First movers don?t necessarily have the best track records.
They are unsuccessful about half the time, while fast followers endure a failure rate of just 8 percent. Those are jarring statistics. So why shouldn?t we all just follow the templates that successfully innovative first movers have laid out for us and cash in on their labor? What?s the point of innovating if someone else can do the dirty work for us? ?
First of all, when done right, capturing a first-mover advantage doesn?t mean certain doom. Amazon and eBay seem to be doing just fine. Secondly, if your organization is going to be successful ? even as a fast follower ? it will have to innovate at some point. No one ever got anywhere by staying put. Samsung had to invest in innovative technology to keep up with Apple, after all.
Victory as a first mover comes down to how you handle innovation.
Innovation?s Dirty Little Words
Lately, we?ve seen a few heated debates regarding the definitions of ?innovation debt? and ?innovation deficit.? These twin challenges impact the success or failure of a company interested in gaining a first-mover advantage, so let?s take a moment to clarify the terms. ??
Innovation debt occurs when a company, in an attempt to gain first-mover advantage, over-invests in innovation to the point that it becomes impossible to retrieve and gain profit from that investment. GoTo.com (later named Overture and now part of Yahoo!) is an example. It created the pay-per-click search engine and advertising system in 1998, something considered so cutting-edge that GoTo was invited to speak at a TED conference that year. In 2000, Google brought its own pay-per-click ad system to market, thanks to GoTo paving the innovative way. GoTo was unable to crawl out from under its innovation debt, and it was acquired by Yahoo! for $1.6 billion. ??
Innovation deficit, on the other hand, really doesn?t have much to do with innovation. It is a company?s lack of or declining investment in innovation, which leads to that company?s customer base shifting elsewhere to have their ever-changing needs met. In other words, more innovative competitors take over. Think of Apple before Steve Jobs returned to rescue it with the Bondi Blue iMac. In an attempt at extra revenue during a tough time, Apple had basically stopped innovating and started licensing the Mac OS and Macintosh ROMs to third-party manufacturers. Supreme innovation deficit ensued until Jobs? return.
As you can see, each of these problems is on the opposite end of the innovation spectrum, yet each can pose a real threat to companies. ??
Ensuring First-Mover Success
With the threat of innovation debt looming large, do keep in mind that gaining first-mover status is full of compelling advantages. You just have to do it right. Here are a few tips:
Patent Protection: Patents are designed to protect your assets, so snatch some up of your own exclusive rights. There?s a reason why so many companies bid on Kodak?s expired patents ? they?re innovative and have proven successful, and everyone wants a piece of protectable intellectual property. ???
Attract and Retain: If your goal is to capture market share, the best way to catch and keep customers is by continuing to innovate, ? la Disney?s recent purchase of Lucasfilm and the ?Star Wars? franchise. Just make sure you research and do small-scale experimentation beforehand so you?re confident the investment will pay off.
A Defensible Ecosystem: Make sure your products and services appeal to a wide range of consumers, without impediments. Apple?s triumph wasn?t really the iPod; rather, it was the fact that iTunes was compatible with Windows, thus ensuring Apple had a massive bulwark against competitors.
Getting Your Team On Board
Now, for those of you afraid of pursuing innovation at all, I suggest you use the CLEAR approach to kick start the innovation process. This will not only provide you a process to manage innovative change, but it will convince your team to take the risk with you:
Customers: Know them and be empathetic to their needs.
Leadership: Make your goals, objectives, and expectations clear. Practice mutual accountability.
Execution: Take a systematic approach to execution. Use a common language for innovation, and practice small-scale experimentation.
Assessment: Practice short-interval reporting. Be sure to reward and recognize appropriate achievements ? even failure.?
Renewal: Invest in your people. By revitalizing their skills, you build the capability for future innovation.
Clearly, you are not damned if you do or damned if you don?t. If you focus too much on the risks, your company might slip into paralysis. Whatever you do, do not use the fear of innovation damnation to motivate employees. A negative set of motivations will in no way get you positive ? not to mention profitable ? outcomes. ?
Just make sure that everyone in your organization understands that innovation requires a balance if you?re going to attain that coveted, flourishing first-mover advantage. If you carefully utilize a plan and keep everyone focused on innovation as a direct expression of company strategy, aspiring to first-mover status is certainly a winning position to take. ?