Innovation Strategies

In the West, we often look at Asian companies as pursuing a "fast follower" innovation strategy. Crawford (1980) would describe this type of behaviour as indicative of an "adaptive" innovation strategy. While an adaptive innovation strategy may work when you enter an industry pre-dominant design, this type of innovation strategy is not wise for industries that display "network externalities."

Network externalities refer to products "for which the utility that a user derives from consumption of the good increases with the number of other agents consuming the good" (Katz and Shapiro, 1985).

Which products?

Online auction; computer software; phones; faxes; video games; and, yes, vinyl turntables.

For these products, being the "fast follower" is not a good idea. An example of this can be seen in Taiwan. In Taiwan, eBay is currently the "fast follower" in Taiwan and is struggling against Yahoo's online auctions, who were first.

There are definitely situations where being first is critical to success -- winner takes all situation.