Today’s BMW is Tomorrows Hyundai

The innovations that will be standard in ten years’ time are most likely emergent technologies today.
As an example, premium brands in automotive performance such as BMW and Mercedes have introduced technology such as ABS braking systems, lane assist and airbags, just to name a few of their many innovations. First mover advantage using innovation as a competitive advantage has kept these premium brands ahead of the pack, but before too long, today's BMW features can be found in tomorrow’s Hyundai.

According to an article by Fernando F. Suarez and Gianvito Lanzollain in the Harvard Business Review (HBR), first-mover advantage can be simply defined as” a firm’s ability to be better off than its competitors as a result of being first to market in a new product category.” First mover advantage is created in one of three main ways:

1. Create a technological edge – by starting early, the firm has a greater chance of mastering the technology before competitors;

2. Pre-empt late arrivals gaining access to scarce resources and

3. Build an early base of customers.

Total industry disruption such as was achieved by the iPhone, is often beyond the average SME given the likely lack of R&D resources and focus required at this size on core business. However, by focusing on emergent industry shifts a displacement strategy that shifts the boundaries of competition is well within the means of the innovative entrepreneur.

Disruptive innovation like the iPhone has its challenges. High adoption rates and rapid growth requires large cash reserves to fund the infrastructure, supply chain and resources to meet this demand. This puts incredible stress on cash reserves and is very difficult to fund through cash flows alone. Businesses rarely get in terminal trouble from lack of sales but can really struggle from lack of working capital highlighted by poor cash flows fueled by a high growth environment.

Suarez and Lanzollain presented a theory of calm innovation. Innovation that quietly recognises and adopts emergent industry trends and, over time, introduces these into their business model, starting with early adopters.

What trends are emerging in your industry that you could slowly and calmly adopt, which over the long term could make your competition irrelevant?