for the last 20 years there has been one big debate around technology innovation should you be a first mover or a fast follower first movers would take on higher risk experiments expecting higher returns but also tolerating higher rates of failure fast followers on the other hand would wait for the kings to be worked out before making an investment so which strategy is better this debate is far from over let's take a look now let's be honest whether you move early or late neither is risk-free digital transformation in the last two years brought it all to the forefront innovators claim years of advancements while laggers question if being ahead is better than being behind so who will be right in the end now first movers or innovators take higher risk and expect much higher returns that's directionally true but just like the stock market higher risk projects have higher level of unknown variables and therefore high risk of failure so higher volatility if you will and that is exactly why you invest in them you expect higher payoffs from such innovations the same way stocks outperform bonds long term higher risk innovation will outperform the status quo of doing more of the same now on the flip side fast following implies that the laggards would over invest and move faster than the innovators to catch up and gain competitive advantage at a lower risk and lower cost or so the argument goes the essence of this dilemma goes back to the good old portfolio theory from business school when you are faced with projects only take higher risk for high rewards right if you think the higher risk will not have incremental payoffs you wouldn't do it and that's the essence of the first mover versus fast follower debate first movers perceive the risks in line with returns and fast followers perceiver is too high one of the fallacies of fast followers is to assume that they are ready to innovate but choose not to because the risk is high followers tend to point to the high failure rate of early experiments whether those are startups or digital projects innovators point out that entering the same space later would require much higher investments or acquisitions one study pointed out that none of the leaders of major sectors are fast followers fast following is a defensive strategy at best or an excuse for underperformance at its worst innovators want to take high risks they are the venture capitalists of their industries whereas fast followers are the hedge funds focused on maximizing the return from existing assets sweating the assets there is actually more at place than just risk there are great growth expectations at least first movers tend to have a growth mindset expect increasing growth rates above and beyond than the current business provides to put it simply their risk tolerance is higher because their growth expectations are higher in my experience laggards or followers tend to have lower risk tolerance because of the smaller growth expectations the only way a laggard can be a fast follower is if their growth rate exceeds the leaders otherwise they are slow followers and will lose market share often the argument of fast followers is that their failure rate is lower than those of the innovators and it's true but irrelevant innovators tend to risk higher failure rate at a lower cost lead comers tend to invest more to catch up as we talked about it overall the calculus may still favor the innovator some fortune 500 companies will not invest in 10 innovation projects at 10 million dollars each but would require business to catch up and spend billions to do so the ultimate question about first movers and fast followers is this do you want to bet small amounts at higher risk or large amounts at lower risk some choose the former the other is the latter but it gets even more complicated than that different tolerance per business unit is the norm the same company may be an innovator in one area and a legacy in another what does that mean like an oil and gas business may tolerate a much higher risk in exploration than in their digital programs in let's say finance the risk level that is normal for one line of business may not be tolerated in another also there's a question of talent being a fast follower assumes that you can attract talent to determine what innovations to follow and what not to also to have the business acumen to make the case for a much larger bet at a later stage than the innovation business to make a catch-up plan could cost orders of magnitude more than an early stage innovation can a laggard attract and retain such strategic talent why would they not go to a business innovator frankly hard to see why the question of first movers and fast followers is ultimately about the overall risk tolerance of a business innovators will make smaller bats at higher risk and laggers will make bigger bets at lower risk both strategies have winners and losers so it ultimately comes down to business principles now in a world where change is not only constant but accelerating being always late is a very expensive luxury and i believe ultimately a fatal one talk soon