Customer Reviews

Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets (J-B US non-Franchise Leadership)

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4 star:		(2)
3 star:		(1)
2 star:		(1)
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This book is about why big, established companies should aim to be "Fast Second" rather than pioneers of radically new markets.

The authors challenge the new hypothesis that big firms need to be "ambidextrous" (i.e. able to use either hand with equal skill). An ambidextrous organization has successfully put in place multiple, contradictory structures, processes, and cultures within the same organizational infrastructure. By developing strong shared values and by putting in charge managers capable of managing variety and ambiguity, ambidextrous organizations can successfully balance the conflicting demands that the simultaneous pursuit of being First Mover (or colonizer) and being Fast Second (or consolidator) would place on them.

The skills, competencies, mindsets, and attitudes needed to succeed as a First Mover versus a Fast Second are like chalk and cheese. From First Mover to Fast Second, these are the 16 differences according to the authors:
1. From engineering or technology skills TO marketing, customer segmentation, and retailing skills
2. From emphasis on novelty, quality, and focus on lead users TO understanding of average user needs, good at spotting consensus
3. From young, restless, fascinated with science, technology, and the leading edge TO more interested in making money than in developing the latest technological wonder
4. From roots in science TO commercial roots
5. From focus on technological achievements and creating the best-performing product TO focus on price and quality and willing to settle for a product that is "good enough"
6. From manage information network in science community TO manage network of feeder entrepreneurial firms
7. From entrepreneurs who prefer autonomy and freedom and do not want to work in a big company TO organization people, happy within the structures and constraints of a large organization
8. From fast, agile, risk-taking experiments TO people who defend the existing business and don't take unnecessary risks
9. From entrepreneurial culture TO functional organization, formal management control systems
10. From first, fast mover TO judicious mover
11. From small is beautiful TO need resources to build the brand and distribution
12. From good at management of product design TO mastery of process engineering, procurement expertise, and mass-market management
13. From a culture of innovation and experimentation TO a culture of discipline and cost-control
14. From flexible TO disciplined
15. From short-term oriented TO long-term oriented
16. From fluid structures that allow easy flow of ideas and learning from mistakes TO managed hierarchy, focusing on mass marketing, customer segmentation, and manufacturing excellence

Not only are the necessary skills for each activity different, they also CONFLICT with each other. This means that firms that are good at being First Mover are unlikely to be good at being Fast Second. Looking at the list above, it's obvious that big firms have the skills and mindsets to be good Fast Second market players. Trying to teach them the skills of a First Mover will not usually work because their existing skills conflict with many of the skills they need to develop. Big firms should focus on what they are good at - the consolidation of radical markets into mass markets (Fast Second). They can achieve this by adopting an acquisition or network strategy with young start-up firms.

I got the book from Amazon the other day and finished it last night. It usually takes longer to read a strategy book, but this one is slim with only 170 pages. Being a business development manager, the topic of strategic innovation is very familiar and the arguments are surprisingly clear ... and very thought provoking, indeed. I'll highly recommend this book. It's a bold challenge to the conventional wisdom of the need to build radical innovation competence for big firms. It makes you rethink what you aim for ...

If you're interested in strategic innovation, do also consider Kim & Mauborgne's "Blue Ocean Strategy", Slywotzky's "How to Grow When Markets Don't", and Markides' "All the Right Moves".

Peter Leerskov,
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business

This book presents an interesting thesis: Big companies should not try to produce radical innovations (ie, innovations that create a new market based on a new technology) but instead they should scale up the new markets and make money doing so. The authors support this position with two main arguments:
- It is not only difficult for big companies to create radical innovations, it is often contrary to their best interest and culture. Big companies have no incentive to change their markets.
- If big companies are not good at innovating, they are very good at scaling up markets (due to their existing relationship with distribution channels and customers).
Since most of the money in a new market is gained by scaling it up, big companies should focus on their strengths rather than trying to become more innovative.

This thesis seems to make sense. However there are many problems that are not properly addressed in the book. First, it is not clear how a big company is supposed to enter a market at the right time to scale it up. The authors provide only vague information on how to do that although it is central to make their suggestion work. The examples of big companies jumping into a market and scaling it up are not convincing. For example the authors cite Ford. But Ford did not just scale the market for automobile, it was a pioneer too. The authors do not provide clear examples of how a company is supposed to consolidate a market without being in it first. Second, the authors make an analogy with creative industries as a model for inventor/distributor cooperation. The model is sketchy at best. Why not study some real cases such as the recent cooperation in the pharma industry (eg, Imclone/BMS)? It seems that the authors did not invest the time to fully fledge and support their ideas.

The Harvard Business Review published an article in April 2005 about the factors that help or endanger first mover advantage. Among the factors are the speed of technology evolution (the higher the more likely a second mover with deep technical skills will be able to win the market) and the size of the market (the bigger the more likely a second mover with strong marketing power will win the market). The creative industry that the authors use as example belongs to the last category: power lies with the companies that have the marketing clout to push the movies nationwide. It is quite telling that a 10 page article does as good a job as this book at elucidating some of the issues with first vs. second mover advantage.

The thesis of the book is interesting. Unfortunately the supporting material and the practical advice are very light. I believe the book would have greatly benefited from less repetition and much more thourough case studies of consolidating companies. The book is a disappointment.

(If the authors haven't done their research they seem to have enrolled enough people from London to give the book glowing reviews. Read them with a critical mind.)

This brilliant book argues that big companies should not waste time and resources trying to discover new products and markets. Their sheer size, embedded culture and traditional mindsets are prohibitive factors. Radical innovation is much more likely to emerge from the efforts of all those small companies, start-ups and entrepreneurs that dream of becoming the next Microsoft. They are flexible and can afford to take risks without being burdened by rules and bureaucracy. What they lack, however, is the ability to turn a niche market into a mass market. This is when big companies should step in. If they are "smart" enough to spot the markets of the future early on they should leverage their brand name, pricing power, distribution network and marketing muscle to turn these niche markets into profitable mass markets.

Markides and Geroski use brilliant and highly accessible language to convey their message. They support their thesis by providing a whole range of examples of companies that succeeded in creating new markets by being "Fast Second" rather than "First". They also offer detailed recommendations on how to scale up and dominate a new market.

The book's thesis is very credible in a world where companies are increasingly outsourcing innovation and relying on others for ideas. And by being so specific in terms of what it recommends, "Fast Second" is superior to Gary Hamel's "Leading the Revolution" and Kim & Mauborgne's "Blue Ocean Strategy". These authors recommend that big companies should aim to grow by being open to new ideas and by attempting to create new markets themselves. But they fail to say how to do this.

I believed this book was excellent. Anyone that is in the business industry should read this book especially finance career bound individuals. The author breaks down and analyzes what pioneers of certain products have done wrong to lose the market to a "fast second" company. Some reviews of this book claim the author has gone into way to much detail on his examples. In fact, the details will help you further understand the point. One chapter is devoted to what characteristics firms have that are the inventors of the product and what character tics firms have that dominant the market. Additionally, the author lists several companies that have the substantial market share of everyday products we use and you will be shocked to find out who the actual creator is. However, he claims that very rarely do companies become both the inventor and the dominant producer of the product. After reading the book I do believe it would be difficult to do both, but with research ahead of time, as many of the companies discussed in book have failed to do, companies can invent and become the dominant producer of the product.

Advanced Technology is not the only road to innovation. In fact, technology alone often leads to failure for a couple of reasons: 1) Even with a patent, your concept will be worked around - especially by those with deep pockets, and 2) Technology is highly overrated, it's much more important to serve genuine needs without all the bells and whistles that simply confuse consumers.

Fast Second shows time and time again that you don't need to be the first horse out of the gate to win the race. From a strategic viewpoint, being second gives you the distinct advantage of seeing what works and what doesn't - before committing scarce resources. Also, it's been said that The Second Mouse Gets the Cheese!

Markides and Geroski point out significant advantages for larger enterprises. For example, most big companies find it difficult to create radical innovations. However, large enterprises excel at scaling up markets.

Fast Second is segmented into eight compelling chapters that will definitely stimulate your creative mind:

1) Spotting the real innovators
2) Where do radical innovations come from?
3) From new technologies to new markets
4) Colonists and consolidators
5) From colonization to consolidation
6) Racing to be second: when to enter new markets
7) The changing basis of competition
8) Creating the markets of the twenty-first century

While not concisely set out in the test, you may want to consider acting as a fast second by looking at the competition for sources of inspiration. Observing what works and what doesn't in the marketplace sets up the opportunity for real-time strategic experiments.

"The ability to learn faster than your competitors may be only sustainable competitive advantage." - Arie de Geus

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Michael Davis, Editor - Byvation

"Business Success through Innovation"

A suggestion for those who found the thesis of this book interesting, but were put off by the amount of detail and examples (as two reviewers complain below): I suggest augmenting this book with Reid Watts' "The Slingshot Syndrome: Why America's Leading Technology Firms Fail at Innovation". Watts' book was the first to propose the link between creative industries and radical products (and is acknowledged as such on pg. 176-177 of "Fast Second"), and is very worthwhile reading for anyone seriously interested this subject.

While the authors come up with some suggestions that challenge the conventional wisdom in strategy making - innovations are the only way to be truly successful in times of change - the book is still disappointing. This is due to two shortcomings: first, the authors' main argument only applies to radical innovations (such as the invention/development of cars, TV, or the Internet), which by their very nature create a new industry in which established firms hardly ever compete. Consequently, radical innovation is not the type of innovation that established firms (should) care about in real life anyway. Second, the authors keep repeating the same arguments over and over again, and even use the exact same sentences several times throughout the book. This is very frustrating for the reader who is curious to find out about the real implications and recommendations for established firms that emerge from the authors' prime insight that established firms should focus on scaling up the innovations that others have pioneered.
In summary, the book discusses an interesting new idea, but fails to provide enough detail and examples to truly underpin this idea.

Constantinos C. Markides and Paul A. Geroski face a curious challenge: They have a lot of data to support their claim that the way to make big profits, if you're quick enough, is to be the second company to take an innovation to market. However, the myth of the first mover - the idea that being first to market is the way to make money - is pervasive enough that they have to spend a lot of time convincingly debunking it. They also show the challenges and risks of trying to become a successful "fast second." The authors explain the complicated, almost organic, interaction among innovators, competitors, markets and consumer demands that tug at the marketplace. They do a fine job of documenting the collective act of creation. getAbstract recommends this book to those who want to rethink their strategies for innovating or entering new markets. The possibilities of being a second mover will appeal to anyone who is interested in innovation, planning, new product marketing, or social and economic change.

The main theme of the book is:- "Established corporations should subcontract the creation of new, radical products to start up firms and concentrate their efforts on consolidating the markets because the skills, mindsets, and attitudes required for creating a radically new market not only differ from those needed to grow and consolidate the market but also conflict with one another." If you buy in the above, you will be satisfied with the tons of well written samples and analysis which can be helpful to support any relevant strategic proposals to the board in real life. However, I am obliged to warn passionate readers of the need to remain skeptical of the suggestions of the authors to put their strategy into real practice. No matter what, recommended as a good business read!

In his previously published All the Right Moves (1999), Constantinos Markides asserts that "superior strategy is all about finding and exploiting a unique strategy in the company's business while at the same time searching for new strategic positions on a continuing basis." First he explains how to create and execute such a strategy and then locate its most favorable position; then he explains how to prepare for strategic innovation which will strengthen that position. In the final chapter, he concedes that "designing a successful strategy is a never-ending quest. Even the most successful companies must continually question the basis of their business and the assumptions underlying their 'formula for success.' (In fact, in one way or another, this is what most successful companies have done to get where they are.) New who/what/how positions are constantly popping up around the mass market, and established companies must be on the lookout for them. Like a modern-day Christopher Columbus, each company must set out to explore its industry's evolving terrain, searching for new and unexploited strategic positions."

In this his newest book, Markides and co-author Paul Geroski explain what a "fast second" strategy is and how to formulate it as well as how "smart companies" using that strategy have been able to bypass radical innovation to enter and dominate new markets. They identify and then examine four quite different types of innovation: Major, Radical, Incremental, and Strategic. "Our thesis is that it is impossible to offer proper advice on how to create or colonize new markets without first understanding where new markets come from, what they look like, and what it takes to succeed in them." They focus on demand and supply-side influences, arguing that, in the main, "most radical new technologies are pushed onto the market from the supply side." Therefore, radical innovations are by nature disruptive. For both customers and producers. Moreover, radical new markets are rarely created because of demand or customer needs. "Instead, they are created in a haphazard manner when a new technology gets pushed onto the market."

Others have their own reasons for why they admire this book so much. Here are two of mine. First, Markides and Geroski (in effect) call for a "Time Out!" on initiatives to create or respond to disruptive technologies, suggesting that less heat and more light are needed insofar as assumptions about such technologies are concerned. In this book, as noted, they identify four types of innovation and explain the significant differences between and among them. Each requires different strategies and tactics. This is especially important before decision-makers "set sail" in search of what Chan Kim and Renée Mauborgne characterize as "blue oceans" (i.e. uncontested market space). Without really understanding the nature of the given technology and market, decision-makers will be victimized by what Jeffrey Pfeffer and Robert Sutton characterize as the Doing-Knowing Gap." This book will be invaluable to those who struggle to get appropriate align of strategy and market.

I also admire what Markides and Geroski share because their insights challenge another durable but questionable assertion: that larger, established organizations can become more "entrepreneurial" by developing cultures and structures of much smaller, start-up firms. This challenge will, I hope, require decision-makers to re-evaluate their own assumptions about pioneering, creating new products and/or services for new markets, the proper role of internal R&D, etc. With all due respect to Markides and Geroski's material, however, I think it would be a fool's errand to implement, without rigorous scrutiny, all of their opinions and recommendations.

It remains for each reader and her or his associates to formulate what Markides and Geroski refer to as a "dominant design," one which lays the groundwork for the rapid expansion of the given market and which not only shapes the nature of the near-term competition in that market but will be a significant influence on market competition thereafter.