By John Kay
Why the last shall be first and the first shall fade away
Financial Times 13 May 1998
Being the first to
the road to riches many
Business history is
Do you remember Berkey or Ampex? Gablinger or Chux?
perhaps you should, because each of them
an important place in the history of product
Berkey produced the first hand-held electronic calculators,
Ampex the first video recorders, Gablinger developed the first low alcohol lagers,
Chux sold the first
Or perhaps you should not,
because none of these companies made a
success of their innovations.
Today the calculators we use are probably made by Casio,
our video recorder comes from Matsushita:
our low alcohol beer is Miller Lite,
our nappies are made by procter and Gamble.
In each of these markets, the innovator was
As the future of EMI hangs in the balance,
it is a good moment to
that this company has one
of the most remarkable records of innovation of any in the world.
EMI was a
in computers, and its CAT scanner transformed
. It has not made any of these products for many years.
Our televisions come from Sony,
our computers from IBM or Dell,
and GE is the market leader in scanners.
Xerox looks like an exception to this sorry catalogue.
The company was first into the photocopier market,
and even if its dominance was ultimately challenged by Canon
it remains a large and successful company today.
But Xerox was also a pioneer in fax machines and personal computers.
Each of these products eventually proved to be a major success
- but not for the Xerox Corporation.
As we all know, it was to be Apple which developed the personal computer market
(although the first computer I bought, back in 1982,
came from Sirius, an Exxon subsidiary.
Where are they now?) But Apple's leadership quickly disappeared
when IBM came on the scene. Still, Apple then jumped ahead by introducing
the graphical user interface.
Their windows and mice brought personal
computing within the reach of anyone. But it is Microsoft who do this for us now.
The business world is not very kind to pioneers.
EMI's experience with that of Britain's most successful
company of the last two decades - Glaxo.
Each had, in the 1970's, a product which would ultimately take the uS health
care market by storm.
Both the CAT scanner and anti-ulcerants were to win Nobel prizes
for the British scientists who invented them.
But there the similarities end.
EMI were proud to employ Geoffrey Houndsfield,
who invented the scanner.
They established a uS distribution network and manufacturing
his innovation. And were quickly
by the superior
, marketing and technical skills of GE.
James Black, who developed anti-ulcerants,
did not work for Glaxo, but for Smith Kline.
Glaxo's Zantac was an imitative product,
second to market. uS distribution was initially contracted out to
Hoffman la Roche, the only foreign-owned drug company previously to have engaged
major success in uS distribution.
The superior marketing skills of Glaxo and its partners enabled Zantac
to overtake Smith Kline's Tagamet and become the world's best selling drug.
Glaxo's achievement was based not on the speed or quality of their
innovation but on their commercial skills in
What is true of technical innovation is also true of innovation
in business process. Direct Line is
losing market share to johnny-come-lately established insurers.
American Express may have pioneered plastic money,
but it was to be Citibank, Bank of America and even Sears Roebuck
who were to capture the market with Mastercard, Visa and Discover.
Next and Ratners identified unexploited market
- fashionable clothing for older women and
cheaper than you imagined buying - only to find that established
could do the same job at least as well.
And what we see as a first mover advantage is often only
that because we now think of the successful
innovator as the first mover.
Many spreadsheet programmes were developed in he 1980's,
and Lotus succeeded not because it was the first or the best but
because it was the product available at the moment
the market was ready to take off.
Even if you know how a market will develop,
timing is a matter of luck - or of quite exceptional
There are two closely related lessons.
One is that being first is not often very important.
The other is that innovation is rarely a source of competitive
advantage on its own.
Individuals, and small firms,
can make a great deal of money out of good new ideas.
The success of large established corporations
- Matsushita, philip Morris, IBM or General Electric -
is generally based on other things: their
, their depth of technical
, then marketing stalls.
And time and again these characteristics enable them to develop
the innovative concept far more effectively
than the innovators themselves.
This is not to say that there is no role in business for the great
innovator. After all, General Electric was built on the
of Thomas Edison's mind, the Ford Motor company on the
abilities of its eponymous
. The imagination of Walt Disney created a company which is
still without parallel or
. perhaps Akito Monta of Sony occupies a similar place in the
of modern business.
However, while many chief executives may see themselves as
Edisons, or Fords, Disneys or Moritas,
not many actually are.
Genius is indeed a source of competitive advantage,
but necessarily a rare one.
So when you are told that the key to the future business success
is to see the future more quickly or more clearly than other people,
ask which established cases in business history
illustrate the point.
And try to remember Berkey and Ampex, Gablinger and Chux.