INN210 – Assignment 2 – Rune Haugestad

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VS.

Netscape VS. Opera –

Strategic insights from “first-mover” and “follower” innovations.

Rune Haugestad

IØR course code: INN210

INN210 – Assignment 2 – Rune Haugestad

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Contents

1. Introduction ................................................................................................................................... 3

2. Description of Netscape and Opera’s product innovations ............................................................ 4

2.1 About Netscape ............................................................................................................................ 4

2.2 About Opera ................................................................................................................................. 4

3. Comparization of “first-mover” and “follower” strategies ............................................................. 5

3.1 The difference between “first-mover” and “follower” strategies ................................................ 5

3.2 Netscape’s first-mover strategy advantages ................................................................................ 5

3.3 Netscape’s first-mover strategy disadvantages ............................................................................ 6

3.4 Opera’s follower strategy advantages .......................................................................................... 7

3.5 Opera’s follower strategy disadvantages ..................................................................................... 7

4. When innovation fails..................................................................................................................... 8

4.1 What can be learned from the Netscape case? ............................................................................ 8

5. Opera - a proud and happy underdog ............................................................................................ 9

5.1 What can be learned from the Opera case? ................................................................................. 9

6. Summary and conclusion ............................................................................................................... 9

6.1 First-mover strategies................................................................................................................... 9

6.2 Follower strategies ....................................................................................................................... 9

6.3 Business models ......................................................................................................................... 10

6.4 Innovations and reinventions ..................................................................................................... 10

6.5 Change management ................................................................................................................. 10

6.6 Marketing and branding ............................................................................................................. 10

6.7 Economy ..................................................................................................................................... 10

6.8 Conclusion .................................................................................................................................. 11

7. References .................................................................................................................................... 12

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1. Introduction

My choice of innovation is the first (widely known) web browser (or simply called browser) who

accomplished to be the first mover on a global scale. The product is Netscape Navigator, released in

December 1994, produced by Netscape Communications Corporation, now a subsidiary of AOL

(Source: Wikipedia). I am aware of that Tim Berners-Lee is the inventor of the absolute first browser

(or rather browser-editor) called; WorldWideWeb, which is the origin of the acronym WWW. Tim

Berners-Lee first edition of his browser was ready Christmas 1990 (Source: Berners-Lee). Then NCSA

(National Center for Supercomputing Applications) developed Mosaic and released its first version in

January 1993 (Source: Wikipedia [1]). Then Netscape Navigator was later developed by Netscape,

which employed several of the original Mosaic authors. “Netscape Navigator was the name of

Netscape's web browser from versions 1.0 through 4.8. The first beta release versions of the browser

were released in 1994 and known as Mosaic and then Mosaic Netscape until a legal challenge from

the National Center for Supercomputing Applications (makers of NCSA Mosaic, which many of

Netscape's founders used to develop), led to the name change to Netscape Navigator. The company's

name also changed from Mosaic Communications Corporation to Netscape Communications

Corporation. Mosaic's popularity as a separate browser began to lessen upon the release of Marc

Andreessen's Netscape Navigator in 1994.Netscape Navigator's code descendant is Mozilla” (Source:

Wikipedia [2]) Opera began as a research project at Telenor, the very same year that Netscape

launched. “In 1995, it branched out into a separate company named Opera Software ASA. Opera was

first released publicly with version 2.0 in 1996, which only ran on Microsoft Windows.” (Source:

Wikipedia [3]). The founders of Netscape were: Marc Andreessen (also the founder of Opsware (HP),

and co-founder of the social network Ning). I decided on the following premises for this assignment:

I choose to categorize Netscape as the first mover hence the fact that they were born by Mosaic and

was partly built of the people who created Mosaic, but was the first widely adapted by consumers,

on a global scale, and ruled for almost a decade. Then I choose to categorize Opera’s web browser

from Opera Software ASA, as a follower product innovation, hence their release two years after

Netscape.

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2. Description of Netscape and Opera’s product innovations

2.1 About Netscape “The browser was easily the most advanced available and was therefore an instant success, becoming

market leader while still in beta. Netscape's feature-count and market share continued to grow

rapidly after version 1.0 was released. Version 2.0 added a full mail reader called Netscape Mail, thus

transforming Netscape from a mere web browser to an Internet suite. During this period, both the

browser and the suite were known as Netscape Navigator. Netscape 3.0 introduced many new

features such as new plug-ins, background colors for tables, the archive attribute and the applet

element. Netscape Navigator 3 was a huge success and the undisputed web browser giant in its time

with over 90% share, but was later eroded by the free Internet Explorer included with Windows 98”

(Source: Wikipedia [2]). Netscape has developed several other products i.e.: Netsite Communications

web server, Netsite Commerce web server and Netscape Proxy Server (Source: Wikipedia [4]).

Netscape is credited with developing the Secure Sockets Layer Protocol (SSL) for securing online

communication, which is still widely used, as well as JavaScript, the most widely used language for

client-side scripting of web pages, Java later was handled and owned by Sun Microsystems , which

has since merged into Oracle Corporation (Source: Wikipedia [4]).

2.2 About Opera Opera has added several innovations into their browser: “As of version 10.5, Opera features a new

JavaScript engine, as well as a new vector graphics library, which together significantly increase

Opera's overall rendering speed. Opera includes built-in tabbed browsing, ad blocking, fraud

protection, a download manager and BitTorrent client, a search bar, and a web feed aggregator.

Opera also comes with an e-mail client called Opera Mail and an IRC chat client built in. Opera also

includes a "Speed Dial" feature…” (Source: Wikipedia [3]). Today Opera is the number one browser in

some few countries, but still the underdog against Microsoft and Google on the desktop browser

market. But in the mobile market, Opera Mobile and Opera Mini are the number one and market

leader by the user adaption (Source: Wikipedia [5]). The founders of Opera Software ASA were: Jon

Stephenson von Tetzchner and Geir Ivarsøy (Source: Wikipedia [6]).

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3. Comparization of “first-mover” and “follower” strategies

3.1 The difference between “first-mover” and “follower” strategies What does first-mover strategy mean? To quote Smith (2010 p. 163): “The first-mover strategy, as its

name implies, is about being first to market with a new product or service.” What does follower

strategy mean? Follower strategy described by Smith (ibid) “…a follower or latecomer or sometimes

even an imitator strategy, this involves taking a “wait-and-see” approach, rather than perceiving

innovation as a race in which being first to market is critical.” The follower often analyzes the first-

movers innovation, technology, product or service, and how the market adapt to the innovation.

Smith (ibid) points out; “When it becomes clear that there is a high level of consumer acceptance in

the market or the number of competing designs begin to show signs of diminishing, then and only

then does the latecomer (follower) enter the market.” I will look into both first-mover and follower

strategy advantages and disadvantages below, and how Netscape and Opera exploited them.

3.2 Netscape’s first-mover strategy advantages The first-mover has several potential advantages; “Firstly the first-mover, by being first, has an

opportunity to establish a technological lead, thereby becoming more familiar, more practiced and

more competent as far as the technology is concerned” (Smith 2010 p. 163). Netscape was a new

product innovation (Smith 2010 p. 25-26), especially regarding the easy user interface. Netscape was

a radical innovation based on a totally new user graphic user interface (GUI), and held for a long time

global high (90%) market share. Netscape is also an architectural innovation (Smith 2010 p. 32-38)

regarding building further layers of features based on functionality in the Mosaic browser. Regarding

internal organizational skills and knowledge built over time creating a new innovation lets a company

get further along the learning curve and sometime secure cost advantage over competitors (Smith

(2010 p. 164). This will vary from industry to industry and from company to company; some have

resources (people, technology, partners, and economy), methodology and knowledge to create new

innovations or reinvent versions of the first-mover innovation (very) fast (ibid). Netscape ruled the

world for almost a decade, until Microsoft started to bundle their browser Explorer with Windows

98. A second factor is connected more directly to technological leadership. When a company can use

in-house R&D know-how and resources to create, protect and contain their innovation via patents or

licensing strategies, they may be able to create obstacles for new competitors with intellectual

property (IP) rights (ibid). Netscape offered the browser for free to consumers, but sold to

enterprises their server applications with software licensing fees, and in addition they offered annual

support contracts. On top of that Netscape licensed their trademark (Source: Quora by Angus Davis).

A third factor is the ability for the company to acquire scarce resources, thereby pre-empting

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followers in their market. Examples on scarce resources are; locations, suppliers (Supply chains) or

distribution (Smith 2010 p. 164). Netscape did not use any of these factors. Fourthly, the mechanism

of diffusion and high market adaption gives an opportunity to create and build both a solid customer

base, which can hold newcomers in the back seat. Netscape succeeded with this for a long time.

Another important part of a successful first-mover is to establish and build a well known brand

synonymous with the product or innovation. This was maybe the most important success factor for

Netscape. If succeeded with these tactics, existing customers may find it inconvenient or expensive

to choose another product or service from a follower (ibid). Yes, for a period it was inconvenient for

consumers to find good replacement products for Netscape. The main advantage for a successful

first-mover strategy is to create barriers that stop, delays or minimize follower innovations, products

or services and/or market adaption (ibid). Netscape managed to perform these tactics. Common

reasons to choose first-mover strategy are when; a company owns a new invention, has internal R&D

department, has enough financial muscles, and has the ability to create a long term market or create

a temporary monopoly. Netscape managed to scoop the market based on their innovation, kept their

know-how within internal R&D department, had for a while lots of money and succeeded building

both a long term market, and in retro perspective; a temporary monopoly.

3.3 Netscape’s first-mover strategy disadvantages Some organizations do have a greater or faster learning curve and capacity than the first-mover, and

this flattens the first-mover effect (Smith 2010 p. 164). Within technology (and especially software

industry and digital services), there are limits to its effectiveness for first-movers. Suarez and Lanzolla

(ibid) suggest “that two important factors affecting the suitability of a first-mover strategy are the

pace of technological change is taking place, they suggest that a first-mover advantage is unlikely

because the rapid pace of change will draw in new competitors”. Netscape’s competitors were close

behind, developing their own browsers. This is also explained by the theory of punctuated

equilibrium, quoting Smith (ibid) “…the theory of punctuated equilibrium which predicts that periods

of relative stability will be broken by technological breakthroughs that lead to disequilibrium with

many competing design” (Smith 2010 p. 164). This was exactly what happened when both Mozilla

(Firefox) and Microsoft (And late follower Google Chrome) developed their browsers. If the first-

mover fails to protect their technology/innovation with patents or other intellectual properties (or

choose not to use such protection), followers can harvest from the first-movers R&D knowledge

(Smith 2010 p. 166), and be able to copy, replicate or imitate the innovation, product or service for a

much lower cost and then jumpstart their own additional innovation features, then possible to i.e.

faster achieve break-even, get higher ROI (Return-On-Investment) and/or lowering the price. The

first-mover may not be able to lower their price because they need to pay back their initial R&D or

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other costs, or they must find other additional revenue streams (New innovations or reinventions) to

meet the competition. In this case, Netscape implemented freemium business model, so price was

not the issue, but momentum and market adaption and share was crucial.

3.4 Opera’s follower strategy advantages Follower strategy advantages appear in several ways. The free rider effect is when a follower is able

to utilize the benefit of earlier investments, initiatives and results from earlier innovators when they

entered the market (Smith 2010 p. 166). The results of this are often that the first-mover has built

market adaption, acceptance and approval by the customers/consumers (ibid). Opera benefitted

from the pioneers in those ways. Information spill-over effects are when followers benefit of the R&D

costs who the first-mover needed to innovate, when available the follower achieve cost advantages

relative to the first-mover (ibid). Some of the code and ideas from Tim Berners-Lee’s browser was

further developed by Opera and others. Learning effects are insights/attributes where followers are

able to analyze and learn from the first-movers mistakes and failures and deploy a higher degree of

“smartness” into their innovation (ibid). I believe learning from the first-mover and other followers,

has helped Opera in several ways. Opera early recognized that there was a high level of consumer

acceptance in the market for web browsers, with easy to understand value proposition (Connectivity

across the World), easy to communicate value creation (ease of use), and identified several ways of

monetizing the browser to create sustainable value capture (Smith 2010 p. 12-15). Other potential

advantages for the follower are that they are learning from a much more mature market, regarding

consumer/user requirements, and then the follower can monetize on this (ibid). This is maybe less

the situation for Opera since they launch relatively shortly after Netscape. Opera more likely

achieved skill in building better, wider or smarter complementary assets, such as within marketing

strategies and tactics, manufacturing/development capability and project management (ibid).

Another advantage with Opera is that they most likely are a more lean and flexible organization than

their bigger competitors (Microsoft, Google, Mozilla and Apple), and therefore faster adaptively to

change.

3.5 Opera’s follower strategy disadvantages First, if you decide to follow the first-mover, you risk that you need time to hit the market, especially

when the first-mover has been able to establish a well known innovation and/or brand loyalty.

Another risk is if the first-mover managed to build to many barriers to entry the market (Smith 2010).

The biggest barrier for Opera has been Microsoft bundle strategy with Windows 98 including

Explorer, and the strongest late follower Google with Chrome, which grew fast market shares, most

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likely because of its big brand and strong share-of-voice within the press and media. Opera’s

economical muscles are also small compared to Microsoft, Google and Apple.

4. When innovation fails

When AOL started bundling their software with Microsoft's Internet Explorer, Netscape was the first

to face any serious competition in the form of Microsoft Internet Explorer. Netscape (With high

brand equity), however, easily held off Microsoft's challenge and remained the “number one”

browser for the time being. But when Netscape met both creative destruction (Schumpeter) and

creative disruption (Waldman 2010) from Microsoft when they launched their Internet Explorer

bundled with their Windows 98 operating system, Netscape then soon lost the battle. Microsoft

successfully used their bundle with Windows 98 distribution as market booster for their browser. So

it was not necessary that Netscape met a competitor with a better innovation, but Microsoft used a

clever marketing strategy to conquer the browser market.

4.1 What can be learned from the Netscape case? It was not weak innovation process; management, project management, organizing, corporate

venturing or bad leadership. Neither was it bad motivation or corporate culture. The people behind

Netscape were highly creative innovators and skilled entrepreneurs. But it seems like several flux

factors occurred; uncertainty (technology), complexity (in the market), messy (Microsoft’s bundle

strategy), disruptive (both technological and market), creative (lots of other highly skilled

companies/followers who developed browsers) (Smith 2010). Netscape had both a dominant design

and absorptive capacity (Smith 2010 p. 68-69). If I shall point out a few observations, it must be

about the ability to cover intangible aspects such as change management and opportunity

recognition and strategic leadership. Netscape did not manage to meet external disruptive market

forces; new entrants, with the ability to turn this around with usage of new creative reinventions or

new market strategies and tactics to encounter (Waldman, Simon 2010). Today it is Google with

Chrome as a late follower who steals market shares especially from Microsoft.

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5. Opera - a proud and happy underdog

Opera Software today use both multi-sided markets (Licensing on TV and game platforms and Mobile

advertising) and multi-sided platform’s i.e.; Mobile (iOS and Android), PC and Mac, SMART TV and

game console solutions (Osterwalder & Pigneur 2010 p. 77-79).

5.1 What can be learned from the Opera case? Opera as a follower has showed us that it is possible to gain a sustainable business competing against

giants. They are capable to create new innovative features in their browser, and to reinvent their

browser for new platforms and markets (Mobile, TV, and Game). Opera has also innovated their

core business model, from one revenue stream based on ads to multiple ad sources, and in addition

licensing to TV and gaming companies. Opera has included freemium business model for their

browser, sponsored by their diversified revenue streams. Adding new reinventions, changing their

business model and entering new markets (Mobile), adding more revenue stream sources, they all

contributes to reduce the risk for being swept aside by existing competitors or new entrants. Today

Opera thrives excellent as a proud and happy underdog in the shadows of the giants.

6. Summary and conclusion

How important is it to be a first-mover within digital businesses? Can it be that following the follower

strategy, is a smarter way?

6.1 First-mover strategies In a digital world, and especially for digital enterprises such as Netscape and Opera, it seems like

follower strategies have more advantages than first-mover strategies. While it always be able to

point out some successful digital first-movers and examples of the first-mover advantages theory in

practice (think eBay). In the majority of business cases, the successful players aren’t successful purely

because they were there before anyone else but because they did their function (Value creation)

AND marketing & branding better than anyone else. Still, Netscape ruled the world for almost a

decade, and many of their innovations and inventions (Spill-overs) within software codes and

standards lives today spread amongst other companies.

6.2 Follower strategies Google? Not the first search engine. Facebook? Not the first social network. Groupon? Not the first

deal site. Amazon? Not the first online bookseller. Instagram? Not the first photo-processing app.

iPhone? Not the first SmartPhone. Opera, not the first browser. Still, Opera as a follower thrives, still

creating new software reinventions and continue to reinvent itself.

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6.3 Business models Freemium business model was both used successfully by Netscape and within Opera today. This

model has been the number one choice of many software and mobile app companies. The golden

times when a company could create a market monopoly for a longer period, certainly today are

reserved for a few (think Facebook, twitter, ebay, Amazon and Google). For the rest, strategic focus

must be to try to create a series of minor (in time) monopolies as promoted by Kjell A. Nordström

(2002). He says it is not possible any longer to obtain and stay as a monopoly for long periods of time

anymore. He suggests building temporary monopoles, and when competitors adapting their business

models or products, they change again and then build a new temporary monopoly. And then create a

never ending line of temporary monopoles (ibid).

6.4 Innovations and reinventions It seems like both digital first-movers and followers both need to keep on creating new innovations

or reinventions to survive or keep their market positions.

6.5 Change management How you change and adapt to crisis or disruptions, are success factors. Insight about this “How”

subject is shared by Dov Seidman in his book; How. To quote Seidman; “To differentiate yourself from

your competition, you can no longer rely on price and service, or even on best practices. Everyone will

have those sooner or later, - everyone who stays in business. You will differentiate your company

from the others by HOW you do business” (Friedman 2006 p.468).

6.6 Marketing and branding Today’s consumers are less loyal than ever, because they have more choices than ever (Nordström

2002). This is also true regarding the browser market and competition: The browser war continues

between: Microsoft Explorer, Google Chrome, Mozilla Firefox, Apple Safari and Opera. One of the

latest battles was lost by Microsoft, now legally admitted to deliver a startup window on new PC’s

showing all the browsers, letting the consumer choose amongst them. Opera’s approach to compete

is to fight back with inexpensive; digital branding, viral marketing and online PR strategies with smart

tactics.

6.7 Economy If you succeed as a first-mover, you can earn good money. If you fail as a first-mover, you probably

lose even more. If you succeed as a follower, you often earn money faster, but often for a shorter

period. If you fail as a follower, chances to adapt from disruption or crisis and handle change can be

easier than for the first-mover.

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6.8 Conclusion First-movers have managed to break away from the competition. With few or no competitors, they

have an opportunity to capture market share in a new region or for a new product, establish a brand,

build brand loyalty and ensure that their brand becomes synonymous with the product. Hence digital

businesses, this in turn can form the basis for a sustainable short or long term competitive advantage

or temporary monopoly. Followers on the other hand, can look at the first-mover’s position, then

choose from a variety of strategic options i.e.; price, quality, placement, user needs and behavior,

distribution platforms, and then develop their own strategy for eroding the first-movers advantage. A

sound innovation strategy will usually succeed, and a weak one will usually fail, no matter who

moves first. In my opinion; it doesn’t matter where you come in the line of digital movers – the

successful ones are the best at what they do in sum of: innovation and marketing.. Either you are a

first-mover or follower leading the pack; you also need to find out how you are going to stay ahead.

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7. References

Curriculum

Smith, David (2006). Exploring Innovation, Second Edition. UK: McGraw-Hill Education.

Additional books

Friedman, Thomas L. (2006). The world is flat. London: Penguin books Ltd.

Nordström, Kjell A. (2002). Funky Business – Talents makes capital dance. UK: Prentice Hall - Financial

Times, Pearson Education Limited.

Osterwald, Alexander & Pigneur, Yves (2010). Business Model Generation – A Handbook for

Visionaries, Game Changers, and Challengers. US: John Wiley & Son Inc.

Waldman, Simon (2010). Creative Disruption – What you need to do to shake up your business in a

digital world. UK: Pearson Education.

Internet sources

Berners-Lee, Tim. The WorldWideWeb browser. Located 26.08.12 at WWW:

http://www.w3.org/People/Berners-Lee/WorldWideWeb.html

Davis, Angus (18.02.11). How did Netscape Navigator make money? Located 26.08.12 at WWW:

http://www.quora.com/How-did-Netscape-Navigator-make-money

Wikipedia [1]. Located 26.08.12. at WWW: http://en.wikipedia.org/wiki/Mosaic_(web_browser))

Wikipedia [2]. Located 26.08.12. at WWW: http://en.wikipedia.org/wiki/Netscape_(web_browser)

Wikipedia [3]. Located 26.08.12. at WWW: http://en.wikipedia.org/wiki/Opera_browser

Wikipedia [4]. Located 26.08.12. at WWW: http://en.wikipedia.org/wiki/Netscape

Wikipedia [5]. Located 26.08.12. at WWW: http://en.wikipedia.org/wiki/Usage_share_of_web_browsers

Wikipedia [6]. Located 26.08.12. at WWW: http://en.wikipedia.org/wiki/Opera_Software