Pioneers & Conquerors
How to do battle over Radical Innovation…
First to market is most important?
It has long been claimed that being first to market is everything and that the “first mover” advantage is key… well it turns out that’s not always the case.
Having commercialised the first car did not help the Duryea Motor Wagon Company of 1893. Ford was what we would call a “Fast Follower”, someone who enters a radical innovation opportunity having studied what went before it, seen what could be improved and brings it to the mass market, defining the dominant design as they do it. Facebook, Google, Microsoft and Apple are other good examples of Fast Followers. None of them pioneered the inventions they would make famous.
They were not the first to invent, but they were the first to scale.
“When a new technological trajectory opens up potential new markets, everyone competing within those markets has a choice to make. Should they try to enter first with what they think might be a winning product, or should they wait to see what happens? Those who choose to move first are the trailblazers who begin the process of establishing the new market. But historically, successful innovation is essentially a coupling process that requires the linking of two distinct activities: the discovery and testing of a new product or service that creates an initial niche, and the transformation of the idea—through dominant design— from a niche into a mass market.
Indeed, most companies that choose to be trailblazers exit the market pretty much as fast as they entered it. This is not to say that their presence in the market is not profitable— often it is very profitable, but on a scale appropriate to the market at the time that they are in it. For example, though the 35mm still camera was invented by an employee of Germany’s Ernst Leitz Company (now Leica), which introduced it in 1923, Japan’s Canon is credited with being the innovator that created the mass market in the latter half of the 20th century.
Needless to say, timing one’s entry to coincide with the emergence of the dominant design is not the only thing required for a firm to conquer the new market. [Conquerors] have to proactively and strategically invest to grow the market and capture the mass consumer. Often this requires heavy investments in exploiting scale economies, cutting costs and prices, developing strong brands, and controlling the channels of distribution to the mass market. But a prerequisite for all this is correct timing of entry.”
- Constantinos C. Markides and Paul A. Geroski (Harvard Business Review 2008)
“The firms that end up capturing the new market are those firms that time their entry so they appear just as the dominant design is about to emerge… For big, established firms contemplating entry into a new radical market, this is the best strategy to follow.”
Constantinos C. Markides (Fast Second)
Radical Innovations share a peculiar property, since technology innovation leads the customer demand, the target that inventors are aiming at is imprecise.
This is important and carries three major implications:
Since there is initially no immediate and well-articulated need, it is likely to have slow take-up rates and thus take a long time before mass market adoption.
It’s impossible to be sure exactly which is the right technology for this market, hence expect a wide variety of solutions to be made available as entrepreneurs each guess as to the winning solution. This makes it haphazard and chaotic.
Consumer preferences will evolve as the situation develops presenting plenty of opportunities for new entrants and fast moving followers.
This leads to the following attributes of a new radical market:
Despite enormous tech and product uncertainty, newly created markets are invaded by hordes of new entrants (maybe hundreds or even thousands) before the new market starts actually growing!
The rate of innovation at the start is the highest the market will ever see
Everything is very fluid until a dominant design emerges. Then a shakeout occurs where those players not part of or able to adapt quickly to the dominant design fade away and signals the start of the market growth phase.
Pioneers are best suited to small, agile start-ups who can operate in a high level of uncertainty and risk taking.
The Conqueror is the company who can scale up the opportunity and take it to the mass market. Large established companies very rarely have the expertise to be Pioneers but are exactly suited to the Conqueror role, waiting till it looks like a dominant design is forming. Then bringing their expertise and resources to bear on taking that design to the mass market (where the majority of customers sit).
The advice from Constantinos is that big companies should not be pioneers, they do not have the ability to create new markets and also get the most value out of that market at the same time, these are conflicting skills. Better to stick to what they are good at and spot a new market in the making and be a fast follower.
The risk is that many companies are slow followers or fail to follow at all.
“Fast-second movers are often established firms whose business is threatened by the new technology. It is not in their interest for the new technology to become established, but once it seems likely that the new technology will take hold, it is in their interest to become leaders in the new market. Hence they have little incentive to move first but every incentive to move fast when someone else enters the market.”
Constantinos C. Markides and Paul A. Geroski (Harvard Business Review 2008)