Leadership Book of The Week: Fast Second: How Smart companies bypass radical innovation

Which company created on-line bookselling in the 1990s? Amazon.com? Nope. The first on-line bookstore was set up by an Ohio-based bookseller named Charles Stack in 1991. Jeff Bezos didn’t launch Amazon till four years later.

We’re constantly being told that leaders need to foster a culture of innovation, to move into Blue Ocean spaces where no competitors exist, then profit from the customers before our competitors copy us and move into the space we have created.

Well, not always. Henry Ford used to argue that it made more sense to be second to market – let someone else take the risks of seeing if something new is what customers will buy. Then, when the market is proven, often at great expense, follow in and do it better. That’s the core argument in this book, and the author lines up plenty of examples to prove his point.

And he does have one. The argument against him is the first mover advantage argument – That markets move so fast nowadays you need to be first to market with something new so you can mop up the customers. That may be true if there’s only room for one dominant supplier, and if your aim is to be that dominant supplier - the Amazon of your marketplace, if you will. But there’s usually plenty of room for smaller niche players who take the main innovation, tweak it a bit and find a space in the market that way. It’s like ‘the long tail’ argument.

Tom Peters argues that markets move so fast that trying to be second to market means you will just be mopping up the leftovers as those who were brave enough to lead and create a new market take all the prizes. Well, sometimes, maybe. But, not always.

The uncomfortable answer is that sometimes being first to market is the winning strategy and sometimes being second or even third, when the pioneers have proved what works and what doesn’t and lost all their money in the process, is the right strategy. It seems odd to say 'Take the lead on being second or third' but leadership doesn't always mean being first to market. That's my view, anyway (in synch with the author of this book). 

Nobody can tell you which one works in your particular situation (a strategy of being first, second or third to market). But, the closer you are to knowing your customers’ or potential customers’ needs – to instinctively know what they want even before they know it themselves – the more likely your innovation is to be a winner.

And that, though it doesn't explicitly say so in this book, is why leaders need to be as 'close to the customer' (thank you Tom Peters, even if it was 25 years ago he said it) as possible. That means interacting with customers whenever you can, not receiving reports from middle managers about the customer base, but immersing yourself in the customer base, no matter how lofty your role in the organization is.  

End of preachy bit. Anyway, interesting book...

 How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets  Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets by Constantinos C. Markides and Paul A. Geroski (Hardcover - 14 Dec 2004)

 Phil  

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