Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets [Englisch] [Gebundene Ausgabe]

This book is about why big, established companies should aim to be "Fast Second" rather than pioneers of radically new markets.

The authors challenge the new hypothesis that big firms need to be "ambidextrous" (i.e. able to use either hand with equal skill). An ambidextrous organization has successfully put in place multiple, contradictory structures, processes, and cultures within the same organizational infrastructure. By developing strong shared values and by putting in charge managers capable of managing variety and ambiguity, ambidextrous organizations can successfully balance the conflicting demands that the simultaneous pursuit of being First Mover (or colonizer) and being Fast Second (or consolidator) would place on them.

The skills, competencies, mindsets, and attitudes needed to succeed as a First Mover versus a Fast Second are like chalk and cheese. From First Mover to Fast Second, these are the 16 differences according to the authors:
1. From engineering or technology skills TO marketing, customer segmentation, and retailing skills
2. From emphasis on novelty, quality, and focus on lead users TO understanding of average user needs, good at spotting consensus
3. From young, restless, fascinated with science, technology, and the leading edge TO more interested in making money than in developing the latest technological wonder
4. From roots in science TO commercial roots
5. From focus on technological achievements and creating the best-performing product TO focus on price and quality and willing to settle for a product that is "good enough"
6. From manage information network in science community TO manage network of feeder entrepreneurial firms
7. From entrepreneurs who prefer autonomy and freedom and do not want to work in a big company TO organization people, happy within the structures and constraints of a large organization
8. From fast, agile, risk-taking experiments TO people who defend the existing business and don't take unnecessary risks
9. From entrepreneurial culture TO functional organization, formal management control systems
10. From first, fast mover TO judicious mover
11. From small is beautiful TO need resources to build the brand and distribution
12. From good at management of product design TO mastery of process engineering, procurement expertise, and mass-market management
13. From a culture of innovation and experimentation TO a culture of discipline and cost-control
14. From flexible TO disciplined
15. From short-term oriented TO long-term oriented
16. From fluid structures that allow easy flow of ideas and learning from mistakes TO managed hierarchy, focusing on mass marketing, customer segmentation, and manufacturing excellence

Not only are the necessary skills for each activity different, they also CONFLICT with each other. This means that firms that are good at being First Mover are unlikely to be good at being Fast Second. Looking at the list above, it's obvious that big firms have the skills and mindsets to be good Fast Second market players. Trying to teach them the skills of a First Mover will not usually work because their existing skills conflict with many of the skills they need to develop. Big firms should focus on what they are good at - the consolidation of radical markets into mass markets (Fast Second). They can achieve this by adopting an acquisition or network strategy with young start-up firms.

I got the book from Amazon the other day and finished it last night. It usually takes longer to read a strategy book, but this one is slim with only 170 pages. Being a business development manager, the topic of strategic innovation is very familiar and the arguments are surprisingly clear ... and very thought provoking, indeed. I'll highly recommend this book. It's a bold challenge to the conventional wisdom of the need to build radical innovation competence for big firms. It makes you rethink what you aim for ...

If you're interested in strategic innovation, do also consider Kim & Mauborgne's "Blue Ocean Strategy", Slywotzky's "How to Grow When Markets Don't", and Markides' "All the Right Moves".

Peter Leerskov,
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business

This book presents an interesting thesis: Big companies should not try to produce radical innovations (ie, innovations that create a new market based on a new technology) but instead they should scale up the new markets and make money doing so. The authors support this position with two main arguments:
- It is not only difficult for big companies to create radical innovations, it is often contrary to their best interest and culture. Big companies have no incentive to change their markets.
- If big companies are not good at innovating, they are very good at scaling up markets (due to their existing relationship with distribution channels and customers).
Since most of the money in a new market is gained by scaling it up, big companies should focus on their strengths rather than trying to become more innovative.

This thesis seems to make sense. However there are many problems that are not properly addressed in the book. First, it is not clear how a big company is supposed to enter a market at the right time to scale it up. The authors provide only vague information on how to do that although it is central to make their suggestion work. The examples of big companies jumping into a market and scaling it up are not convincing. For example the authors cite Ford. But Ford did not just scale the market for automobile, it was a pioneer too. The authors do not provide clear examples of how a company is supposed to consolidate a market without being in it first. Second, the authors make an analogy with creative industries as a model for inventor/distributor cooperation. The model is sketchy at best. Why not study some real cases such as the recent cooperation in the pharma industry (eg, Imclone/BMS)? It seems that the authors did not invest the time to fully fledge and support their ideas.

The Harvard Business Review published an article in April 2005 about the factors that help or endanger first mover advantage. Among the factors are the speed of technology evolution (the higher the more likely a second mover with deep technical skills will be able to win the market) and the size of the market (the bigger the more likely a second mover with strong marketing power will win the market). The creative industry that the authors use as example belongs to the last category: power lies with the companies that have the marketing clout to push the movies nationwide. It is quite telling that a 10 page article does as good a job as this book at elucidating some of the issues with first vs. second mover advantage.

The thesis of the book is interesting. Unfortunately the supporting material and the practical advice are very light. I believe the book would have greatly benefited from less repetition and much more thourough case studies of consolidating companies. The book is a disappointment.

(If the authors haven't done their research they seem to have enrolled enough people from London to give the book glowing reviews. Read them with a critical mind.)

This brilliant book argues that big companies should not waste time and resources trying to discover new products and markets. Their sheer size, embedded culture and traditional mindsets are prohibitive factors. Radical innovation is much more likely to emerge from the efforts of all those small companies, start-ups and entrepreneurs that dream of becoming the next Microsoft. They are flexible and can afford to take risks without being burdened by rules and bureaucracy. What they lack, however, is the ability to turn a niche market into a mass market. This is when big companies should step in. If they are "smart" enough to spot the markets of the future early on they should leverage their brand name, pricing power, distribution network and marketing muscle to turn these niche markets into profitable mass markets.

Markides and Geroski use brilliant and highly accessible language to convey their message. They support their thesis by providing a whole range of examples of companies that succeeded in creating new markets by being "Fast Second" rather than "First". They also offer detailed recommendations on how to scale up and dominate a new market.

The book's thesis is very credible in a world where companies are increasingly outsourcing innovation and relying on others for ideas. And by being so specific in terms of what it recommends, "Fast Second" is superior to Gary Hamel's "Leading the Revolution" and Kim & Mauborgne's "Blue Ocean Strategy". These authors recommend that big companies should aim to grow by being open to new ideas and by attempting to create new markets themselves. But they fail to say how to do this.