It's Tough to be a Follower

by Steve McKee

Following the Market LeaderThe news is out. Sales of the much-ballyhood Palm Pre are…a disappointment. The new smartphone, launched to compete head-on with Apple’s groundbreaking iPhone, has lost its momentum.

The Pre, which was launched June 6, got off to a good start but has faded in recent weeks. According to the Wall Street Journal, analysts projected lower sales in the current period than had been expected, and Palm reported a loss of nearly $165 million for its most recent quarter–the first full quarter to include Pre sales results.

Jon Rubinstein, Palm’s CEO, says the company “will face near-term pressures until we transition to a more diversified carrier base and expand our family of webOS products, but we are confident we’re on the path to success.” Makes you wonder if this is a case of actions speaking louder than words, as Palm recently cut the Pre’s price by 25 percent (tied to a two-year service agreement), and is issuing 16 million more shares of common stock to overcome a cash problem.

The Pre, by all accounts, is a terrific phone, and offers some enhancements that the iPhone doesn’t yet have (see “Features, Smeachers“). But drafting behind the leader isn’t the same as taking the lead, and being a little bit better often isn’t enough. Especially when the guy up front has his own race strategy (Apple cut the price of its first generation iPhone to 99 bucks within two days of the Pre’s launch).

Palm PixiPerhaps Palm will do better with Pixi, a phone targeted at youth, which should be available in time for Christmas. If it’s different enough from other offerings in the marketplace, Palm may get it share of attention (and accolades). But if it’s another me-too product, the Pixi will get little more than a yawn.

Sometimes a company, like an athlete, falls behind and simply has to catch up. But “catching up” is not a strategy for victory. Innovation is all about finding a way to get–and stay–out front.

Steve McKeeSteve McKee is a columnist, marketing consultant, and author of “When Growth Stalls: How it Happens, Why You’re Stuck, and What To Do About It.” Learn more about him at and at

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