Core Course Innovation Session 1 PPT 1d

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RCM Corinne Grenier 
INNOVATION STRATEGY OF 
COMPETITIVE COMPANIES AND 
ENTREPRENEURSHIP
Professeur RCM : Corinne Grenier
Track One – What innovation is
PPT 1d – Innovation and Time
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Outline of PPT 1d
 Main ideas
 Leader versus follower dilemma 
 Time-based Competition for innovation
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Main ideas
 Competitive rules are changing since more than one decade.
What appears much more critical is not only the ability of companies to launch 
radical innovations into the markets BUT to launch fresquently innovations. 
As all companies are more and more interlinked (networks, clusters, “pole de 
compétitivité”…), which favor rapid diffusion of innovations, the leading 
companies are obliged to continuously innovate to maintain their strategic 
positions.
 Two debates: 
- When to innovate: the leader versus follower dilemma
- At which pace to innovate : the Time-based Competition 
We speak about continuous innovation 
 Various ways allows companies to continuously innovate:
- to articulate radical innovation and incremental innovation (see PPT 1b)
- to develop platform of innovation (see track 2)
- to develop partnerships (see PPT 1e)
• First mover advantage derived from innovation
– Long-run advantage
• Reputation, switching costs, network effects
• Learning curve
• Patents
• Preemption:
– Tie up inputs, location, distribution channels
– Preemptive positioning in marketing or standards
– Often trade-off between maximizing value of pre-entry market power and 
long run advantage
• But (study by Golder and Tellis, 1993)
– 50% of pioneers disappear
– Market leader is a first mover in 11% of cases
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When to innovate: the leader versus follower 
dilemma
• First-mover disadvantage
– Technological competition
• Provision of a public good
• Non-proprietary technology
– Patent protection?
– Can new technology been leapfrogged?
– Uncertainty on market size and structure
• Entry/future market structure
• Resolving demand uncertainty. First mover gives information for free to 
competitors
– Example: Palm with first product; Casio and others benefited
– Regulatory approval
• Follower advantage
– Lower risks 
• Information on technology reliability and market response
• Avoid products with no potential
– Reduced R&D and marketing/penetration costs
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When to innovate: the leader versus follower 
dilemma
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Followers benefit obviously from lower risks since they get more information on the 
reliability of the technology and the market response
Advantages :
- Avoid products with no potential
- Reduce R&D and marketing / penetration costs
Prerequisites :
- Imitate, but with a little something extra
- Price incentive expected by the clients
- Be reactive : enter the market at the beginning of its development (first 
followers' strategy)
- Be able to incorporate 2nd generation technologies
When to innovate: the leader versus follower 
dilemma
RCM Corinne Grenier 
When to innovate: the leader versus follower 
dilemma
Compulsory reading 
 In the Textbook, chapter 8, sections : “First mover strategy” and 
“Follower strategy” 
Non compulsory readings (for students reading French)
Read article
 Manageris Collection, “Tirer parti des innovations des autres – une
alternative à la stratégie d’innovation” 
With more information on technology viability/reliability and market acceptance, 
the follower benefits from lower risks (and costs?) 
Some products and time of market 
acceptance
Microwave oven 20 years
VCR 20 years
Light drinks 10 years
Credit cards 8 years
Pocket books 5 years
Product Pioneer Imitator
Aircraft De Haviland Boeing, 
Douglas, Airbus
Spreadsheet Visicalc Lotus, Multiplan
IRM Fonar Johnson & 
Johnson, 
General Electric
Video games Atari Nintendo, Sony, 
Sega, NEC
Illustration 
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When to innovate: the leader versus follower 
dilemma
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"A two – step imitation process” in “Managing imitation strategy” by Schnaars.
2nd imitation step
1st imitation step
innovation
Pioneer enters
with an innovative
product 
imitator with an 
enhanced product
or 
entering with a
Lower price
Many 
imitators with 
lower prices
Time 
When to innovate: the leader versus follower 
dilemma
RCM Corinne Grenier 
In the 1980s, large companies in North America and Europe became concerned 
about the ability of Japanese manufacturers to produce high-quality goods 
at low cost.
BCG consultants observed that while Western companies were organized for 
economies of scale and control, their Japanese competitors tended to focus 
primarily on fast throughput. 
Time-based Competition for innovation
Two innovation strategies
• Innovation ‘leadership’
– First to market
– Technological leadership
– Strong corporate commitment to creativity and risk-taking
– Close linkages to sources of relevant new knowledge and to the needs and 
responses of customers
• Innovation ‘followership’
– Being late on the market
– Imitation (learning) from experience of technological leaders
– Strong commitment to 
• Competitor analysis and intelligence 
• Reverse engineering
• Cost cutting
• Learning in manufacturing
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When to innovate: the leader versus follower 
dilemma
• Strategy for development of a sustainable competitive 
advantage
– Deals only with lead-time areas most important to the customer
– Reductions in lead-time derive from the removal of waste from the 
processes involved
– Lead-time reductions through system analysis and attack of the 
underlying processes; not product driven
• Reductions in lead-times in the processes and structures 
used to design, manufacture and deliver products to 
customers
– In particular shorten development times (time-to-market), e.g. 
concurrent engineering vs. linear model (see Track 2)
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Time-based Competition for innovation
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Time-based competition (TBC) is defined as a strategy for the 
development of a sustainable competitive advantage, characterized by 
3 major traits:
1-It deals with only those lead-time areas that are most important 
to the customer 
2 -These reductions in lead-time derive from the removal of waste 
from the processes involved
3 -These lead-time reductions must be achieved through system 
analysis and attack of the underlying processes; they 
must not be product driven. 
TBC must be a strategy, which achieves reductions in lead time 
through changes in the processes and structures used to design, 
manufacture and deliver products for its customers
Time-based Competition for innovation
RCM Corinne Grenier 
Some readings
 Compulsory readings 
Sapkauskiene A. & Leitoniene S., (2010) « The Concept of Time-Based 
Competition in the Context of Management Theory”, Inzinerine Ekonomika-
Engineering Economics, vol 21(2), 205-213
 Other readings (non compulsory readings)
-Stalk G. (1988), ‘Time – the next source for competition », Harvard Business 
Review