. In a fast-moving world, standing still is not an option.

Whether you’re an industry leader or a challenger, brand momentum is the key to owning your category.

The question isn’t whether you’re leading today—it’s whether you’ll still be leading tomorrow. Is your brand actively shaping its category, or is it waiting to be disrupted?

Resources

Liquid x Avasta Challenger Index
Brand Momentum Playbook
Webinar replay | Owning Your Category: Challenging Leaders & Defending Your Position