When the Leader follows - Lessons from Sailboat racing

Winning the battle for market leadership is at the heart of competitive strategy. Overtaking the market leader has often been termed “dethronement” in prior literature and is considered a key managerial objective (Ferrier, Smith, & Grimm, 1999; Smith, Ferrier, & Grimm, 2001a). 

Management scholars across different fields have shown that imitating leaders can be an effective way for followers to catch up with and surpass the leader (Posen, Lee, & Yi, 2013). However, less attention has been given to the possibility of leaders imitating competitor moves and to the performance consequences of such a strategy.

This is surprising, since leading firms do leverage imitation strategies in attempts to defend their leadership. For example, Apple, the market leader in smartphones for a number of years, imitated the moves made by Samsung in offering larger screens for iPhones two years after Apple’s chief executive officer (CEO) publicly stated that phones with larger screens would not sell 

Apple, by contrast, decided to launch very similar products to those of its competitors. In other words, while Samsung initiated new actions to catch up with the market leader, Apple followed Samsung’s decision in order to neutralize that move.

In terms of managerial implications for market leaders, the results suggest that imitating follower moves can be an effective way of preventing followers from catching up, especially in uncertain environments and with the leader having a strong head start over competitors. However, if followers possess (or build) superior capabilities and can benefit from information spillovers, the strategy to imitate the follower can backfire. Hence imitating follower actions has its benefits and costs: It helps to defend against dethronement, but risks lower absolute performance

In Sailboat racing, the speed of the boat is dependent on the wind and how well you harness the wind to gain over others. The number 2 boat can overtake the leader only through smart maneuvers and if the leader imitates every move of the number 2 boat then it becomes virtually impossible for the second boat to overtake the first.

A follower that undertakes new actions in an uncertain environment creates upside opportunities that increase its chances of catching up with the leader. Competitive actions in uncertain environments can be used to neutralize the upside opportunities of the follower. In particular, in order to maintain competitive parity in uncertain environments, a leader may decide to follow a strategy that includes holding shared growth options, which provide the same upside opportunities to competitors based on future industry conditions 

In an uncertain environment, a leader who decides not to imitate the follower’s actions increases the risk of being overtaken

Highlights from a research by Jan Michael Ross and Dmitry Sharapov in Academy of Management journal. 


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