We live in a time where innovations have become a part of our daily lives. Modern technology has given us the ability to create groundbreaking products in very short timespans; all that is necessary is the right idea. Creating a start-up is the new American dream; and we are constantly hearing about the success stories on the news. In this constantly expanding market where everyone thrives for success; should we aspire to be a pioneer of a new innovation or is it better to be the first follower? Is it necessary to come up with an idea, or can you more successful by acting fast on an emerging trend?
Here are three reasons why you should strive to be an innovator and three reasons why being a fast follower is enough.
Building a relationship with costumers
A huge advantage innovators have when coming out with their product is being the sole seller of the product. The time period until they are copied is key in building a lasting relationship with their costumers. By being the only option on the market, consumers have no other options and must turn to the innovator himself when purchasing. 48% of consumers said that the most critical time to gain their loyalty is when they make their first purchase or begin service. Remember, it costs about 5 times more to acquire new costumers than it does to keep current ones so you better “strike while the iron is hot” and make sure you get those first costumers on board.
Think of dolls for a second, what is the first word to come to mind? Was it Barbie?
Now think of mp3 players, did you think of iPod or Apple?
Lastly, think of fast food. I imagine you thought of what you would order right now, but if I told you to think of a brand most of you would say McDonalds.
Brand association is a big thing. There is a very strong positive correlation between brand awareness and association and purchase decision. By being the first brand to sell a product, if done right, you can make your brand name almost synonymous with the type of product. The media is also more likely to cover a “first of” than a “slightly better” version.
“The early bird catches the worm”
What do Amazon, eBay and Coca-Cola have in common?
These three companies had this motto in mind. They acted fast solely on the belief in their product. By being a first mover you get a head start on your potential competition and are in a prime position to test the product with real users. This process where testing and adapting, is done in front of real users, as opposed to a development lab, is at the heart of the popular “lean startup” dogma.
The First Follower
“The second mouse catches the cheese”
There were search engines before Google. There were navigation apps before Waze. There were even social media sites before Facebook.
In a study conducted of 500 companies, the first mover (first to sell a product) had a failure rate of 47% as opposed to the 8% failure rate the first follower (enter a market early but not first) faced. Why is this so?
The companies I listed before weren’t necessarily better than their predecessors. They used the data that was already available to them from the first movers and improved themselves. They had better business models, better managements and better timing. They were more focused and learned from mistakes previously made by others in the field. Also, by entering the market later you can see if there is already a market for your product based on the first mover’s success.
With all change comes skepticism. Innovation can even cause a scare (just look at TV’s, computers, phone etc.) It takes time for the public to accept a new idea/product. The market can be split into 5 groups, with the late adaptors and the laggards (estimated at being about 50% of the public) being the last ones to tag along to a new innovation.
By not being an innovator you allow the public time to adapt to a new product and enter a market that is not necessarily fresh and new. You enter at a time when there is already consumer interest and public awareness.
Competition is good
By adding another player to the market we create competition between firms. Competition is a good thing for both buyers and sellers: Consumers will get better prices for products and better quality of products due to the companies trying to get an advantage on their competition. Firms will be able to learn from each other in order to perfect their products and focus on what they do best. By being a fast follower you will have to always bring your “A” game. This is the only way you will be able to succeed. This will result in higher customer satisfaction and hopefully lead to larger revenues.
Bottom Line: By being an innovator you give your company more time to “take off” and build up lasting relationships with your customers. You give your product a good opportunity to get brand association. On the other hand, being a fast follower can be very rewarding. You allow yourself to join an already flowing market and can learn from where your competition went wrong.