Available Now

Order now and be among the first to learn from Alternative Investing expert Bob Rice. Begin building your alternatives portfolio today! Order from Amazon.com, Barnes & Noble or 800-CEO-Reads

This episode aired on BloombergTV on Jun 26, 2012

Fast Follower

Fast Follower is a term from the start up world that goes hand-in-hand with the idea of first-mover. Fast followers are those firms that observe a first-mover, identify its successes and failures, strengths and flaws, and using this knowledge, attempt to better-execute the original business’s idea.

Q. So, this is a big idea is startup land, right? It’s essentially the opposite of “first mover”?

A. Right. Weirdly, there’s a long line of business cases that imply that true innovation can be overrated. And it boils down to this: a first mover is inventing something really new, and its easy to make lots of mistakes that are very instructive for the next guys. So if you’re a smart observer of the scene, you can learn from those mistakes and be an extremely successful “fast follower.”

Q. Can you give us some examples?

A. Well, look at Microsoft… an awesome “fast follower”. Word was a knockoff of Wordperfect; Excel was a knockoff of Lotus; IE was a knockoff of Netscape; even Windows itself was a knockoff of the GUI pioneered by Mac. That pretty much accounts for all their success to date.

Q. Well, that’s an exceptional case, right? Are there other similarly successful examples?

A. Well, there’s one called Google you might have heard about. In 1998 I visited Goto.com, a small startup that had invented the pay per click and bidding system for text ads. At the time I thought: pay for listing in a search engine? Who would trust such a thing? Shows you what I know. Google was fully two years behind but did it better, and became, well, Google. And how about one more? Amazon, which itself was two years behind the first online book store.

Q. Wow, OK, what lessons should first movers take from this? Patent the heck out of whatever you start?

A. No: its surprising how ineffective – and expensive—IP protection is in the real world. One of my engineers used to say, the whole idea is knowing something can be done— once I know that, I can find another way to do it that doesn’t violate the patent.

Q. Alright, then, what is the trick of keeping “fast followers” off your tail?

A. One way is to try for super-rapid adoption, the network effect, so that your platform takes the air out of the room. Social media platforms aim for that. But the really, really, crucial point is speed of iteration—as the first mover, you have to improve fast enough that people have no reason to switch. That’s really where the first mover/fast follower battle is won and lost.