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Innovator Innovates and the Imitator reaps all the Rewards

"If there are innovators who lose, there must be followers / imitators who win" [David Teece]

Imagine the situation, a brand new startup or well established firm brings an innovation to an ‘attractive market’ and has the first-mover advantage over many other competitors following closely behind. Despite this, it receives limited success with very little customer traction. Subsequently, one of the competitors following behind (or imitators) is able to build an almost identical innovation but manages to gain mass customer adoption in the market and commercialise this success.

Just a few examples include first-gen search engines such as vLib and Excite whom most have probably never heard of, but paved the way for modern day search engines such as Yahoo, Alta Vista (and more recently) Google etc. Other examples are RC Cola whom invented Diet Cola back in the 1950's and were then immediately upended by both Coca Cola and Pepsi whom introduced a Diet variation of Cola into their product lines, overshadowing RC Cola. Or think of the classic example of Facebook, who were relatively speaking; a very late entrant to the Social Networking market with players like MySpace, Hi5 and to a certain extent, Friends Reunited already operating successfully in this market

This is also one of the reasons there has been a rapid increase in patenting and 'patent wars' between Apple and Samsung for example. One firm will invest large amounts into R&D to develop a feature or product, which if not patented, can be replicated by their rival at a fraction of the cost.

No doubt, there are a number of varying factors, but here are a few factors behind an innovator leaving themselves exposed to failure whilst imitators reap the rewards:-

1. Everyone in Business School will come across the importance of First Mover Advantage at some point. But I think that needs to be refined to the more recent saying of “It’s not having the first mover advantage but rather being the first to scale”. Ultimately, companies should measure success according to scalability rather than being the first to market.

2. Never get too comfortable and continue innovating. Theres an argument against MySpace et al, that they stopped listening to customers and instead started making assumptions about what would provide value to customers. This was clearly misinformed and allowed Facebook to listen to and build something more customer-centric starting from university students and beyond.

3. Ensure the company is adept at all parts of the Value Chain to bring the product / service from production to the customer. In the case of RC Cola who did the hard work of market validation. Pepsi and Coca Cola were able to use their already strong value chains (distribution, brand etc) to get their products to market and scale with relative ease and speed.

4. This is rather stating the obvious (so its the last point) but obtaining any patents, copyrights or preserving the knowledge around a particular product or service. This is the first line of defence against imitators

In these times, the question should also be asked, are imitators / late entrants really that bad? I would say, for Innovation and customers; no, for competitors; of course!



Comments: (4)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 November, 2015, 13:25Be the first to give this comment the thumbs up 0 likes

Nice post. "Crossing the chasm" is indeed a critical success factor. That said The ability to "cross the chasm" from the early adopter to the mainstream stage of market is indeed a critical success factor. That said, the path from early adopter to mainstream stages of the market is not so straightforward: While it's necessary to listen to customers, the gurus also say that the vendor must develop a p.o.v and have the ability to rally the market around it and that it must say NO more often than YES, and so forth. IMO, key is the ability to strike the right tradeoff between seemingly contradictory approaches. And, of course, timing and a lot of luck!

A Finextra member
A Finextra member 10 November, 2015, 08:53Be the first to give this comment the thumbs up 0 likes

Thanks for your thoughts Ketharman. Agreed, 'crossing the chasm' is essential and is what I am referring to in my blog. There are a number of theories e.g. bell shaped market adoption curve or the S curve. Ultimately they make the same point about the 'chasm'

Would be interested to get your thoughts about saying 'no' more often than 'yes'. Intrigued by what do you mean by that?

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 10 November, 2015, 10:44Be the first to give this comment the thumbs up 0 likes

Steve Jobs, Warren Buffett, Google Product Manager - and many gurus have said that a company cannot scale if it keeps building all (or even most) features requested by all (or many) customers. Thence the famous Steve Jobs quote, “it's not about saying yes to everything. It’s about saying no to all but the most crucial features.” This advice seems to contradict the advice to listen to customers and build features requested by them. Ergo I believe that successfully walking the tightrope between contradictory approaches is a greater driver of scaling up rather than just following one approach over the other. 

A Finextra member
A Finextra member 10 November, 2015, 14:08Be the first to give this comment the thumbs up 0 likes

Thanks, yes thats an interesting one. It really is a balancing act but I suppose also depends on what the product or service is e.g. iPad customisation vs service customisation and also the target market e.g. less customisation with B2C than B2B for example

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This post is from a series of posts in the group:

Innovation in Financial Services

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