Page 40 - (DK) The Business Book

38 38 GAINING AN EDGE

significant. They give the example have enjoyed short-lived advantage
of the market for vacuum cleaners, but in dynamic markets such an
and, in particular, of the long-term advantage is rarely durable. Even
market leader, Hoover. Until the Apple, who enjoyed significant
relatively recent introduction of early-entrant advantage in the
Dyson cleaners, the market was smartphone market with the If you do things well,
benign and technological iPhone, is not immune from first- do them better.
advancement slow. Having been mover disadvantage. Competitors, Anita Roddick
first to market in 1908, Hoover Samsung in particular, were able UK entrepreneur (1942–2007)
enjoyed several decades of to listen to customer complaints
advantage—an advantage that about iPhones, analyze customer
was (and, in some places, still is) needs, and produce products with
reflected in the widespread use of features and functionality welcomed
the company’s brand name as the by the market. Apple, locked into
verb “to hoover.” previous technology iterations, took
In other industries, however, time to react and iPhone sales importantly, the organization
where technological change or suffered as a result. insists on a deep understanding of
market evolution is rapid, first- customer needs in any market they
movers are often at a disadvantage. Customer needs enter. In other words, they would
The first search engines are To gain an edge, therefore, you do rather enter mature markets than
examples of businesses that had not always need to be first. Indeed, be first into new ones.
too much invested in early US multinational Procter & Gamble, The company values long-term
iterations of a technology to keep for example, prefers only to enter relationships with its customers
up with the rapid pace of change. those markets in which it can and suppliers; its view of innovation
Early advantage quickly establish a strong number one or is different from small companies
becomes obsolete in changeable number two position over the long- who, in attempting to capture
markets. As the market evolves, term—rarely is this achieved in a market share, strive to gain an
later entrants are those that seem blind rush to be first. edge through the introduction of
to be cutting edge, offering Procter & Gamble seeks disruptive technology—innovative
innovative features that build on markets that are demographically technology that seeks to destabilize
the market-knowledge as well as and structurally attractive, with the existing market. Procter &
learning from the mistakes of the lower capital requirements, and Gamble, perhaps heeding the
first-mover. The first-mover may higher margins. But most research, considers such strategies
to be short-lived. They realize that
overly rapid innovation runs the risk
of cannibalizing their own sales
and reducing the returns on new
product investment. In the market
for disposable baby diapers, for
example, Procter & Gamble was
more than ten years behind the first
mover. The company’s now famous
Pampers brand was launched in
1961, following some way behind
Johnson & Johnson’s Chux brand,

The PalmPilot, launched in 1997, was
a successful fast-follower product. It
followed Apple’s unsuccessful Newton,
which was the first personal digital
assistant (PDA) to enter the market.