Follow the Laggard


Came across an interesting strategy deployed in sailboat racing while browsing the book 'Art of Strategy' by Avinash Dixit & Barry Nalebuff. In a two boat race, the best strategy for the leading boat is to mimic the moves of the trailing boat. In this scenario, any change of wind that can speed up the trailing boat, will also have a similar effect on the leading boat, thereby enabling it to maintain its lead. 

This sort of turns the idea of leadership through innovation on its head. 

I remember a quote by Sean Parker about myspace that said basically the same thing, "There was a period of time where if they (myspace) had just copied Facebook rapidly, I think they would have been Facebook"

What this seems to suggest then, is that the onus of innovation is on the upstart. This has been the case in the technology space. This makes the extraordinarily successful innovation by the likes of Apple a little less remarkable. They had to be blindingly original because if they were not, no one would have heard of them. Apple, of course, was not entirely a start-up, but after decades of declining performance, Jobs’ second-coming at the firm was effectively a new start.

This also says something about the prospects for continued success for the likes of Facebook and Apple. Innovation by them, as impressive as it was, is the price of entry for a start-up. But now that each is a market leader in its domain, would they find it harder to innovate? Should they, instead, change tracks, to actively imitating innovation by others and replicating? That would seem to be the ‘rational’ choice.

The markets seem to agree, at least for Facebook. The most hyped up IPO in history turned out to be a dud, largely on fears that the wellspring of innovation at Facebook would run dry sooner or later. Facebook, to their credit, do seem to have realized the change in strategy that would be required. The over-the-odds payments to acquire some innovative start-ups like Instagram is a sign that they realize that they might not be able to out-innovate the competition forever. Following the laggard just might save them. 

Comments

  1. This works in very limited contexts, with lots of ifs. If I am an innovator, who had managed to get in front by innovation in the first place , and if it is a two boat race (there isnt a third innovator gaining on me by sheer innovation), then just to stay ahead without increasing the gap, I should follow the laggard. Basically if I have an advantage, I maintain it by just about staying in front. Application of this to all players in the universe would slow down progress , since by the very nature of being a laggard, more often than not they are likely to do things less efficiently. And everyone emulates them.

    Btw, I dont understand the fourth paragraph about technology and Apple :|

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  2. @eternalmonotony: Absolutely agree with the conditions under which this is applicable. What I found interesting was that under certain conditions, such a strategy might be optimal.

    And yes, this wouldn't make any sense for the non-leading firm(s) to attempt.

    The 4th para is saying that products like the iPod, iTunes, iPhone, iPad etc. were more likely to come from an Apple (a laggard, at the time) than a Microsoft or Google. There is more to Apple's success than this, of course.

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  3. Great article, Thanks for your great information, the content is quiet interesting. I will be waiting for your next post.

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