Is it better to innovate or wait for a competitor to be the first to market, learn from their mistakes and then try to take a market share? That’s the eternal question for all businesses. The market, world and humankind needs and thrives on innovation. It is the evolution of our tools and interactions. It is a natural progression for some and feared by many. Why and what does it take to successfully drive it?
Naturally, being a leader in unexplored territory takes huge risks and investment. There are no guarantees as little or no market information can be used for anticipated sales or what changes must be made to fine-tune the product or service. That has to be done with usage and during a period of time where the consumers have had usage and developed definite opinions on the innovation… for better or worse. Better drives sales – worse is a loss that may not be recoverable.
All large corporations call among their employees to think of innovations for company success but it is well known that most innovative ideas are squashed before ever being presented above middle management. The reason is fear – fear of backing what may be a losing idea, fear of the unknown, even fear of just making a decision that will have far-reaching consequences. Some refer to it as the “Hendry Theory.”
The reduction theory of David F. Hendry provides a comprehensive probabilistic framework for the analysis and classification of the reductions associated with empirical econometric models. However, it is unable to provide an analysis on the same underlying probability space of the first reduction – and hence the subsequent reductions- given a commonplace theory of social reality, namely the joint hypotheses that the course of history is indeterministic, that history does not repeat itself and that the future depends on the past. As a solution this essay proposes that the elements of the underlying outcome space in Hendry’s theory are interpreted as indeterministic worlds made up of historically inherited particulars.
*Read the entire paper on the theory HERE.
Basically, if you don’t want to be put to sleep by the entire paper on the subject, Hendry asserts that the first to market will always retain at least above 56% of the market, starting with 100%, of course, and reducing itself as others enter the competition for market shares. As the entry leader, you will need the lion’s share of the market to recoup the investment capital spent on research and development.
An interesting example of this comes from a friend of mine who focused on an innovative product and wanted to bring it to market. Just the legal fees for patent searches and writing the patent papers was $10,000 – hefty investment, not including the research and development of the product itself. The end results for him was finding out that a large corporation had filed the patent for a very similar product just after he had started the research, development and patent process.
In speaking with him about his options to save some semblance of the product, he related that, the patent would not allow him to enter the market without major changes that would negate the usefulness of the product. He did point out that the company that entered the market had not included several important key elements that his product had incorporated and the product introduced failed but was still patented and he was stuck.
This is one factor in attempting to be the first to market. Even quick action can be cut off by those acting quicker. There are, as the old saying goes, two types in business – the quick and the dead!
Most studies have found very strong and consistent pioneering advantages, but this was mostly due to “survivor bias” (i.e. they considered pioneers that stayed in the market for years, not the ones that failed early). Later studies found that pioneers often do not have an absolute advantage but do obtain much better effectiveness of their marketing efforts due to higher awareness and the fact that consumer ideas about the category have formed around the pioneering product – so followers have to offer better scores on these attributes and overcome customer switching costs. Read more.
There is a great article on “colonizers vs. consolidators” in market entry. Highly suggested for those looking to introduce innovation into the market. If you need some inspiration because you are dedicated to the idea of successful innovation, just read from this extensive list of the greatest innovations… read more.
Need a little more inspiration? Try these enlightening quotes!
Need a little push in steps on self-initiated projects? Try this.
Want to see what failed miserably? You’ve been warned! Stick with the article or quotes on the links above… or click here.
There are corporations that go through the expensive process of bringing innovation to the market on a consistent basis. The loss is, naturally, within the predicted factors included in the yearly budget. Still, what happens to that product you never saw or heard of, it’s out there… somewhere.
Company files of patents, ideas, plans, blueprints, stolen material and other dirty secrets are the Indiana Jones warehouse of the lost arc. Some are tried and others reconsidered but all of them are important enough to own the patent. One day the water-powered, jet pack, popcorn-making machine that makes people tell an uncomfortable secret about themselves will resurface… when we are ready.
Most feel that in the digital age, something must show an appreciable ROI within six months. The thought behind the cut and run, so to speak, is that they usually don’t engage customers to see what THEY wanted incorporated in the service or product and make correction from there. Market research is rarely done efficiently. The key is truthful and useful feedback from hardcore users as well as perception from the first time buyer/user. Like Henry V, you need to walk among your consumer base and see what they really feel, without the conscious boundaries of how to answer what seems always present in most market research face-to-face sessions.
The military is one of the largest corporations interested in innovation, next to Apple, which is, right now, the largest corporation with the most influence in the world. From the boots on the tippy-toes of the soldiers to the sub-orbital vehicle with the ability to bomb those boots from low orbit. They have had their share of innovations that don’t quite work out. The “peace ray” sort of ruined the war business.
Once again, with warehouses filled with working models of these nasty thingies, eventually someone may stumble across one that will just perfect for slaughtering human beings faster and with less human interaction that might contain pity. Oddly enough, this is less harsh than the fashion industry!
Have you ever seen the kids who love that hat with the fur that’s all the rage? If you missed it, you won’t see it next year because there will be a new hat fad. Even fads can pay off if you know when to get in and better, when to get out.
I’ve worked for several companies that had introduced some very innovative products and they made money like they were shoveling it at them. Some did, I believe and no, it wasn’t a shovel manufacturer. Where these companies failed is that they either had no good customer recognition, poor order fulfillment and when competition started popping up, they didn’t fight it off well enough to keep over 56% of the market. Some quit at the first signs and ran with the money. Some collapsed and it is never a pretty sight.
When entering into any market, it’s important to do as much groundwork as you can before suffering the inevitable expenses. Sometimes companies jump in too fast without looking… or thinking and even what is seen, at the time, as a minor setback due to a brand hit for a lousy product or such, it is very rare to see a full comeback.
As with just about anything, the risk of innovating has many decision turns you will need to navigate. Patience, fortitude a keen business sense with a little psychic ability… some might call it a keener business sense with the ability to read people but I like the mystery of having a sixth sense. In reality, that does seem to be one of the keys to success. Did I mention a groin of steel is also a good thing to have?
Some people just don’t have it and that’s okay. You do, however, need a certain something not everyone has. When you see an accident, do you react without thinking, letting your body acting faster than your mind or do you sit, frozen? Your reaction to emergencies and quick-changing situations will keep you well as a new product launches. A happy mix of the two makes for a great go-getter with nerves of steel but the ability to stop and react and not let the actions of the body (in this case the body is the things that can go wrong with a project) rule the mind.
On Being Second
The internet probably spawned the terms, “third party” after the automotive industry coined “aftermarket.” It’s an innovation on an existing item and bypassing via loopholes in the patent, providing additions to certain things.
When you follow the path of a successful product, you are set up for comparison right away. Pokémon was followed by Yu-Gi-Oh and then Card Captors. There were more that never quite caught on as the others did but it is interesting that Yu-Gi-Oh did extremely well and earned a huge market share from Pokémon. Pokémon, however, continues to pull in an audience and maintain a good licensed presence.
There are certainly other examples but you generally must introduce a direct, improved version of what sits on the market. Greeting card companies are always testing which competitor will bring a certain innovation to the market. Greeting card companies have a great deal of people moving to other companies and sometimes they bring ideas they heard in a meeting or in the elevator, to the competition. This isn’t the big concern as one company can test the waters and the others will then introduce their own version and take it just a step farther to grab market share pie. Oddly enough, I believe there is a greeting card company star chamber where they plan who will take what to market first and just switch it up year to year… and plot to enslave humankind into a paper-sending frenzied existence.
The cosmetics industry isn’t so nice. At one client (one of the biggest firms), we were instructed to destroy all design documents for packaging and ads at the end of every day. Proper employment contracts were near death sentence for leaving the company and most materials were never to be removed from the studio. There were other rules I don’t remember but I do remember commenting once that it would be easier to “sneak nuclear bomb plans out of the Soviet Union than out of this place!” Part of the joke was there was no more Soviet Union. It was funny at the time, I swear!
Without laughing, an art director calmly replied, “yes. It is!”
THAT is dedication to the brand protecting its innovations because the imitators will jump right on the secondary product just from the bigger brand recognition. It’s sometimes just what makes the world go around and around. Whatever you do, do with confidence, planning, patience and a good lawyer.
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