We often hear it: "Our innovation strategy is to be a fast follower." Too frequently, the person saying the phrase shakes her head as the words come out, oozing irony. The fast-follower approach has ended up pushing the company in many directions, with little strategic coherence. Worse, it has led the firm into competing head-on with entrenched incumbents rather than creating new markets.
Strategies like "fast follower" usually become popular for good reason. Oftentimes, however, they are transplanted from the industries where they emerged into settings where they are inappropriate. The challenge for firms is to distinguish which strategies fit their particular circumstances. We would suggest three settings in which a fast-follower approach makes good sense:
- Local market power – Businesses with strong local economies of scale, such as grocery stores or newspapers, can easily look outside their home markets at how other firms are innovating for similar customers. The Philadelphia Inquirer may have much to learn from the Detroit Free Press, for example. Oftentimes companies in these industries will eagerly collaborate to share discoveries, and quickly copying successful experiments is sensible business practice.
- Asymmetric capabilities – Big pharmaceutical companies have made excellent returns by being fast followers in drug categories, leveraging their sales capabilities to win market share even if their drugs’ effectiveness is no better than that of the firms who were first to market. By being somewhat later to launch, they can learn from the pioneers’ clinical trial results and avoid expensive failures. Yet this approach may have a limited shelf-life. In pharmaceuticals, insurers are increasingly pushing for cost-effective solutions, and they are not keen to subsidize large salesforces that may add little in terms of medical outcomes.
- Ability to create new offerings based on synthesized learnings – Real-world experience is vastly preferable to countless hours spent brainstorming on a conference room whiteboard. The trick is to synthesize among a large number of experiments in-market, and to create a unique offering that draws from these lessons. Rising mobile phone manufacturers such as LG have done this well; they have closely observed how users interact with models currently in the marketplace, and they incorporate key features while adding new ones, such as a mirror to help with applying make-up.
Unfortunately, the fast-follower approach tends to be adopted in a fourth circumstance: as the lowest common denominator on which everyone in a company can agree. After all, few firms will state that their innovation strategy is to be a distant laggard. The result is a fractured portfolio in direct competition with motivated market leaders.
