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The Benefits of Lying in Wait: Diamond’s Vice Chairman Helps Uncover Myth of the ‘First-Mover Advantage’ in Wall Street Journal Article

Research Finds Technology Platform ‘Followers’ Are Often Best Positioned for Success, Writes Diamond Management & Technology Consultants’ John Sviokla

1.25.2010

CHICAGO, January 25, 2010 -- This morning’s Wall Street Journal features an article co-authored by Dr. John J. Sviokla, vice chairman of Diamond Management & Technology Consultants, Inc. (NASDAQ: DTPI), that details research on information technology-heavy industries, to determine whether there’s truth behind the fabled "First-Mover Advantage," or whether there’s actually a "Follower Advantage."

The article, entitled “The IT Platform Principle: The First Shall Not Be First,” appeared in a special “Business Insight” section (page R4), which is produced in collaboration with MIT’s Sloan Management Review. Dr. Gezinus Hidding, associate professor of information systems at Loyola University Chicago’s Graduate School of Business, and Dr. Jeff Williams, professor of business strategy at the Tepper School of Business at Carnegie Mellon University co-authored today’s article.

The authors specifically explored industries that revolve around technology platforms such as Oracle, SAP, and social networking products. Of the 15 platform industries studied, 14 of the current industry leaders came to market as followers of a competitor's platform. SAP was the only example of a platform creator that is still the leader.

“These findings are important because the impact of platform businesses continues to increase rapidly,” says Sviokla. “If there’s a platform happening in your industry, senior management needs to understand the dynamics because the window of opportunity could be small. You don’t want to innovate too fast and you also don’t want to wait too long.”

Among other examples, Sviokla and his co-authors use the case of Apple’s ubiquitous iPhone, which was late to the smartphone market, but has carved out a new platform by combining three formerly separate functions: cellphones, PDAs, and personal computers, according to the copyrighted Wall Street Journal article.

Platform leaders typically assume a leadership role through specific Follower Advantage techniques, according to the article. Five of the industry leaders studied were “Fast Followers,” those entering the market as the second, third, or fourth players. Many platform leaders also use “Staircase Strategies,” focusing on customer experience by making it easy to upgrade to new versions while maintaining compatibility with earlier versions, according to the article.

The authors found that, used separately or together, these approaches appear to predict both the behavior and the success of companies that lead in platform industries.

In addition to the iPhone, the article uses industry examples such as Microsoft’s Windows, Amazon.com, and eBay. Sviokla regularly discusses issues surrounding technology innovation in his Harvard Business Review blog, “The Near Futurist.”

In the end, the First-Mover’s Advantage is exposed as a myth—a platform’s originator rarely has the best chance of dominating its market for years to come.

About Diamond

Clients trust Diamond Management & Technology Consultants, Inc. (NASDAQ: DTPI) to help their companies grow, improve margins, and increase the productivity of their investments. Working together to design and execute business strategies that capitalize on changing market forces and technology, Diamond’s consultants are experts in helping clients attract and retain customers, increase the value of their information, and plan and execute projects that turn strategy into measurable results.

Diamond's capabilities are rooted in deep strategy, technology, operations, and industry experience. The firm's approach to client service is based on objectivity, collaboration, and an unwavering commitment to its clients' best interests. Headquartered in Chicago, Diamond has offices in New York, Washington, D.C, Hartford, London, and Mumbai. To learn more, visit: www.diamondconsultants.com.

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