When Boeing President Bill Allen saw the Comet at the Farnborough Air Show in 1950, he realized that the future of civil aviation rested with jet propulsion.
In the wake of a number of Comet crashes, Boeing (with its 707) and McDonnell Douglas (with its DC-8) have come to dominate the market.
IBM, which Peter Drucker called “the world's foremost creative imitator,” trailed Remington Rand in introducing a commercial mainframe computer but claimed market leadership within four years of the original's entry.
IBM repeated the feat with a personal computer that took the best of the Apple and Commodore machines, among others, and combined them to create the first commercially viable product, only to lose out to clones led by Compaq and Dell.
Many examples of this phenomenon can be found. Nintendo was one of seventy-five imitators of Atari's 1975 Pong video game but became the industry standard bearer. Conner Peripherals' 1989 version of Prairietek's 2.5-inch disk drive captured 95 percent of a market the pioneer had dominated; Netscape did the same to Spry before succumbing to Microsoft's Explorer. Honda and Toyota waited for Ford and GM to be the first followers of Chrysler's minivan but pushed them out of the market with their own versions of the vehicle. These are not merely anecdotes: many studies confirm that fast second movers, and even latecomers, do very well.
Why are many imitators successful? With the innovator and pioneer paving the way (and paying for it), the imitator enjoys a free ride. It saves not only on research and development but also on marketing, because customers have already been primed to use the novel product or service. The imitator avoids dead ends, whether a losing bet on a dominant design, such as Sony's Betamax VCR format, or an innovative prescription drug that proves not to work.
With almost 90 percent of drugs under development failing in the trial phase after a billion-dollar investment, the potential savings are enormous. And even though the innovator is granted a monopoly period during which it can try to recoup its investment, a fast follower enjoys a monopoly of its own: the first generic maker to challenge a branded patent is granted a six-month window of exclusivity during which its product may sell for as much as 80 percent of the branded equivalent. In the case of a blockbuster drug like Lipitor, this means a $1 billion return on a $13 million investment.
That's not bad under any circumstances, but it's an especially lucrative deal given the low risk involved in following a route shown to work scientifically and marketwise. If this sounds extreme, consider a large study covering 1948 to 2001: it found that innovators captured only 2.2 percent of the present value of their innovations; the rest, we can conclude, went to the imitators.
With the benefit of hindsight, imitators capitalize on the shortcomings of early offerings. Disney, for example, not only leveraged the technical and organizational innovations of the early animation studios but also was in a position “to discern the limitations of existing cartoon animation with its excessive reliance on cartoon strip characters, the weak or even non-existent stories, their over reliance on recycled formulas such as chases, the lack of characterization of central figures, and their poor visual quality.”
Because imitators do not incur the investment made by the pioneer incumbent, imitators can tweak the original to fit shifting consumer tastes, or they can leapfrog into the next technological generation. Samsung, like other South Korean manufacturers, serves as an example. Samsung was hopelessly behind in analog technologies when it leapfrogged into the digital age. Having observed market reaction, imitators can better calibrate a product, positioning it where returns appear more secure and promising.
Because most productivity gains come not from the original innovation but from subsequent improvements, imitators are often better positioned to offer the customer something that is not only potentially better but also considerably cheaper. With the need to retrace many, though not all, of the innovator's steps, imitation entails nontrivial costs; however, overall costs in most instances are markedly lower, typically 60 to 75 percent of the costs borne by the innovator.
In an era of thin margins, a gap of that magnitude has huge repercussions. It enables the imitator to make competitive moves, ranging from substantially lower pricing (thus passing the cost saving to the consumer) to the offering of superior product (or service) features, better distribution and service, or a longer and better warranty (to compensate for a lesser-known brand). Or the savings can be channeled toward, well, innovation.
Imitators are also less likely to become complacent, a significant problem for innovators and pioneers who are taken with their success to the point of underestimating the dangers lurking in the rearview mirror. Imitators, which come from behind, tend to be paranoid about others following in their footsteps and are better prepared to repel the attack. As Jonney Shih, Asustek's chairman, notes, “We can't forget that there are people running after us.”
Because imitators often differentiate themselves from the original, they are often more attentive to game-changing technologies. The pioneer animation studios were reluctant to adopt sound and color when they became available, but Disney was quick to realize their promise and used them to emerge as the leader.
Finally, because imitators often work from more than one model, they are constantly reminded that there is more than one way to go forward, a precursor to further imitation as well as to focused innovation. It should not come as a surprise that the most profitable innovations often are those containing a strong dose of imitation.