Firms need innovation to continue existing in the current markets. Many companies used to benefit from developing original innovative products. However, the current rapid rate of technology has increased the rates of competition in industries and firms have to find ways to adapt and compete well. Pioneers no longer have the opportunity to benefit with their products for a long time. They have to deal with the fact that follower companies are introducing competition to the market at a faster rate. Through effective strategies, it is possible for early entrants to reap from their innovations.
It is important for firms to time entries in accordance with the evolution of complimentary technologies and customer requirements. Companies need to determine how its products will affect the market. They need to conduct thorough research aimed at identifying the needs of a customer at a particular time. SixDegrees identified the needs of its customers to connect with each other when it first began. The likely success of a technological innovation depends on timing. Launching a product at the wrong time can decrease the chances of its failure regardless of how good the product might be. Technological introductions are less likely to be successful when they are introduced early in emerging markets. However, in established markets it is important to ensure that any introductions are not late, as this will increase the chances of competition from earlier entrants (Schilling 390). In the case of SixDegrees, it succeeded in the first years because it launched at a time when there was no competition.
When a pioneer starts a new market with an original product, the costs and risks are often very high. This makes product survival in the market difficult. However, incrementally new products realize lower risks and costs. This makes it easier for the pioneers to survive. Pioneers can also benefit from the early market monopoly. Early followers can exit the market without incurring heavy costs as the pioneers (Min, Kalwani, and Robinson 15). Even though SixDegrees closed after only three years, it had managed to get over three million users at its peak. It had the market’s monopoly since it had little competition. Early followers have the chance to learn from the mistakes of the pioneer. This was the case with Facebook. The company launched in 2004 and released to the public two years later.
Instead of controlling all its development in-house, as its rivals had done, the company opted to invite the users to develop the features they wanted. Facebook knew the importance of engaging the users in many activities once they visited the site. Within two years after its introduction to the public, it had already overtaken MySpace, which was the main social networking site at the time. In contrast, people using SixDegrees felt that the networking site did not attract many members. They felt that the site was not interesting enough to attract many people. In addition, the site developers did not develop applications that would enhance the user experience. Those who joined the site could only invite their friends and receive requests from other friends. There were limited activities for the members to participate in once they logged on to the site.
A first mover advantage is the firm’s ability to beat its competitors because of being first in the market in a new product category. Firms can take advantage of this to improve their market share and increase their profitability. Firms achieve first mover advantages when they are able to develop a technological edge over their competition. Starting first means that the company will have more time to accumulate and develop expertise on the technology. Another way that firms are able to achieve first mover advantage is by creating loyal customers. The company needs to find ways of ensuring that customers will find it inconvenient and expensive to switch to later entrants. Companies need to anticipate their competitors’ access to scarce resources. This includes supplies, people, and location (Suarez and Lanzolla). However, rapid technological changes are changing the competition for first entrants. Technologies are developing at a faster rate than they were before, and this is affecting how companies operate once they introduce a new product to the market.
SixDegrees was limited in its technological applications. When it launched, technology was not as it is today, or as it was when Facebook was first launched. In addition, many people did not use the internet as frequently as they did when Facebook was launched. These factors determined how Sixdegrees developed. The company was not able to meet the demands of the clients. The users felt that they had limited options since they could not interact with each other once they had created their profiles and invited their friends. Facebook was able to develop quickly because it took advantage of the emerging technologies at the time. Technology helped it to overcome the limitations that SixDegrees had experienced. By the time Facebook developed and grew, digital technology had grown significantly. People could access the internet through their mobile phones with minimal effort. This made it possible for people to interact more easily. They did not have to be limited by the fact that they had to access the internet through their computers.
Facebook was able to appeal to many diverse classes of people because it was able to identify the market needs. The ability to identify and fulfill the needs of its customers caused greater customer satisfaction. Users came up with different activities and applications including social games, product reviews, and groups. People liked the fact that they had so much to do when they visited the site. Moreover, allowing the market to determine its features enabled the site to serve the interests and needs of their clients. Users could share all manner of information with their friends. This included photos and data. In addition, Facebook gave the users more flexibility in determining the people who would access their information. The site was more secure and it appealed to its initial users by avoiding advertisements. Facebook emerged in the market when people needed something different. It was able to overcome the limitations of MySpace, especially in improved security and giving the users more flexibility.
Knowledge of innovation strategies will enable the company to benefit from its innovation. Collaboration strategies are effective for small companies that need the capital to progress and expand their market share. Identifying the right partners and the right type of collaboration is important. Companies need to determine how collaboration will enhance their strengths, create a competitive advantage, and overcome their limitations. In addition, they need to determine how much control they are willing to relinquish when determining the type of collaboration strategy they want. Knowledge of these factors will enable the company to determine whether it is willing to collaborate. Companies opt to work individually when they have the required capabilities, when they feel that it is important to protect and have exclusive control of their technology, and when they want to determine and control the use and development of their technology. In addition, if the product is essential in developing the firm’s capabilities, then companies will remain for solo business instead of collaborating. Some firms realize the magnitude of developing their innovations and they may lack the capabilities needed. Such firms opt to look for other businesses that are willing to collaborate with them. Firms realize several benefits when they decide to collaborate.
Collaboration enables firms to achieve much at a faster rate. Firms are able to acquire the resources they need for development purposes. They get the opportunity to learn from their partners. In addition, collaboration enables firms to reduce asset commitment. They do not have to incur much costs and risks when they collaborate. The joint venture collaboration between Dyesol and Tata Steel enabled Dyesol to get the funds it needed to continue with the development of its product. Dyesol would benefit from the expertise of Tata Steel, which is one of the largest steelmakers in the world. In addition, Dyesol would benefit since its collaboration with Tata Steel meant that more people would get to know more about its technology and its products. This would enable it to expand its markets. Because of this collaboration, Dyesol was able to develop the largest DSC module. It developed a solar steel roof, which was installed in a building. This achievement would not have been possible without the input from Tata Steel. The collaboration with Pilkington was beneficial for Dyesol. The two companies formed DyeTec Solar under a joint venture. This enabled Dyesol to use its technology on architectural glass. The company was able to identify a new market for its product because it opted to collaborate with Pilkington. It reaped from the market base that Pilkington had already developed over the years.
Collaboration strategies can have several disadvantages. Firms have to share the rewards they get. They also have to relinquish some of the control over its products. In addition, there is a risk of partner malfeasance. Dyesol was concerned about its partnership with Tata Steel. Tata Steel is a big company compared to Dyesol. The main worry that Dyesol had was that Tata would know how to reverse engineer its dye product. It was also concerned that in time, Tata would be able to circumvent its patent. If this happened, Dyesol would lose its knowledge and expertise. Its main partner would become its competition. Another disadvantage with collaboration strategies is that they can cause a rift or disagreement among the shareholders. The managers at Dyesol could not agree on what the company ought to do after its second joint venture. Some of the managers felt that it would be better for the company to license the technology to different manufacturers. Making this decision would enable the company to reap from the royalties it had. In addition, the company did not have to worry any more about protecting its intellectual property since others would be able to use it legally. However, others felt that this would not be a wise decision. Licensing the product would mean relinquishing control and sharing knowledge.
Min, Sungwook, Manohar Kalwani, and William Robinson. “Market Pioneer and Early Follower Survival Risks: A Contingency Analysis of Really New Versus Incrementally New Product Markets.” Journal of Marketing 70.1 (2006): 15-33
Katz, Michael L. and Carl Shapiro. “Technology Adoption in the Presence of Network Externalities.” Journal of Political Economy 94.4 (1986): 822-841
Schilling, Melissa A. “Technology Success and Failure in Winner-Take-All Markets: The Impact of Learning Orientation, Timing, and Network Externalities.” Academy Management Journal 45.2 (2002): 387-398
Schilling, Melissa A. Strategic Management of Technological Innovation. New York: McGraw Hill. Print
Suarez, Fernando and Gianvito, Lanzolla. “The Half-Truth of First-Mover Advantage.” Harvard Business Review. Apr. 2005. Web. 16 Feb. 2016