First Mover or Fast Follower?
Is it better to be a first mover or a fast follower in innovation? The answer depends on the nature of the innovation.
A novel and new invention clearly offers the opportunity to create benefit (including wealth), but so too does providing an improved version of something that already exists. In the first case, the benefit comes from an actual differential advantage — something you have that your competitors don't have yet. In the second, the benefit comes from efficiency — competitors provide the same item or activity, but you provide it more efficiently.
The figure at right shows the future opportunity curve of computer infrastructure (a novel and new invention) in 1943 mapped against its evolutionary stages, and the equivalent curve for utility computing in 2006 (a more evolved, industrialized and operationally efficient method of providing an existing service).
Whether wealth will be generated by something novel and new depends on numerous factors, but in all cases the opportunity declines as the activity becomes widespread. The future differential benefit of a well-established, mature product is vastly less than at its inception.
The fast-follower path is appropriate for the creation of something novel and new because the future opportunity will be greater if someone else has shouldered the burden and risk of research and development. In general, unless intellectual property rights interfere, it is better to let someone else blaze a trail, then move quickly into the market and maximize your opportunity.
The same logic applies to a more industrialized form of a preexisting activity. For example, by 2006, using computing infrastructure had little or no future benefit in terms of differential value but was simply a cost of doing business. As the figure shows, the shift toward utility provision does provide some operational impact, but it quickly declines. Logic suggests that maximum benefit comes by letting others lead, so they discover the pitfalls and incur the costs of changing practice.
However, this logic fails when the utility provision becomes a component of higher-order systems that extend the industrial value chain — for example, electricity used for radio, television, lighting and computing. Here, the first movers might not maximize operational efficiency, but they have the opportunity to develop higher-order systems that are new sources of opportunity (and wealth).
Furthermore, when the utility services are provided to others (such as Amazon's EC2 service offering utility computing to many companies) the supplier gets to know about new, higher-order systems that others are creating. That's why the first movers to industrialize are in an ideal position to detect and become fast followers for any novel, higher-order activities that are created.
So, being a fast follower creates the greatest advantage when we're talking about the genesis of something novel and new, but being a first mover can create the maximum advantage when dealing with the industrialization of a preexisting activity.
SIMON WARDLEY is a researcher for Leading Edge Forum, a global research and thought-leadership community.