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Innovation – Leader or Follower?

Tue, 08/13/2013 - 10:10 -- KevinMcFarthing

 

A question often asked when considering the fit of innovation within corporate strategy is whether you want to be a leader or a follower.  Some examples are fairly clear.  Most research-driven pharmaceutical companies want to launch the first medicine in its class and to maintain leadership with ongoing clinical support.  At the other end of the spectrum it would be highly unusual for a retailer to introduce the first entrant to a new category as a private label. 

In between there seems to be a whole mass of grey, it isn’t simple.  The result isn’t always what you may expect.  For example, Apple did not launch the first tablet and yet have been enormously successful with the iPad.  I’m sure you can think of many other examples where the first entrant to a novel market was not the eventual winner.  It’s a reminder of the old saying, “the second mouse gets the cheese.” 













It’s easy to see why some companies may be confused and cautious.  It may be safer to let a competitor do the hard work and deep investment of establishing a new category, then launch your offering with the objective of surpassing the established performance standards.  Why spend your money educating users so that your competitors can step in and just invest on communicating their product?

The phrase “fast follower” is often used, to suggest a scenario where the perfect riposte can ambush a competitor entry very quickly.  This is fine in theory, but is a potentially dangerous position to take.  It’s rare to have the full picture of what will be launched, when and by whom.  It’s only when the competitor’s product actually appears that you know.  The response that’s ready and waiting in the wings may just be appropriate – or it may not, in which case you may need to loop round another development cycle.  In many ways, trying to be a fast follower could be a more risky strategy than aiming to lead.  It may be better termed a “slightly faster follower than we would have been if we’d done nothing” strategy.

Innovation strategy is of course important in deciding the allocation of resources to different categories or areas of business.  “Leader” segments should take priority over “followers”.  The risk of the follower approach means it will always be second best, both internally and externally, and find it a struggle to avoid long-term decline and death. 

Trying to be a fast follower needs to take account of the number of competitors.  In some retail categories if you’re not in the top two you will find it difficult even to be on the supermarket shelf.  It also needs to consider the Intellectual Property (IP) landscape; without IP or freedom to operate even a fast follower option may not be possible.

The full stories of followers beating first entrants only become apparent with time.  We don’t have the advantage of the mythical Retrospectoscope to look backwards into the future.  So what does a fast-following company do when they find themselves with the opportunity to launch something new?  Wait for somebody else to go first?  After all they could spend the time fruitfully refining the product, albeit in the absence of benchmarks.  Should they launch?

To succeed as a follower, you must offer something different, for example delivering the same benefits as the benchmark but at a significantly lower price.  This is essentially the strategy followed by private label; there is nothing wrong with this, except the number of players able to follow this route is very limited.

Of course there are so many parameters that are specific to the individual industry, company, product or service.  But I believe there are some points to highlight when deciding whether to pursue a leader or follower strategy.  First, the decision whether or not to launch is made at a fixed point in time with a limited amount of information.  You don’t have the benefit of a case study.  Second, in the case of breakthrough or disruptive innovation, each opportunity should be considered on its merits rather than applying a “one size fits all” strategy.  The potential size – or indeed penalty – of disruption justifies a separate assessment of the right way to proceed.  Finally, the longer your development cycle, the more risky it is to pursue a follower strategy.

That’s why my bias is to set the default mode to launching innovations as soon as you can.  Don’t try to make it perfect – “perfect is the enemy of good” (Voltaire) – but focus on aggressively seeking to capture as many customers and as much market share as soon as you can afford; and support the new platform with incremental improvements.  Of course the best offering ultimately succeeds, but whoever starts the race ahead of the rest has more chance of being the winner.

 

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