As a child you may have played “Follow the Leader,” which is a fun game—for children. In business, playing follow the leader into new products and markets can be an effective strategy that can also be profitable——in the short term. However when you have a product or service for which the ultimate difference from your competition is merely a lower price, then following the leader is not your best option. In the end, most follow-the-leader products get lost in the marketplace and the companies that put them on the shelf get caught in the profit squeeze. (Okay, I can hear the “But look at Wal-Mart!” They compete on low price. Yes, there are exceptions, just like there are people who get hit by lightning and win the lottery!)
A slightly more sophisticated version of follow the leader is what we experienced in our teenage years, where many of us wanted to be in on the latest and greatest trends and fads. This version for businesses has us in focus groups and studying the markets, consumers, and competition for any sign of what will be the “break-out idea.” This version has us playing the game but trying to be just ahead of everyone else by finding out what will be the break out product and who the leader is before everyone else does.
Competing for the Long Run: Innovative New Products
Follow the leader in any version isn’t bad strategy. It can definitely pay off and done well can propel companies into the market, but it does make them vulnerable and often just one of the crowd. These companies are just one more of a group that needs to know what the customer is thinking and are tuned into the same frequency for trends. Competition is important and moves together. The company and the market is guided by what everyone else is doing and isn’t the sole source of “ideas,” so it doesn’t stand out. Everyone follows where the leader goes, and there is no stepping outside the lines.
Color Outside the Lines
Innovative ideas come from “no boundaries” thinking: going where no one has gone before, looking at needs, attributes, and extrapolating beyond today. Innovation examines what is beyond feasibility and what exists now. If there is one thing that innovation requires, it is an ability to look beyond the lines that have been established to develop new products (and to redefine how to develop and define a “new” product). All too frequently, businesses become satisfied with product-line extensions that are small deviations of the same product they have been making and selling successfully: changing little more than surface characteristics or minor attributes. These companies are afraid to risk past success and profitability by going too far from the “proven” product. And while they stay “safe,” the competition moves dramatically, drastically, and innovatively ahead and captures the customer with truly new products. By staying “safe,” these companies create a self-fulfilling prophecy. They don’t change the product and lose the customer to others who innovate with nothing to lose and everything to gain.
Companies need to get comfortable with innovation, which lies somewhere between “playing it safe” and “jumping off a cliff.” Innovation requires finding the new products that attract the customer, keep the competition at bay, and challenge the current view of what everyone “knows to be true.” Successful businesses are ones that are willing to take calculated risks and lead. They still are saying “Pick me! Pick me!” But it is “Pick me because I’m innovative and I am a product that does something for you!”
Lead Instead of Follow and the Competition Doesn’t Get In the Way
How do companies take the leadership position in the marketplace? They innovate. Innovation comes through one of four abilities. Companies must:
- Identify an unfulfilled need in the marketplace
- One that customers are aware of, but has not been met
- One that no one (neither customers nor competitors) recognized
- Challenge the assumptions of “normal” and “how things are done”
- Leverage core competencies and existing strategic assets
- Identify discontinuities (points of disruption)
True market leaders are innovators in product design, marketing, positioning, distribution, business models, business methods, reaching the customer, technology, or some combination of these factors. They serve as disruptions in the marketplace and move the market in profound ways. Through their innovation, these companies not only impact the industries in which they do business but also create ripple effects in other industries and markets. They lead, others run to catch up.
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