It pays to be second

In the wide and weird world of business plans (and having sat on VC panels during start-up pitch parties, I have seen some mightily weird business plans) being a fast follower is the sanest approach. A fast follower lets another company prove that a market exists, then lets the follower rapidly become a competitor by mimicking the core features in their competitor’s ground breaking product while adding those that they missed. Risk is lower, development costs are lower, and if well timed you join the party at the moment early majority buyers raise their sluggish heads and open their tightly clasped wallets.

I maintain that Microsoft made its fortune by being a fast follower. MS-DOS was a practical clone of CP/M which had proven that the personal business computer concept was viable. Microsoft also mimicked Macs when creating Windows and Apple mimicked Xerox’s pioneering of GUIs. Imitation is the most sincere form of profit.

Which brings us oddly to e-books and the revolving lead/follow relationship between Amazon’s Kindle and Barnes and Noble’s Nook. Though e-books had existed before Kindles, the market remained undefined because digital tomes were read on PCs, which was a very un-book-like experience. Amazon innovated and eliminated all the painful aspects of finding, acquiring and reading an e-book (and in the process they cut out every middleman in the book publishing business). They were the innovators.

Barnes and Noble became a fast follower (so did Apple — Sony and a few others were failed contenders). The Nook in its early incarnation was a Kindle that used a different digital e-book format (which didn’t matter to readers at all).  But Barnes and Noble knew that following fast was not enough — they needed to take the basic Kindle concept and expand upon it to create a broader reader experience. Thus they developed the Color Nook, which is in fact an Android slab in chains. It delivered book, multi-media magazines and applications, fulfilling broader buyer desires without violating the core mission of making machines the replacement for dead trees. This made Barnes and Noble a fabulous fast follower.

Which is now Amazon’s role as they prepare to release their first slab, which I’ll call the AmaSlab since the proper product name has yet to be revealed. We know it is Android based (like the Nook), has an e-ink screen like the Kindle, and know very little else. But we do know that before rumors of the AmaSlab came forth, Amazon had already created one of the largest Android app stores available, and we can safely bet that shopping for all Amazon products will be very easy on the AmaSlab. So Amazon was the innovator, found real competition from their major fast follower, and is now a fast follower themselves.

The marketing lesson is that new markets are minefields. Knowing that a market exists is iffy in the absence of serious market research. Knowing the exact set of features and the buyer’s expected outcomes is a crap shoot. Letting someone else take the risk of exploring the market, even if they are a mammoth competitor (ala Amazon) is worth while. But it also means that being a fast follower will attract new fast followers who want to do to you what you did to the original innovator. A great strategy is to be a fast follower, then to keep innovating upon the core concept until you achieve market dominance and have exhausted all possible paths to expansion.

Then follow again.