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.