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Fast Second – How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets
Book: 'Fast Second – How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets'
Author: Constantinos C Markides and Paul A Geroski
Let’s start with a quiz: What do Amazon.com, Thomas Edison and the Ford Motor Company have in common? Many people would immediately reply that they are all innovators who were first to bring new products and services to market. But that answer isn’t quite correct. In fact, Amazon.com wasn’t the first online bookstore, Edison didn’t invent the electric light and Ford didn’t make the first motor car.
What they have in common is that they all scaled up someone else’s niche market idea into a hugely successful mass market. In brief, they were all Fast Second in their respective markets. International strategy experts Markides and Geroski challenge the conventional wisdom that those who enter a new market first have a major competitive edge over later entrants. Instead, they state that, “companies that create radically new markets are not necessarily the ones that scale them up into big mass markets”.
Fast Second gives many examples to support the assertion that first movers typically create a niche market, but rarely scale up to dominate a mass market. Innovators who develop truly innovative products typically go to market with sub-optimal prototypes. These create a niche market and help to define what the ideal consumer proposition should look like. Other competitive companies then enter the market with improved products, and one of them typically succeeds in dominating the market.
So creative little guys come up with the world-changing innovations, but entrepreneurs and big businesses make the money. As Markides and Geroski put it, “The pioneers almost always lose out to latecomers”. And as we can see from the opening question above, those entrepreneurial second movers are the ones that eventually become famous. Everyone assumes that they invented the idea, when they actually refined and perfected someone else’s niche market idea into a successful mass market proposition.
Of course, most companies are actively working at becoming more innovative. They hire innovation consultants and introduce programs and corporate structures aimed at fostering innovation. But according to Fast Second they are wasting their time, since “most big companies cannot create radical new markets”. The basic problem is that truly radical innovation is a messy and uncontrolled business – and that is simply not in the DNA of a modern corporation.
Big companies want things to be tidy and controlled. Consequently, their strength is in creating and sustaining mass markets, not in coming up with major breakthrough innovations. So how can modern companies get more radical innovation into their products and services? Markides and Geroski have no doubts – big companies should build on the pioneering efforts of others by outsourcing or acquiring their radical innovation.
With its sustained and well-argued challenge to conventional first-to-market thinking, Fast Second is provocative reading.
Web link for more information on this book: http://as.wiley.com/WileyCDA/WileyTitle/productCd-0787971545.html